Canada faces economic headwinds due to geopolitical change, including a trade war with its closest economic partner , the United States.
Authors
- Mylon Ollila
PhD Candidate in Indigenous Economic Policy, Université du Québec en Abitibi-Témiscamingue (UQAT)
- Hugo Asselin
Professeur titulaire, Université du Québec en Abitibi-Témiscamingue (UQAT)
Canada's policymakers are searching for new, sustainable sources of economic strength. One such source is already here and is being overlooked: the emerging Indigenous economy. It has the potential to boost Canada's economy by more than $60 billion a year .
But Indigenous Peoples are still largely seen as an economic liability to manage instead of an opportunity for growth. It is time for a mindset shift. For it to happen, the federal government should remove unfair economic barriers and invest in closing the employment and income gap.
Canada's future depends on Indigenous Peoples
Economic growth is projected to decline over the coming years for developed nations, with Canada expected to have the lowest GDP of the 38 OECD countries by 2060 . As growth stalls, living standards will decline and governments will face increased fiscal pressure.
Compounding this challenge is Canada's aging labour force . The number of people aged 65 and over is growing six times faster than the number of children aged 14 and under - those who will be entering the job market in the coming years. This demographic shift places additional pressure on pensions, the health-care system and the economy.
But these gloomy projections often overlook one of Canada's comparative advantages: a young Indigenous population, growing at a rate outpacing the non-Indigenous population . While Indigenous Peoples comprise five per cent of Canada's population, they only contribute 2.4 per cent of the total GDP .
If Indigenous Peoples could participate in the economy at the same rate as non-Indigenous Canadians, their GDP contribution could increase from about $55 billion to well over $100 billion annually .
Despite this potential, Canada has largely failed to invest in Indigenous Peoples and reform the colonial structures that create inequality.
While some progress has been made, such as the First Nations Fiscal Management Act that offers communities tools to strengthen their economies, progress is still too slow.
Economic barriers hold back First Nations
There are two parts to every economy: economic advantages and the institutions that make those advantages actionable. Some institutions lower the costs of doing business and encourage investment, while others do the opposite. Investment naturally flows to places that have both economic advantages and low costs of doing business .
In Canada, strong property rights lower the costs of doing business and support the finance of business ventures. An efficient tax system creates predictability and allows governments to provide services . Business-grade infrastructure reduces logistical costs. All these institutions work together to support Canada's economic development.
In contrast, First Nations communities are constrained by Canadian institutions. The Indian Act limits First Nations' authority over their own affairs, segregating them from mainstream finance mechanisms . Unclear legal jurisdiction between federal, provincial and Indigenous governments and weak property rights discourage business investments.
Limited authority and fiscal powers mean First Nations governments cannot provide services at national standards and must depend on other governments.
Compounding these issues is the fragmented, insufficient and culturally inappropriate nature of federal support systems. First Nations people have economic advantages and an entrepreneurial spirit, but they are burdened with unfair economic barriers , such as inadequate infrastructure, limited access to capital and administrative hurdles.
Investing in Indigenous economies is vital
In 1997, the Royal Bank of Canada predicted that not investing in Indigenous Peoples would widen the socioeconomic gap . As predicted, this is what happened .
Canada has consistently chosen to manage poverty instead of investing in growth. While financial support for Indigenous Peoples more than doubled over the last decade , it only resulted in modest improvement in living standards .
The RoadMap Project , a national initiative led by the First Nations Financial Management Board and other Indigenous organizations, proposes a pathway to economic reconciliation. Investing in the Indigenous economy means supporting Indigenous training, providing access to capital for Indigenous organizations and reforming the institutions that continue to impose systemic barriers.
Education is one of the most effective ways to reduce poverty, improve health outcomes and drive economic development . The federal government should therefore support training programs designed to meet Indigenous needs.
Online learning could help remote communities achieve educational goals, but its success depends on major investments in high-speed internet access, which remains lacking in many areas .
Indigenous organizations are best positioned to understand and respond to local training needs. That is why Indigenous control over revenue transfers and program design must be central to any future investments in education. To support this, the federal government should partner with Indigenous education institutions to develop common goals and values .
Financing and supporting Indigenous growth
Indigenous Peoples develop new businesses at nine times the Canadian average, but only receive 0.2 per cent of available credit . Most Indigenous enterprises are small and cannot grow without viable financing options .
Yet, individual Indigenous entrepreneurs and First Nations governments face challenges securing loans and financial support .
Internationally, development banks have been used to fill credit gaps when the private sector is unable to meet the needs of emerging economies.
In Canada, the First Nations Financial Management Board and other Indigenous organizations are calling for a similar solution: the creation of an Indigenous Development Finance Organization . By lending to Indigenous governments and businesses, this finance organization could bridge the gap between the financial markets and the Indigenous economy.
While investments in capacity and development finance are urgent needs, only the dismantling of economic barriers and increased access to effective institutions can assure Indigenous development.
Legislation such as the First Nations Fiscal Management Act and the Framework Agreement on First Nation Land Management can support Indigenous economies through taxation, budgeting, land codes and financial laws. They offer a pathway between the Indian Act framework and self-government, without waiting on lengthy negotiations.
Growing stronger together
Canada's economic future will remain uncertain if short-term solutions keep being prioritized while ignoring the growth potential of the Indigenous economy. Improvements to the status quo are no longer sufficient.
The federal government must support Indigenous-led initiatives like the RoadMap Project to foster shared growth and prosperity for Indigenous Peoples and all Canadians alike. Investments are needed to narrow the employment and income gap through new supports for capacity, access to capital and institutional reform.
Mylon Ollila is a Senior Strategist for the First Nations Financial Management Board.
Hugo Asselin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
