How Canada Lost its Inferiority Complex.

Looking back the past 15 years I must say things have changed in our country. Once the butt of jokes from my American friends, Canada today, is in far better shape financially then our neighbours to the south. Where we felt we were the most indebted nation in the early nineties today we look at the USA and also Europe and realise that these countries are in terrible shape economically. I just got back from Ireland and there is no question Ireland once the “Celtic Tiger” is the “Celtic Pussy Cat”. The country is on the verge of bankruptcy.

Remember when “Canada was a Northern European welfare state in the worst sense of the term, and very proud of it.” Compared to the U.S., Canada had low economic growth, high unemployment, and a lower standard of living—all of which contributed to a constant “brain drain” that threatened to leave us ever further behind. I distinctly remember in the nineties the CEO of Nortel ( remember him) talking about the brain drain and that Canada was going to go to “hell in a hand basket” if we did not do something about our best and brightest leaving our country , most to the USA. Well Nortel is long gone but Canada is thriving.

It started in the mid-nineties when a Liberal-led small-C conservative government led by Jean Chretien (yes he was a Liberal), launched in 1995 a “Program Review” and a massacre of federal public-service manpower. I was working in the federal government during   “Program Review” and the cuts to spending were merciless. The cupboard was bare and everyone knew it. I can really emphasize with my friends in the USA who are going through their version of program review.

In 1996, the total all-level expenditures by Canadian governments were equal to about 47 per cent of a year’s gross domestic product. In a table of Organization for Economic Co-operation and Development (OECD) countries, Canada came in right next to the Netherlands, Norway and Germany—practically definitive “Northern European welfare states”—at around 49 per cent. The U.K. stood far behind, at 42 per cent. The U.S. was at 37.Source

Today, although Canada’s federal government is thought to have taken on a small structural deficit, its overall fiscal health is nowhere near as poor as it was in the early and  mid-’90s, when debt-servicing costs were eating up a third or so of federal revenues.  As of 2009 we had dropped nearly to the bottom of the OECD table in expenditure-to-GDP ratio, at 44 per cent. (The previous year, before the economic crisis hit and the stimulus taps were opened everywhere, the figure had been under 40 per cent.) Oil-rich Norway is still two points ahead, but Germany is at 48, and Holland and the U.K. over 51. Most remarkably of all, the U.S., at 42 per cent, has almost caught up. .  Source

I guess it is safe to say that Canada when it comes to the economy has taken a conservative bent at least by international standards. Our unemployment insurance is OECD average for the short-term unemployed and well below average for the long-term; we simply do not let employable adults rot away on the dole as France or Britain or Germany do. The “tax wedge” gouged out of Canadian labour income, including net worker losses on social security, is low at all income levels. We have about half as many working-age adults on disability benefits as the U.S., and far fewer than in Western Europe generally. We rank among the “worst” in the OECD’s index of employee-protection regulations, meaning that Canadians can be fired or laid off more easily than almost anyone else. We score low in state control of business, low in product regulation, and low (lower than the U.S.) in barriers to entrepreneurship—that is, in red tape. Source

Most importantly Canada has shed much of our traditional inferiority complex with regard to the United States. No one is talking about a brain drain anymore. I can remember as a professor at both of the business schools in Ottawa many students talking about moving to the USA, but you don’t hear that from business students today. Yes they want to stay in Canada because they realise that the USA has close to 9% unemployment (in the nineties it was around 4 or 5 %).  The quarter-century trend of the Canadian dollar losing about a cent a year against the U.S. dollar has reversed. Today our dollar is almost $1 .05 US ( I remember when our dollar was over 30 cents lower than the American dollar) . I have seen friends and families in the USA , especially Florida, California and Arizona seeing the value of their homes plummeting to prices they never dreamed imaginable and many “scavenger”  Canadians buying homes in the sunshine states for  “ a song”

Oh yes , we have not turned totally conservative yet …  Canada is still the world’s rogue anarchist when it comes to abortion, and Canadians take more pride every day in granting access to same-sex marriage.

For more information on how Canada  is outperforming the U.S. on every economic front. See Forbes article  by Frank Miniter.