Illustration by James Clapham
Hardheaded Socialism Makes Canada Richer Than U.S.
On July 1, Canada Day, Canadians awoke to a startling, if pleasant, piece of news: For the first time in recent history, the average Canadian is richer than the average American.
According to data from Environics Analytics WealthScapes published in the Globe and Mail, the net worth of the average Canadian household in 2011 was $363,202, while the average American household’s net worth was $319,970.
A few days later, Canada and the U.S. both released the latest job figures. Canada’s unemployment rate fell, again, to 7.2 percent, and America’s was a stagnant 8.2 percent. Canada continues to thrive while the U.S. struggles to find its way out of an intractable economic crisis and a political sine curve of hope and despair.
The difference grows starker by the month: The Canadian system is working; the American system is not. And it’s not just Canadians who are noticing. As Iceland considers switching to a currency other than the krona, its leaders’ primary focus of interest is the loonie -- the Canadian dollar.
As a study recently published in the New York University Law Review pointed out, national constitutions based on the American model are quickly disappearing. Justice Ruth Bader Ginsburg, in an interview on Egyptian television, admitted, “I would not look to the United States Constitution if I were drafting a constitution in the year 2012.” The natural replacement? The Canadian Charter of Rights and Freedoms, achieving the status of legal superstar as it reaches its 30th birthday.
Good politics do not account entirely for recent economic triumphs. Luck has played a major part. The Alberta tar sands -- an environmental catastrophe in waiting -- are the third-largest oil reserves in the world, and if America is too squeamish to buy our filthy energy, there’s always China. We also have softwood lumber, potash and other natural resources in abundance.
Policy has played a significant part as well, though. Both liberals and conservatives in the U.S. have tried to use the Canadian example to promote their arguments: The left says Canada shows the rewards of financial regulation and socialism, while the right likes to vaunt the brutal cuts made to Canadian social programs in the 1990s, which set the stage for economic recovery.
The truth is that both sides are right. Since the 1990s, Canada has pursued a hardheaded (even ruthless), fiscally conservative form of socialism. Its originator was Paul Martin, who was finance minister for most of the ’90s, and served a stint as prime minister from 2003 to 2006. Alone among finance ministers in the Group of Eight nations, he “resisted the siren call of deregulation,” in his words, and insisted that the banks tighten their loan-loss and reserve requirements. He also made a courageous decision not to allow Canadian banks to merge, even though their chief executives claimed they would never be globally competitive unless they did. The stability of Canadian banks and the concomitant stability in the housing market provide the clearest explanation for why Canadians are richer than Americans today.
Martin also slashed funding to social programs. He foresaw that crippling deficits imperiled Canada’s education and health- care systems, which even his Conservative predecessor, Brian Mulroney, described as a “sacred trust.” He cut corporate taxes, too. Growth is required to pay for social programs, and social programs that increase opportunity and social integration are the best way to ensure growth over the long term. Social programs and robust capitalism are not, as so many would have you believe, inherently opposed propositions. Both are required for meaningful national prosperity.
Martin’s balanced policies emerged organically out of Canadian culture, which is fair-minded and rule-following to a fault. The Canadian obsession with order can make for strange politics, at least in an American context. For example, of all the world’s societies, Canada’s is one of the most open to immigrants, as anyone who has been to Toronto or Vancouver will have seen. Yet Canada also imposes a mandatory one-year prison sentence on illegal immigrants, and the majority of Canadians favor deportation. Canadians insist that their compassion be orderly, too.
This immigration policy is neither “liberal” nor “conservative” in the American political sense. It just works. You could say exactly the same thing about Canada’s economic policies.
Canada has been, and always will be, overshadowed by its neighbor, by America’s vastness and its incredible versatility and capacity for reinvention. But occasionally, at key moments, the northern wasteland can surprise. Two hundred years ago last month, the War of 1812 began. Thomas Jefferson declared, “The acquisition of Canada, this year, as far as the neighborhood of Quebec, will be a mere matter of marching.” The U.S. was comparatively enormous -- with almost 8 million people, compared with Canada’s 300,000. The Canadians nonetheless turned back the assault.
Through good luck, excellent policy and even some heroism, Canada survived the war. But it has taken 200 years for Canada to become winners.
(Stephen Marche is a novelist and columnist for Esquire Magazine. His most recent book is “How Shakespeare Changed Everything.” The opinions expressed are his own.)
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