cent, and by the mid - 1990s it had climbed to 70 per cent. increasingly, through the late 1980s and early 1990s, the growth in government spending raised concerns about whether this represented the most efficient use of the economy ’ s resources. from a policy perspective, the greatest concern was that persistent large deficits were pushing canada ’ s debt - to - gdp ratio to unsustainable levels and driving up risk premiums in our interest rates. the economic costs of canada ’ s rising indebtedness became very clear after 1991, when our inflation rate came down quickly, but medium - and longer - term interest rates were slow to respond. one important reason for that was the persistence of high risk premiums because of fears that governments might be tempted to reduce the debt burden through inflation – in effect, by printing more money. canada ’ s vulnerability to such concerns became particularly evident during the mexican currency crisis. high interest rates meant that we had to pay more of our income to foreign holders of our public and private sector debt. this made us poorer as a nation. and these high rates discouraged investment which, to some extent, relates to the third “ disappointing ” trend of the past quarter century – the slowdown in productivity growth. the slowdown in productivity growth productivity has been at the centre of many public discussions in canada recently. for good reason, too, since productivity is critically important to growing incomes and rising standards of living over time. unfortunately, such discussions are complicated by the fact that there is more than one measure of productivity, and there often seems to be some difficulty in distinguishing between the growth and the level of productivity. things become even more complicated as one gets into cross - country comparisons. after a strong showing from the end of the second world war to the early 1970s, our productivity growth became lacklustre. output per worker slowed from an average rate of about 3 per cent in the 1950s and 1960s to 1 per cent in the 1980s and 1990s. productivity growth also slowed in other industrial countries, including the united states, over this period. indeed, average gains in labour productivity in the canadian and u. s. business sectors have been roughly similar in the past 25 years. this means that the gap in productivity levels in favour of the united states has not really widened ; but neither has it narrowed. moreover, growth in u. s. productivity seems to have picked up strongly in the last year or so. i do not have a complete explanation for the productivity slowdown in

mr thiessen evaluates the performance of the canadian economy at the end of the 20th century address by the governor of the bank of canada, mr gordon thiessen, before the canada club in london on 2 june 1999. as the curtain comes down on the twentieth century and we move on to the next millennium, it is difficult to resist the temptation to be both retrospective and prospective. ask canadians to think back and many will tell you that the economy and they, as individuals, have been through some difficult times. those with longer memories, however, will recall the remarkably positive climate between the end of the second world war and the early 1970s. canada came out of the war with a relatively strong economy compared with the ravaged european countries. moreover, there were sizable and sustained gains in productivity through the 1950s and 1960s. these reflected the revolution in agriculture and the forced modernization and expansion of canadian industry during the war as well as the rapid changes in technology and industrial processes that followed. all this led to a substantial rise in canadian standards of living instead of the post - war depression that many had feared. and despite the exodus of workers from agriculture, the overall unemployment rate remained low. at the same time, rapid economic growth generated rising tax revenues that governments could spend on an increasingly wider social safety net without taxpayers feeling much of a pinch. compared with this post - war prosperity, our economic performance over the subsequent quarter century has been the source of some disappointment and concern. various explanations have been advanced for this less - favourable record since the early 1970s. there are four trends in particular that i would highlight in this regard : high inflation in the 1970s and 1980s ; large and rising fiscal deficits from the mid - 1970s to the mid - 1990s ; a slowdown in productivity growth ; and a decline in the prices of primary commodities. tonight, i propose to comment on these four trends and their effect on the economy over the past 25 years. much of the sense of economic disenchantment that canadians have been feeling in the 1990s has been related to the difficult process of reversing these trends or adjusting to them. fortunately, considerable progress has been made on several fronts. hence, there are grounds for optimism regarding canada ’ s economic future. the harmful effects of high inflation the rate of inflation which, after getting through some of the post - war bottlenecks, averaged just over 2 per cent in the period to 1972, more than tripled over the next two decades. this pickup in inflation was