Quebec in Last Place Regarding Entrepreneurship, Economic Growth

Last month, Quebec’s government tightened its purse strings, and since then, residents across the province have been up in arms over the expected cuts.  Premier Philippe Couillard has pledged to fix Quebec’s economic issues, but a recent report from the C.D. Howe Institute predicts that the process will be a difficult one.

Authored by Philip Cross, the former chief economist at Statistics Canada, the report details the extent to which the economies of Ontario, Quebec and the Maritimes currently rely on public sector versus private sector investment.  Since 2000, public sector investment as a share of GDP has doubled in Quebec to almost six percent.  Conversely, private investment has stalled at seven percent, placing Quebec near the bottom of the list, just a notch above New Brunswick and Nova Scotia.

In order to have business investments, you have to have businesses, and this is the primary source of Quebec’s economic problems.  Statistics Canada released a report in December outlining the rates at which new businesses had been joining and leaving the marketplace in each province.  From 2000 to 2009, no province had lower firm entry than Quebec.  Additionally, in the manufacturing, transportation, retail and finance sectors, more companies actually left the province than joined.  No other province had such a disparity between comings and goings.

Quebec has also struggled in regard to entrepreneurship.  Another report from earlier this year that was conducted by the Global Entrepreneurship Monitor ranked Quebec as dead last in Canada in regard to the percentage of working-age adults engaged in entrepreneurship.

Many are quick to blame Quebec’s business problems on the government, citing the fact that the province reportedly subjects businesses to some of the highest taxes in North America.  Moreover, shareholders have had their rights reduced by the government in the defense of underperforming Quebec companies, thereby inhibiting potential investors.  This puts Quebec in a difficult spot, as private investors are reluctant to step forward and contribute while businesses struggle to profit.

The Quebec government has taken steps to encourage entrepreneurship, doling out state-sponsored funds to those it deemed worthy entrepreneurs.  In March, $230 million was distributed to small and medium sized enterprises.  While the money seems to have helped those specific businesses, it has not done much to encourage new ventures.

Ultimately, in order for Quebec to emerge from last place, more entrepreneurs will need to set up shop while more private investors will need to step in.  Otherwise, the province may have a difficult time rising among the ranks—and tackling its $2.4 billion deficit.