US economy could do worse than look to Canada for ideas

Say this very quietly to your American friends or read it with an open mind if you are yourself American; it might be time for the US to look to other nations for an improved economic model to assist the one that remains in a post recession stall that looks set to continue for a long time to come. When a nation has been seen as the global economic heavyweight for decades any reinvention of roles might take some getting used to. The old saying was ‘when America sneezes the rest of the world catches a cold’ that adage could now be replaced with ‘when America sneezes the rest of the world says – you forgot to take your medicine’. The US need not look too far to find a model that is more efficient, more progressive and more recession resistant than their own and before you ask it still leaves room for profit, growth, success and reward. I doubt my advice will reach the corridors of power but much could be learned by just looking to your neighbour to the North and see how things stand in Canada. I know there’s the pitfall of adopting a healthcare system that isn’t on life support but you have to be ready to adapt and change.

Pushing healthcare to one side, its worth researching how Canada is outperforming the States in a number of critical measurements; unemployment, deficit, earnings and competing earnestly in the ‘new’ global economy. Thats another misconception too, the global economy isn’t new any longer as the realities have been with us for decades it only seems new if you are still adjusting to it. Just like Europe and Japan the US is hampered by fiscal deficits so large as to be almost impossible to comprehend. Meanwhile Canada offers a financial sector that is lean, efficient and by all accounts fully secured. Over the last few years more than 8 million jobs were lost in the United States workforce, even moderate analysts feel that it will take perhaps 4 more years to replace those lost jobs, if things don’t take a downward turn. Meanwhile Canada has recovered nearly all jobs lost in the downturn with expectations being that Q4 will see the labour force returned to pre-recession levels.

Its not by simple chance that the Canadian situation finds itself on much firmer footing than most other developed economies, the safeguards in place were primarily the result of experience. While the US still fears that regulation means the market won’t find it’s ‘natural balance’ there is currently no balance in place which led to an unregulated Wall Street gambling on a bull market that never arrived in the middle of the decade, lending practices that lacked prudence and security all merged with a reliance on imports that could only lead to catastrophe. Canada itself faced much less regulation in the early 1990’s which when coupled with outrageous government spending blossomed debts to 70% of total output a recipe that led to deep recession at that time. The measures since implemented have left Canada with a foundation with subtle differences to Europe and Canada, differences that have ensured the savings and loans markets can not marshall full control nor can spending escalate the way it has in these other markets.

Naturally I’m comparing a market 1/10th the size of the United States but economic principles will essentially work on any model within certain parameters. There is a balance to be achieved with regulation but preventing the likelihood of a collapse that mirrors the one we’ve just experienced should surely be a motivating factor that all governments consider. History repeats itself and never as frequently as in economics.