Canadian Solution
Canada is doing well nowadays (according to Fareed Zakaria) in spite of having dreaded universal health care that some argue would bankrupt our nation. In spite of that, Canada is seemingly doing well.
Canada has done more than survive this financial crisis. The country is positively thriving in it. Canadian banks are well capitalized and poised to take advantage of opportunities that American and European banks cannot seize. The Toronto Dominion Bank, for example, was the 15th-largest bank in North America one year ago. Now it is the fifth-largest. It hasn’t grown in size; the others have all shrunk.
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Canada has also been shielded from the worst aspects of this crisis because its housing prices have not fluctuated as wildly as those in the United States. Home prices are down 25 percent in the United States, but only half as much in Canada. Why? Well, the Canadian tax code does not provide the massive incentive for overconsumption that the U.S. code does: interest on your mortgage isn’t deductible up north. In addition, home loans in the United States are “non-recourse,” which basically means that if you go belly up on a bad mortgage, it’s mostly the bank’s problem. In Canada, it’s yours. Ah, but you’ve heard American politicians wax eloquent on the need for these expensive programs—interest deductibility alone costs the federal government $100 billion a year—because they allow the average Joe to fulfill the American Dream of owning a home. Sixty-eight percent of Americans own their own homes. And the rate of Canadian homeownership? It’s 68.4 percent.
Canada has been remarkably responsible over the past decade or so. It has had 12 years of budget surpluses, and can now spend money to fuel a recovery from a strong position. The government has restructured the national pension system, placing it on a firm fiscal footing, unlike our own insolvent Social Security. Its health-care system is cheaper than America’s by far (accounting for 9.7 percent of GDP, versus 15.2 percent here), and yet does better on all major indexes. Life expectancy in Canada is 81 years, versus 78 in the United States; “healthy life expectancy” is 72 years, versus 69. American car companies have moved so many jobs to Canada to take advantage of lower health-care costs that since 2004, Ontario and not Michigan has been North America’s largest car-producing region.
It’s still too cold for me in Canada.
Filed under: Practical Solutions
Canada has been remarkably responsible over the past decade or so.
I think this is the key sentence. Small countries (in terms of population and economy) I think are more understanding about how their country (and more specifically, the government) needs to live within its means. That means (if at all possible) keeping the trade deficit to a minimum and the current account and cash reserve balances at a maximum. Of course that doesn’t mean small countries can’t get into financial trouble, turning to the IMF for loans, but they often ask for the loans precisely for the reasons why they have to live frugally in the first place: they don’t have a large enough tax base to rely upon, and they aren’t necessarily able to borrow huge amounts of money on the international capital markets.
As a Canadian, I think it should be pointed out that, contrary to what the article states, Canada is not currently thriving; Canada is in a recession, it’s just not as bad as in a lot of other countries.
Canada was in the same position as the US now of having endless deficits and ever increasing debt servicing costs up until the early 1990’s. After trying a few less painful methods it was discovered that the only way to eliminate deficits is to increase taxes and decrease services. I know that is almost heretical to say, but unless the US gets their deficits, both budgetary and trade, under control things are only going to get worse. Governments can be crushed under the weight of its debt just like individuals. Maybe now is time for stimulus, but you need to get out from under its weight as soon as possible.
By the way, although it has a smaller muslim population than the US, Canada is very Muslim friendly and is a very good place for Muslims to live.