Let the good times roll. That was the gist of a startling Statistics Canada report that hit the front pages last week. For the first time in decades, “real national income” is growing faster in Canada than in the U.S. — up by 15.6 per cent since 2002, versus 8.6 per cent in America. Thanks to record global commodity prices, the soaring loonie and the Western oil boom, we’re no longer the continent’s poor cousin.

Statistics Canada’s conclusion was as cheerful as it was blunt: “In three years, real income levels have returned to the levels of the mid-1980s. Much of this has been due to the much maligned resource economy.” But can three years of runaway commodity prices really reverse an entire country’s economic destiny? If this sounds too good to be true, maybe it is. Much as I hate to interrupt some chest-thumping, this rosy conclusion needs some serious second thought.

Let’s start with definitions. Most economists focus on GDP. That’s the value of what we produce each year. On this score, Canada has nothing to boast about. Its GDP per person, adjusted for inflation, is up 6.9 per cent since 2002, versus 8.4 per cent in the U.S.

So how did Statistics Canada construct such a happier ranking? It focused on an unconventional measure of prosperity called “real national income.” This requires two key adjustments to the GDP numbers. First, it incorporates the rise in Canada’s international terms of trade: the value of our exports, compared with what we pay for imports. Since prices for our oil and minerals have soared in recent years (thanks to China, OPEC and the Middle East), our terms of trade have improved.

But, while this looks good for the “nation,” whether it benefits individuals depends on whether lower import prices are passed through to consumers. As the four million Canadians who went shopping in America last month can readily attest, this has not occurred.

Statistics Canada also folded in profits that Canadian-based companies and financiers have pocketed on investments in other countries. There’s been a $30-billion turnaround in this net investment income flow since 2001, mostly thanks to booming foreign investments by Canadian-based companies. This outflow of investment actually undermines our economy at home. But it generates a positive entry on the national income scorecard.

So, if you own an oil company or have big investments in a foreign subsidiary, you’re doing much better than the GDP numbers make it seem. But if you work for a living, you still must earn your prosperity the old-fashioned way — by producing it. In other words, Canada’s true prosperity depends on what we make, how efficiently we make it and what we get paid for it.

Sadly, Canada’s productivity performance during the resource boom has been abysmal. High-productivity industries such as automotive manufacturing are shrinking rapidly, battered by the loonie. The efficiency of resource extraction, meanwhile, is deteriorating, as companies are enticed by inflated prices to exploit lower-quality deposits. Statistics Canada has confirmed that, relative to the U.S., Canada’s productivity performance is plunging. Our economic star can’t possibly rise for long, with our productivity heading the other way.

Meantime, real incomes for working Canadians are barely inching along. Adjusted for consumer prices (the ones we actually pay, not the mythical terms of trade), compensation per employed worker is up 5.8 per cent since 2002 — a third as much as real national income per capita. It seems, then, your share of this resource boom depends on which side of the national tracks you inhabit.

In the real economic race, using a one-time resource windfall to boost performance is akin to using steroids to win a 100-metre dash. We might look good for a while. But, in the long run, our national wealth depends on our real economic muscle, not on the fluctuating price of whatever is buried in the dirt beneath our feet. And by this measure, we are still in the slow lane.

Jim Stanford

Jim Stanford is economist and director of the Centre for Future Work, and divides his time between Vancouver and Sydney. He has a PhD in economics from the New School for Social Research in New York,...