Evolution of freedom

The Freedom Index ranks Canada among the freest countries of the world, fifteenth of 164. Canada has held a high ranking since the beginning of these data (1995), however the most recent ten to fifteen years reveal some slippage.

The political subindex trends down from 2016, primarily driven by falling scores for civil liberties and legislative constraints on the executive. The government drew criticism for overly heavy-handed COVID-19 restrictions, yet other high-income countries did much the same. Because the drops continue after pandemic restrictions ended, other explanations are needed. The current government has implemented an energetic social justice diversity-equity-inclusion (DEI) agenda; however, a recent poll by the nonpartisan Macdonald-Laurier Institute shows broad opposition to DEI policies, pronoun lists, and the like. Other civil liberties controversies include Quebec’s Bill 21, restricting overt religious symbols, and Bill 96, limiting the use of English.

The overarching constraint on executive power is that the government must retain the confidence of parliament to retain power. Canada’s Westminster democracy inherits a relatively powerful executive from nineteenth-century Britain. Party discipline is strict, so a majority or majority coalition can enact legislation and the appointed Senate has limited powers. The current minority Liberal government, now trailing badly in polls, has survived successive corruption scandals, discussed below, and no-confidence votes with adept procedural tactics and support from the socialist New Democratic Party (NDP) and, after that party withdrew its support, Quebec’s left-leaning nationalist Bloc Québécois.

Political rights varied little in Canada over the past decade. In contrast, the United States and many high-income European polities show declining scores for freedom of expression and association, reflecting threats from both left and right. Both threats exist to some extent in Canada, but are to date unrooted. Canada has no organized populist “blood and soil” nationalist party, though fringes of Quebec nationalism have this flavor.

The legal subindex drops some five points after 2017, mainly reflecting worsened judicial independence and control of corruption. In a move pertinent to both subindexes, Prime Minister Justin Trudeau removed Justice Minister Jody Wilson-Raybould in 2018—allegedly for refusing to quash a corruption investigation into the Montreal construction firm SNC-Lavalin. Wilson-Raybould released a taped phone conversation proving the allegations, whereupon the prime minister expelled her from parliament for violating confidentiality.

A series of prominent scandals may explain the five-point deterioration in Canada’s Corruption Perception Index since 2018. One involved the government’s awarding management of a C$900 million Canada Student Service grant to the non-governmental organization WE, which had paid members of the Trudeau family substantial speaking fees. Another involved the C$836 million industrial policy tool, Sustainable Development Technology Canada, which the Auditor General Report concluded was used to channel funds to Liberal insiders.

Canadian judicial independence, historically seen as more secure than in the United States, is under stress. Democracy Watch has campaigned to expose political influence in the judicial appointments process and the issue has drawn mainstream media attention.

Two other components of the legal subindex require explanation. Internal security, or at least perceptions of it, show deterioration. Anti-COVID-19 lockdown demonstrations by commercial truckers in 2021 subsequently ceased, and so cannot explain the pattern.

Homeless encampments, a new phenomenon in Canada, have proliferated in major cities, contributing to the rising sentiment of insecurity. Rising housing and living costs, and lack of access to mental health and addiction services are contributing. The “decarceration” priority of the government—aiming at reducing the current rate of persons incarcerated relative to the population by 30 percent overall and by 50 percent for Black and Indigenous people—may have exacerbated the issue as ex-convicts are especially prone to homelessness. About one in five individuals released from prison in Ontario ends up homeless. Polls show falling public support for decarceration.

Despite showing little movement over the period, clarity of the law has been concerning. Subsequent interpretations of the Supreme Court’s sweeping 2004 ruling that Indigenous First Nations cannot veto major infrastructure projects but must be “adequately consulted” fail to provide meaningful clarity. It is unclear what “adequate” means, which First Nations need to be consulted, what marks the completion of consultations, and who represents each First Nation—the elected band council, traditional chiefs, or elders, and if the latter, who qualifies as an elder.

Countering this trend, in 2023 the Supreme Court found the Impact Assessment Act, which let the federal government block any large construction project it deemed not in the public interest, unconstitutionally broad. Parliament is rewriting the act to narrow its scope to environmental and Indigenous issues. Overall, the Supreme Court and federal government seem to appreciate a need to “do something” about environmental and First Nations problems, but want to preserve wide options for what that might be. The result is legal opacity that some argue makes large investment projects unviable in Canada when a rapidly growing population urgently needs upgrades and expansions to an aging public and private-sector capital stock.

Another issue is time limits for trials. The Supreme Court’s 2016 Jordan Rule requires provincial and superior court cases to conclude within eighteen and thirty months, respectively, of arrest. The fraction of adult defendants hitting the Jordan limit fell from 11.4 percent in 2015–16 to 5.3 percent in 2022–23, while that for juveniles rose from 11.0 percent to 18.8 percent. Critics cite prosecutor triage freeing dangerous offenders and rushed prosecutions convicting the innocent.

Finally, Canada retains high scores in all aspects of the economic subindex. The economy is open to trade and investment; and property rights protection remains strong. Investment freedom rose from 2007 to 2014, when successive Conservative governments reduced regulatory barriers.

Evolution of prosperity

Canada performs well in the composite Prosperity Index; however Canadian real income per capita, 15 percent below that of the United States in 2009, fell to 25 percent below the United States in 2023. Canada’s chronically low and, since 2015, declining productivity is widely thought responsible. Canada’s corporate research and development spending averaged 0.95 percent of gross domestic product (GDP) from 2003 to 2022, far below the 3.1 percent US figure and second lowest to Italy in the G7. Fewer Canadian firms now rise into global giants than previously. The Bank of Canada, Industry Canada economists, and corporate groups decry a productivity crisis. Figure 1 summarizes the problem.

Since 2015, federal and provincial governments have responded with increased business subsidies, officially totaling 1.84 percent of GDP in 2022. This omits loan guarantees and other channels, so the true total is likely higher. As Lerner shows, subsidy programs rarely stimulate productivity, often misallocate resources, and not infrequently worsen corruption. More abundant subsidies can channel resources to more able subsidy-seekers rather than more innovative firms.

Figure 1. Contributions of multifactor productivity (MFP) growth and capital per worker growth to growth in total output per worker, Canada vs. United States

Canada’s education subindex may reflect reforms in recent years to decolonize curriculums and teach social justice advocacy. However, fears of an impending shortfall in STEM (science, technology, engineering, and mathematics) skills also command attention.

The Organisation for Economic Co-operation and Development’s (OECD’s) Programme for International Student Assessment (PISA) scores provide comparable quantitative assessments of countries’ school systems in mathematics, science, and reading. Canadian students, traditionally well above the OECD average in all three categories, have slipped since the mid-2010s, with mathematics scores falling the most. Average scores for the OECD also drop, but US scores do not, so the margin by which Canadian students outperform US students has narrowed.

Because provincial governments govern public schools, PISA scores vary substantially across the country. Alberta and Quebec retain scores among the highest in the world; whereas the Atlantic provinces’ scores are most markedly down from 2018.

Canada’s public schools show early signs of stress, but fare relatively well compared to other public goods and services. While Canada continues to outperform other advanced economies on health, there is great concern regarding Canada’s public healthcare system, long deemed a major national asset, but now aging poorly. Figure 2 shows that Canada spends more on healthcare than any other country with socialized medicine.

Yet Canada languishes at or near the bottom in almost all measures of healthcare delivery. For example, among OECD countries, Canada ranks twenty-eighth in physicians per capita, twenty-third in somatic and psychiatric beds per capita, twenty-fifth in magnetic resonance imaging (MRI) scanners per capita, and at the bottom for specialist and elective surgery waiting lists.

Canada’s universal healthcare system, once a source of national pride, became the most expensive and among the least effective in the world for several reasons. One barrier to reform is an ingrained disincentive to experiment. The Canada Health Act (CHA) has the federal government collect taxes and allocate the funds to the provinces, each of which administers its own state-run monopoly health insurance bureaucracy, which must comply with the terms of the CHA. This arrangement let the federal government enter healthcare, which was constitutionally under provincial jurisdiction. Physicians, medical testing facilities, and even surgeries can be private-sector businesses, but all billing must be to the single-payer provincial insurance system. In the past, the threat of losing federal funding reined in provinces that experimented with paid services; though some are again cautiously permitting limited private clinics and surgical centers.

Another barrier is a narrative that reforms would emulate the United States and leave the poor and old without healthcare. Consequently, politicians have viewed healthcare reform as too dangerous to contemplate.

Advocates of the Canadian system especially value its “universality”—its provision of exactly the same free care to all, regardless of income or social position. Privately funded medical care is illegal except for procedures, such as laser eye surgery, not covered by the public system. Canada’s population has grown and grown older, but healthcare provision has not kept pace. Healthcare bureaucracies are expanding, while shortages of medical specialists leave operating theatres dark. Scarce MRI, computed tomography (CT) and positron emission tomography (PET) scanners create long waiting lists for diagnoses, which renders diagnoses more dire when finally made. Undersupplied long-term care facilities keep patients in expensive hospital beds, delaying urgent admissions and populating hallways with the most urgent cases. As the system grows increasingly strained, more Canadians go to the United States to access private care. This effectively creates a private alternative healthcare system for wealthy Canadians, undermining its “universality.”

A 2024 poll reveals an unprecedented shift in public opinion, with 90 percent agreeing that governments have neglected necessary improvements for too long, 73 percent agreeing the system needs major reform, and 80 percent agreeing that the public system should finance private sector surgeries to reduce waiting lists.

Unprecedented stress in the public healthcare system is only the most notable among signs of a general inability of Canadian governments to deliver basic public goods and services. First Nations reserves are all under the jurisdiction of the federal government, which has struggled to provide such basic services as safe tap water. While the incidence of unsafe tap water has declined, that the problem persists is remarkable. Canadians queue for hours to renew passports. Some 40 percent of trains run by VIA Rail, the federal government’s passenger railway state-owned enterprise, arrive late.

Figure 2. Healthcare spending as % of GDP in countries with socialized medicine

Income inequality rose from 1995 lows until about 2015, whereafter it recedes—almost back to 1995 levels. More detailed data show markedly lower top 0.05 percentile incomes and somewhat higher lowest quartile incomes. Highest tail incomes are primarily capital gains, which Canadian stock markets, lacking breakaway innovative superstar stocks, have been loath to deliver in recent years. The lowest quartile rise may reflect real minimum wage increases over the past fifteen years.

The current federal government’s greatest success is perhaps its prioritization of diversity, equity and inclusion. That success is evident in all manner of rankings. The World Population Survey ranks Canada second in the world for racial equality, edged out by New Zealand and ahead of the Netherlands. Human Rights Director (HRD) ranks Canada the second most inclusive country in the world, below Norway and above Sweden and third most gender-inclusive country in the world after Sweden and the Netherlands. Equaldex ranks Canada the ninth most LGBTQ+ inclusive country in the world, below Denmark and above the Netherlands. The University of California at Berkeley’s Othering and Belonging Institute gives Canada the fourteenth highest inclusiveness index in the world, below South Africa and above Denmark.

Amid this acclaim, the abrupt plunge in the minorities component of Canada’s Prosperity Index stands out. The current government has worked unprecedentedly to improve the status of Indigenous and Black Canadians.

The plunge corresponds to the discovery of unmarked graves of Indigenous children at a residential school in British Columbia and elsewhere in 2021, which made headlines worldwide. The fact that no further bodies have been found has drawn less attention, but the initial findings precipitated Bill C-413, an NDP private member’s bill before parliament at the time of writing, which would criminalize residential school holocaust denial. A second factor in the decline in minority rights is Quebec’s restrictions on the public display of religion and on the use of English, Bills 21 and 96, respectively. The former is widely regarded as directed at Muslim immigrants; the latter is widely perceived as a measure to prevent immigrants from using English.

The path forward

The discussion above highlights a major set of issues likely to dominate the next federal election, due before the fall of 2025.

As noted above, reform of the socialized healthcare system is emerging as a pivotal issue for many voters. Major healthcare reforms are likely to be expensive, and to limit governments’ scope to pursue other initiatives.

The general provision of public goods and services—issues ranging from First Nations water supplies to lengthy passport renewal delays—appears to be faltering. Pledges to make government more efficient in general may also arise in the upcoming campaign, especially if US President Trump’s initiatives along these lines show signs of early success.

Foreign interference in Canada is likely to become an increasingly salient issue as well. Ongoing parliamentary machinations around disclosing the names of members of parliament allegedly in the pay of foreign governments have created the impression that these allegations are true.

Canada’s openness to foreign investment is vulnerable to President Trump’s ongoing criticism of North American free trade. Renewal of the revised North American Free Trade Agreement (NAFTA) pact, scheduled for 2026, was expected to be routine until Trump’s victory in 2024. Canada may seek a bilateral free trade agreement with the United States as most of President Trump’s concerns relate to Mexico.

Canada’s current government is also rollback openness to foreign investment. Bill C-34, National Security Review of Investments Modernization Act, enacted in 2024, subjects foreign investment to increased official scrutiny where potential national security concerns arise. This legislation is widely expected to limit Chinese investment in Canada, and may help align the country with US trade reforms.

The separatist Parti Québécois leads the polls at 33 percent and may form the next Quebec government and contemplate another referendum on separation. However, Quebec is now far more ethnically diversified, and immigrants appear unenthusiastic about leaving Canada. Also, the 1995 referendum question—“Do you agree that Quebec should become sovereign, after having made a formal offer to Canada for a new economic and political partnership, within the scope of the bill respecting the future of Quebec and of the agreement signed on June 12, 1995?”—employed tactical ambiguity to overcome polls consistently showing some 80 percent rejecting independence. An overwhelming majority continues to reject independence and the 2000 Clarity Act now limits scope for tactical ambiguity.

Integrating First Nations into the country’s broad prosperity while respecting their traditions and treaty rights remains a work in progress. The current government has prioritized social justice via energetic diversity, equity, and inclusion to remedy systemic racism in Canada. As mentioned above, opinion polls show rapidly diminishing support for such initiatives. No party advocates acceptance of the status quo regarding First Nations, but alternative approaches to solving the problems are likely to command increased attention.

The current government’s other major priority, alongside social justice advocacy, has been environmental leadership. Environment Minister Steven Guilbeault has energetically enacted policies to achieve carbon neutrality, downsize the fossil fuel sector, and promote alternative energy sources. The largest such initiatives include a C$52.5 billion subsidy program, for electric car battery and parts plants, exceeding by 14 percent the total of $46.1 billion in private sector capital spending being subsidized. Another C$1 billion initiative to subsidize green innovation, Sustainable Technology Development Canada, was shut down after a 2024 Auditor General exposed corruption problems.

Canada has long welcomed high levels of immigrants without a populist backlash of the sort now evident in the United States and some European countries. In large part, this is because Canada’s point-based immigration system vetted immigrants for professional qualifications, language skills, and employment histories to ensure that immigrants are not perceived as a burden on the economy.

The current government modified this system to accept more refugee, humanitarian, and asylum immigrants and to boost overall immigration numbers sharply. As these policies unfolded, expensive private “diploma mill” universities instructing predominantly foreign students sprang up across the country. From 2021 to 2022, immigrant admissions rose from 0.6 percent to 1.5 percent of the population. Escalating housing prices are blamed on immigrants, though increasingly restrictive local zoning laws and other regulatory barriers impeding the construction of apartment towers are perhaps more plausible explanations. For the first time in generations, immigration is becoming a political issue. Opposition parties have yet to lay out their alternatives to the current policy mix, but strengthening the traditional points-based system is one obvious path.

Randall Morck is the Stephen Jarislowsky distinguished chair in finance at the University of Alberta and a research associate at the National Bureau of Economic Research. Morck earned a joint BSc and MA in applied mathematics and economics at Yale and a PhD in economics at Harvard, and (most recently) an honorary doctorate from HEC Montreal. He is the most cited economist in Canada, his research referenced more than 53,000 times. 

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2024 Atlas: Freedom and Prosperity Around the World

Twenty leading economists and government officials from eighteen countries contributed to this comprehensive volume, which serves as a roadmap for navigating the complexities of contemporary governance. 

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Jun 15, 2023

Freedom and Prosperity Indexes

The indexes rank 164 countries around the world according to their levels of freedom and prosperity. Use our site to explore twenty-eight years of data, compare countries and regions, and examine the sub-indexes and indicators that comprise our indexes.

The Freedom and Prosperity Center aims to increase the prosperity of the poor and marginalized in developing countries and to explore the nature of the relationship between freedom and prosperity in both developing and developed nations.

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Image: Demonstrators gather on Parliament Hill, one year after a "Freedom Convoy" of trucks blocked streets in protest against coronavirus disease (COVID-19) vaccine mandates, in Ottawa, Ontario, Canada January 28, 2023. REUTERS/Blair Gable