Canada has an investment crisis—and we need more than a Wall Street pitch to fix it

Prime Minister Mark Carney recently stood before the Economic Club of New York and pitched Canada as a premier destination for global capital. It’s a pitch he has been making since Davos—and one that Canada badly needs to land.

The data suggests we’re not even close.

The trends underlying Canada’s poor business investment performance have been building for a decade. They point to a crisis on several fronts: Canadian capital is leaving faster than foreign capital is coming in, and within our borders, businesses are investing less in the tools and technology that make workers more productive and drive higher wages. Making matters worse, entrepreneurs are leaving too.

For most of the past decade, more Canadian capital has left the country than foreign capital has entered, a signal that domestic returns are not competitive. In 2014, the accumulated stock of Canadian investment abroad exceeded foreign investment here by $100.5 billion, roughly 14 percent of the inward stock. By 2025, that difference had grown to $828.4 billion, more than half the entire inward stock—ironically, roughly the same figure as the Carney government’s own target for new investment into Canada.

Graphic Credit: Janice Nelson.

Some economists view Canadian outward investment as a sign of strength; our pension funds and corporations are diversifying and deploying capital where returns are highest. That view deserves consideration. But it also raises a question policymakers can’t ignore: Why are returns consistently seen as higher elsewhere? When Canada’s major pension funds and corporate champions systematically prefer the United States and other markets, it signals something about domestic investment conditions that a Wall Street roadshow can’t paper over.

As evidence that foreign investors are starting to believe in Canada, the Carney government points to FDI inflows of $96.8 billion in 2025, noting it’s the highest nominal level since 2007, which registered $125.5 billion. But that’s a misleading comparison. The economy has more than doubled in size since 2007. As a share of GDP, Canada attracted 2.9 percent in 2025, less than half the investment intensity of its supposed benchmark year (8 percent). And nearly half of last year’s inflows came through mergers and acquisitions of existing businesses—foreign firms buying assets already here rather than building new ones.

Graphic Credit: Janice Nelson.

Another dimension of the crisis is purely domestic. Between 2014 and 2024, the inflation-adjusted stock of machinery and equipment—all our physical tools, robots, and assembly lines—fell 3.3 percent. Canadian businesses today operate with less physical productive capacity than they did a decade ago, even as the population grew 16.4 percent and the economy expanded 21.1 percent.

Perhaps most concerning of all, the annual outlay of total business investment per worker—a direct driver of productivity, paycheques, and living standards—peaked at roughly $20,900 in 2014 and had fallen to $17,600 by 2024, a 16 percent decline. Over the same period, the United States increased business investment per worker by 26 percent, and workers across the Eurozone and the broader OECD also pulled ahead. Canadian workers now receive the equivalent of 55 cents for every business dollar invested in their American counterparts.

Graphic Credit: Janice Nelson.

The path to higher wages runs through productivity, and productivity runs through investment. Canadians are getting less of both.

The innovation picture tells the same story. Venture capital investment, the fuel for our startups and scaleups, has fallen to less than half its pandemic peak as a share of GDP and shows no signs of recovering. Business R&D spending sits at 1.1 percent of GDP, well below the OECD average of 2.0 percent, a gap widening for years. Amazon alone spends nearly three times more on R&D than the entire Canadian business sector combined.

And our most promising entrepreneurs are voting with their feet. Among Canadian founders of venture-backed startups who raised over $1 million in 2024, 48 percent were based in the United States, up from just 19 percent in 2016.

All these problems reinforce each other. When domestic investment conditions deteriorate, capital seeks better returns abroad, further weakening productive capacity at home. When businesses underinvest, workers have fewer and older tools, productivity stagnates, and wages fall behind. It’s a vicious cycle.

The prime minister is right to set ambitious investment targets and to make the case for Canada abroad. But we need bold policies, not targets and pitches. The broad conditions that shape investment decisions for all firms and entrepreneurs—competitive taxes, light and predictable regulation, and greater competition—have eroded.

A lost decade of investment will only be reversed when the economic policy conditions in Canada improve. The investment will flow after.

Charles Lammam is Senior Fellow at the MEI and the author of “Canada’s Investment Crisis Requires Policy Attention.” The views reflected in this opinion piece are his own.