Why Canada Can’t Win Forever

September 24th, 2011 at 10:15 am David Frum | 28 Comments |

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In my column for the National Post, I ask if Canada is about to face an economic downturn:

Is Canada’s luck finally running out?

Through three bad economic years, Canada has emerged as an island of relative stability amid the global storm. More Canadians are working today than were working in the summer of 2008. No other major Western economy has done so well.

Canada has the lowest debt burden of any G7 country. The turmoil in the Eurozone and the gloom in the United States feel very far away from the stability and prosperity of Canada.

Yet Canadians should be warned:

I was talking the other day to a diplomat from a small northern European country. I congratulated him on his nation’s relative economic success. He shrugged. “It’s only a matter of time. You cannot long remain a winner country in a loser region.”

The same principle applies with nearly equal forces on a loser planet.

Click here to read the full column.

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28 Comments so far ↓

  • Arms Merchant

    “Declining home prices mean that Canadians may find themselves owing more on their homes than their homes are worth.”

    Sorry, I don’t see it. My understanding is that the down payment and equity requirements for a home loan in Canada are much stricter than they were in the U.S. pre-2008. The crisis in the U.S. was brought about because the banksters bundled liar loans and junk with good paper and were caught.

    Sure, the Canadian housing market may take a hit if the economy slows, but the impact will be significantly less. In the U.S. so many were upside down, when they went unemployed they simply walked away from their mortgages, overwhelming the market with thousands of properties at once.

    More worrying is the long term trend in the developed world of high labor costs, increasing costs of government at all levels, and declining manufacturing base. Unless western governments stop punishing businesses and stifling innovation, they won’t see the structural changes needed to compete globally.

  • armstp

    Sorry, but when you have much of the natural resources on the planet and only a population of 35 million you will only continue to get relatively more wealthy, particularly as those resources become more scarce and expensive. Based on just natural resources Canada has a very very bright and rich future. There is no reason not to expect that in the future Canada will not be the most wealthy and richest country on the planet, particularly on a per capita basis.

    • overshoot

      I don’t get it. What good do diamond mines and oil sands do for a farmer in Ontario?

      • chephren

        All that synthetic oil, uranium, copper, zinc, gold and all those diamonds fund transfer payments to provinces that benefit all Canadians.

        • overshoot

          I still don’t understand. Do all of the farmers in Ontario own shares in those mines etc?

          Or are the operators just charitable sorts who put philanthropy ahead of their stockholders?

        • Watusie

          Maybe it is because the mine shareholders will, enjoying their increased wealth, eat more, thus increasing demand for the Ontario farmers products.

  • Watusie

    Amazing – DF thinks that it is by virtue of “luck” that Canada has the lowest debt burden of any G7 country.

    It isn’t due to luck.

    It is due to their rejection of supply-side economics, coupled with belief in the efficacy of sensible, sound regulation. Having sounder banking and housing policies, they avoided getting embroiled in the mess that engulfed us.

    We have had three years of bad economic conditions and Canada has had three years of better economic conditions not because we had “bad luck” and they had “good luck”. We had GWB. We had and still have the Republican Party. That is the difference.

    • dgm

      The Conservative government shouldn’t get too much credit for these policies.
      Most of this came from the previous Liberal administration with John Turner as Finance minister. The Conservatives inherited a good fiscal situation and good bank regulations from the Liberals and then, because they only had a minority government, they were prevented from screwing it up by the Liberal opposition.

      I am sure that if they had had a majority they would have immediately cut taxes and reduced regulation and done everything they could to drive Canada into the same mess the U.S. got into under Bush.

      They finally achieved a majority a few months ago. We shall see what happens.

      • paul_gs

        You’re kinda out of date dgm. It was Paul Martin as finance minister.

        And this is the third election in a row the Conservatives have won. They keep getting stronger and the Liberals weaker.

  • blowtorch_bob

    One big reason why Canada avoided the financial storms is that Canada didn’t deregulate its banking system like the rest of the world -which allowed banks to funnel savings accounts in ponzi schemes.

    Having said that the Harper gov’t gave Cdn banks something like $75 billion back in the 09 budget to cover their losses in the downturn.

  • Rob_654

    Funny how such a “socialist” country has fared so much better than the bastion of free market economics just to their south…

    The only thing Canada has to fear is a radical shift to the right to replicate the wonderful economic policies we have followed in the U.S. which lead to insane risk taking by companies, losses that taxpayers had to save companies from, no willingness for Americans to pay for what they want the government to spend on wars and the wholesale give away of wealth so appease the corporate masters who only care about their own short term gains to maximize the wealth of a select few…

    • chephren

      ‘Soviet Canuckistan’ (Pat Buchanan’s name for Canada) is socialist only to far-right fringe-dwellers.

      Canada privatized almost all of its government-owned businesses 20 years or more ago. Federally and provincially-owned railways, airlines, phone companies, utilities and power grids – almost all are now in the private sector. The federal government is about to privatize the last major sectoral government monopoly, the national wheat board that buys most crops from Canadian farmers.

      If you consider the vast number of private contractors in the US (mostly in the military and intelligence sectors), whose revenues come exclusively from government and which employ millions of people (more than 1 million of whom have top security clearances), America is more socialist in its way than many countries conservatives love to demonize for their socialism.

      Public single payer health insurance is the standard means of delivering health care in every capitalist country in the world except the US. Single-payer, ironically, is far less bureaucratic than the bloated, over-manned US health insurance industry. Canadian doctors are almost all self-employed private practitioners – more, proportionally, than in the US, where many doctors are employees of HMOs and corporate hospitals. The overhead cost of single-payer is a fraction of American private insurance, which for all the rhetoric of the Right is stubbornly resistent to competitive market discipline.

      The US government has repeatedly bailed out the financial sector over the past 20 years – in the S&L crisis, the Long-Term Capital Management meltdown, and the recent banking/mortgage/credit blowup. Isn’t that socialism? Canada hasn’t had a major bank meltdown since 1923. Not a cent in government money was spent to recapitalize a Canadian bank – there was no need as they all stayed profitable through the meltdown.

      Who are the socialists here? Not Canada.

  • Frumplestiltskin

    Being that the overwhelming majority of Canadians live within a short distance of the US border, it only makes sense that they will take something of a hit but as everyone points out above, a downturn is not necessarily a catastrophe, only if the US has a full blown depression will Canada take a huge hit otherwise I think David is hyperventilating a bit.

  • overshoot

    “I think David is hyperventilating a bit.”

    One might suspect that David is very hard at work constructing a conceptual framework to explain why “socialist” Canada is doing better than the USA and why it will soon be doing worse.

  • NRA Liberal

    Our Tim’s-lovin’ cousins to the north serve as an effective refutation of the doctrine that financial sector deregulation always leads to the best outcomes.

    • overshoot

      It only looks that way. Give them time.

      Even if Canada’s radical socialism APPEARS to be producing good results in the short run, over time the inherent rot will show. Sort of like the way that other countries might SEEM to have better health care by manipulating statistics like infant mortality, the truth is that the USA has the best health care system in the world. If it weren’t better than anywhere else, why do you think dictators from all over come to the USA for major treatments, huh?

      People in Canada are actually miserable, but have been lied to so thoroughly that they don’t know how wretched they are. No good can come of it.

      • UncleLew

        Overshoot, that is easily one of the funniest posts in a long time.

      • joseelar

        Overshoot:

        Keep you head buried in the sand…..

        You obviously feel the need to build yourself up by tearing us down…..why are you worried – aren’t all you Americans ‘exceptional’…..!

    • rockstar

      +1

  • Lonewolf

    David, the hem of your schadenfreud is peeking out …

  • ottovbvs

    Whose the guy on the right? Christie’s twin brother? And Watusie is right. It”s no accident of fate that Canada has a such a low debt burden. It’s entirely the product of Canadian govt fiscal and monetary economic policy over the last ten years which has been completely unlike ours!

  • Graychin

    A “loser planet”?

    Mr. Frum, if this is your version of optimism, then I’m ready to drink my hemlock right now. Bookended with your vision of our cities of the future filled with a huge underclass? Is that all there is in your world? Accumulate wealth for you and your friends ahead of the world going all Mel Gibson on us?

  • WestQuake

    Mr. Frum’s NP column has a certain logic but is woefully wrong. If Chinese investors have to dampen their appetite for Vancouver real estate – as they have done in the past – this will have a predictable supply/demand effect on high-end ($1 million plus) homes and condos in Vancouver but not much effect on home prices in Saskatoon or Saguenay. Canadian familes are carrying too much debt which will hurt when interest rates start their inevitable rise. However, they are financially better off than their American counterparts for two reasons: the value of their homes is higher than the mortgage on it and they are not health care prisoners of their current employer.
    Mr. Harper deserves zero credit for managing the Canadian economy through the recession. His so-called Economic Plan consisted of government-paid political ads in TV, radio and print with a website link that replayed the same ads. The stimulus plan consisted of Conservative pols holding up pictures of giant Conservative Party cheques. Money was wasted on billion dollar G8/G20 weekend parties. The rest was more pork spent on gazebos in Tory constituencies. Meanwhile, parts of Montreal infrastructure tumble to the ground almost every month.

  • joseelar

    Mr. Frum,
    Canada will be fine. We have one very important element that may just save us and that is ‘political will’. We have a Government that WORKS! Unlike the dysfunctional and ineffectual US President, Senate and Congress.

  • paul_gs

    26 posts on the topic of Canada? That must be a new record for the Frum Forum.

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