Unless the Winter Olympics are on television or someone is clubbing baby seals, Americans don’t pay much attention to what’s happening in Canada. It’s as if we live in a house with a set of quiet, orderly neighbors on one side and a bachelor pad with drunken parties, girls in the hot tub and occasional gunshot eruptions on the other. To whom would you pay more attention?
I dare say Americans could correctly name the president of Mexico (Filipe Calderon) over the prime minister of Canada (Stephen Harper) by a margin of 5-to-1. That’s too bad. While we have every reason to fear the disorder spilling over from our increasingly lawless neighbor to the south, our well-mannered Canadian neighbors have pulled their act together. We could learn a lot from them.
Look what’s not happening in Canada. There is no real estate crisis. There is no banking crisis. There is no unemployment crisis. There is no sovereign debt crisis. Recent reports suggest that consumers are loading up too much debt, but Canada shares that problem with nearly every other country in the industrialized world.
Among the G-7 nations, which also include the United States, France, Japan, Germany, the United Kingdom and Italy, Canada’s economic activity has come the closest to returning to the pre-recession peak. The country has recovered three-quarters of all jobs it lost. The International Monetary Fund estimates that Canada will be the only country among the G-7 have achieved a balanced budget by 2015.
Now, instead of expanding Canada’s welfare state, the conservative government led by Mr. Harper is intent upon building the nation’s global competitiveness. Our friends in the Great White North cut their corporate tax rate to 16.5 percent on Jan. 1 and will see it drop to 15 percent next year. That compares to the current U.S. corporate tax rate of 35 percent. That will give Canada the lowest corporate tax rate among the G-7 nations and an eye-popping advantage for businesses wondering whether to locate on the U.S. or Canadian side of the border.
The last time Canadians really caught Americans’ eyes was when prime ministers such as Jean Chretien and Paul Martin, both leaders of the Liberal Party, were proving uncooperative in the realm of foreign policy. American media played up disagreements over the invasion of Iraq and Canadian participation in the American National Missile Defense Program, which made President George W. Bush look bad and confirmed the narrative that his cowboy foreign policy had alienated old friends around the world. By contrast, when Canadian soldiers became active combatants in Afghanistan, the American media showed little interest.
But that’s nothing new. Except to note how well or how poorly Canada’s national health care system was working, Americans have paid little heed to news coming out of Ottawa. The titanic effort of both Canada’s liberal and conservative parties in the 1990s and 2000s to rein in government spending largely escaped our notice. Nor did it ever occur to anyone to wonder why, with our economies so closely entwined, U.S. housing prices were busting through the roof while Canadian houses remained so sensible.
It turns out that Ottawa’s housing policies and banking regulations tempered the boom in real estate prices. No tax deductions for mortgage interest payments. And get this: buyers actually had to make down payments on their houses. Because there was no real estate bust, there was no banking crisis. (Indeed, healthy Canadian banks are snapping up U.S. financial assets.) Despite the lack of public policies geared toward stimulating homeownership, Canadian homeownership was 68.4 percent in 2008. That would be a higher number than in the United States , which was 67.4 percent in 2009.
Lesson to Americans: if you want affordable housing, stop promoting policies to make it more “affordable.”
Meanwhile, Canada has many of the same assets that Americans like to brag about, such as an immigrant tradition that invites foreigners to live and work in the country. On a per-capita basis, the rate of legal immigration to Canada is comparable to that in the U.S. Settling in world-class, creative cities like Toronto and Vancouver, foreigners add immeasurably to the nation’s wealth-creating capacity.
Talented Canadians have long regarded the United States as the land of opportunity. It may not be long before Americans see our northern neighbor as the land of the future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.