Despite the headlines about high deficits because of the cost of COVID-19 programs, governments must avoid the knee-jerk reaction of drastically cutting spending right now. While deficits can be problematic if left unchecked and persistent for too long, history and context matter a great deal. Canada is among the wealthiest countries in the world — and if thought of as a business, say Canada Inc., it is undoubtedly a great investment opportunity. Why? Because Canada has the natural resources that the world will need for a very long time. It has an educated, modern and robust “knowledge” economy. As a society, Canadians are often seen to be friendly, fair and accepting, not to mention that Canada is a very desirable place to live. These factors and many more increase the “valuation” of Canada Inc. In time, as treatment and prevention for COVID-19 come online, Canada Inc.’s valuation will only go up — perfect in a world of volatile investments with increasingly risk-averse buyers.
Productivity is the quintessential determinant of a country’s long-term growth. At an individual level, a person’s own health directly correlates with their productivity. But the COVID-19 crisis has left our health care system backlogged and fragmented. No amount of management creativity on the part of health care administrators or policy-makers can restore and improve our health care system without money — and lots of it.
The question, then, is where the funding to improve our health care system will come from. To date, spending on COVID-19 by all levels of government in Canada has reached a whopping 8 percent of GDP. Governments rarely spend that much money on any single initiative, but COVID is a stark reminder that large endeavours can be undertaken if there’s the political and public will — and certainly a global pandemic would galvanize it. A prominent historical example of large-scale government spending, which recently celebrated its 50th anniversary, is the Apollo moon project: the United States spent close to 3 percent of the country’s GDP on achieving its goal.
Drawing upon successful global examples, we believe that Canada should create a sovereign wealth fund to ensure our health care system is properly funded moving forward. Call it Canada’s very own “moon shot”: funding to match how we envision our health care system expanding to meet the demands upon it. In broad terms, a sovereign wealth fund is a special-purpose investment owned by a government to hold, manage or administer assets primarily for medium- to long-term macroeconomic and financial objectives.
This is not a far-fetched idea. Two wealthy countries, Norway and Singapore, already operate successful sovereign wealth funds, which help fund their world-leading health care systems. (Singapore has an especially fine system: Singapore General Hospital is one of the top 10 in the world, along with the Toronto General Hospital.) As everyone knows, prevention is better than a cure, and a properly funded health care system would generate significant savings from prevention as compared with the underfunded, reactive system that Canadian health care has now become.
The investment that will be necessary to improve and evolve telemedicine and mobile health care and to stimulate technology in order to maintain and sustain this shift will be significant in the years ahead.
If $85 billion (approximately 3 percent of our GDP) were to be used to start an endowment for a Canadian health care sovereign wealth fund, here’s what could happen. Assume a modest rate of return, 6 percent (the return would fluctuate as the world economy ebbs and flows). That translates to an extra $5 billion (likely more) to be deployed into our health care system annually. Any front-line practitioner will tell you that would mean less-overworked health care professionals, sufficient equipment for patient care, quicker deployment of cutting-edge tools — overall, a system that functions much more smoothly.
COVID-19 has forced practitioners to rapidly develop novel health care practices, and these changes will have long-term implications. In-person care has been ramped down, and telemedicine and telehealth have been thrust to the forefront of clinical care. The investment that will be necessary to improve and evolve telemedicine and mobile health care and to stimulate technology in order to maintain and sustain this shift will be significant in the years ahead. The system also faces the formidable task of creating the increased facilities, budgets and staffing that will be required to deal with the backlog of care from services being reduced to 10 to 15 percent of capacity over the past months. Cancer surgeries are backlogged, health-care-related research has ground to a complete halt, and most elective clinical visits are still months away from resuming at a “new normal” rate.
Investing in the care of our people — while difficult to directly compare with return on stocks, bonds and other financial instruments — will generate considerable returns in the form of a healthy, productive and innovative population. In turn, that well-cared-for population will be more productive. Increases in productivity filter through the tax system in the form of property taxes, service fees, sales tax and income tax, among other channels. As the economy recovers, the focus will be on raising government revenues to repay this significant debt — and rightly so. With a healthy and productive population, a wide array of revenue-generating possibilities is available to policy-makers. After all, in a low-productivity economy, policy-makers cannot tax what is not there!
In the aftermath of the COVID-19 crisis, Canada must be bold and forward-thinking with respect to its economic policies and its public health care policies. COVID-19 has generally lowered asset prices across the board, especially on “real” or tangible assets such as commercial real estate. Since sovereign wealth funds are long-term investors, this is the ideal time to establish one and start buying these undervalued assets. A well-managed sovereign wealth fund will create long-term and predictable funding to direct into our cherished Canadian health care system. That system will lead to substantial economic gains in the longer term.