Conventional economic wisdom says that the growth of our national GDP is important because it leads to higher living standards. However, in recent decades this traditional wisdom has been challenged as inequality in income and wealth has grown in Canada and globally. While many Canadians benefit from increases in our collective prosperity, the data are clear that wealthy and high-income individuals are reaping the most from economic growth. And while certain levels of economic inequality are expected in competitive market economies, at current levels, countries risk not only failing to uphold normative ‘good governance’ functions but also risk increased exposure to the many economic, social and environmental problems accelerated by economic inequality.
As a result, arguments are mounting for more inclusive economic growth, defined by the OECD as “economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society”.
One way that inclusive growth can be encouraged is by ensuring markets are sufficiently competitive. Specifically, market competition can foster a more equal distribution of income. Outcomes of competition, like greater productivity and innovations leading to new products or services, can also enhance living standards. In competitive markets, firms may compete on factors other than price — like providing more environmentally friendly and socially conscious products — which have positive spillover effects outside the specific market in which they compete, enhancing living standards. Importantly, sufficiently competitive markets also help operationalize carbon pricing mechanisms and enable the innovation urgently needed to meet Canada’s greenhouse gas reduction targets.
However, this causation is not automatic. But when laws and policies regulating market competition are designed with inclusivity in mind – there is great potential for economic inequality to be addressed at this fundamental institutional level.
In light of the recently announced review of the Competition Act (Canada’s competition law), Leveraging Competition Law and Policy to Promote Inclusive Growth in Canada provides a robust discussion on the problem of un-inclusive economic growth and argues for inclusive growth as path forward, realized in part through reform to Canadian competition law. We put forth a workable definition of inclusive growth – “growth that enhances living standards for all people in Canada” – that can be used to guide the creation of competition legislation that fosters this kind of growth. Building from this definition, this paper presents a framework that articulates how competition law can best contribute to inclusive growth, acknowledging its comparative advantage as a core driver of inclusive growth and its supporting role for other policy interventions directed at promoting inclusive growth. Based on this framework and analysis, this paper puts forward recommendations for legislative reform.
