Free Markets, Not Socialism, Has Enabled Canada To Surpass The U.S. In Wealth
Investor's Business Daily
Posted 07/18/2012 06:51 PM ET
http://news.investors.com/article/618699/201207181851/free-markets-not-socialism-is-why-canada-is-soaring.htm
Wealth: For the first time in history, a major nation — Canada — has surpassed the U.S. in household wealth. So much for Obama's hope and change. The lesson here is that free markets, not socialism, enabled Canada to soar.
To justify even bigger government, our president and his surrogates have told Americans lines such "deficits don't matter," "tax cuts have been tried and don't work" and "free markets have never worked." But Canada, our long-overlooked, and now richer, neighbor, is telling a different story.As of July 1, Canada surpassed the U.S. in net household worth. That's a sign of a nation that's been growing for a sustained period, boosting household wealth .
According to a study by Environics Analytics Wealthscapes published by The Globe & Mail, average Canadian household net worth in 2011 was $363,202, surpassing by $40,000 the $319,970 U.S. average.
Commentators from The Atlantic to Bloomberg News have rush to lay this success to Canada's socialism. That's nonsense. Canada was stagnant for years until it — like, say, Chile in Latin America, moved away from socialism toward free markets.
The U.S., on the other hand, is moving closer to socialism. And not surprising, it finds itself in roughly the same downwardly mobile position as, say, Argentina.
For one thing, Canada has embraced fiscal discipline. Its federal debt is around 35% of GDP compared to the U.S. at 100%. The deficit is 2% of GDP, not 10% as here. At June's G-20 meeting in Mexico, Prime Minister Stephen Harper told heads of state that economic growth and fiscal discipline "go hand in hand."
"We had budget surpluses and a low and falling debt burden when the crisis hit," Harper said. "It is one reason we have weathered the economic crisis so much better than many others."
But austerity isn't Canada's only story. Canada coupled smaller government with the idea of making the private sector bigger. In January, its slashed its corporate income tax rate to 15%, lowest in the G-7. The U.S. rate is 39.2%, the world's second-highest. That's helped Canadian companies create jobs and cut unemployment to 7.2% as the U.S. remains at 8.2%. Foreign direct investment has also surged, hitting a record $26 billion in 2011, fueling even more jobs and wealth.
Canada also opened itself to the world by enacting 11 free trade deals in the last decade. It has three more in the hopper, and is negotiating or exploring deals with 16 others. Among these are some of the world's biggest markets — the European Union, India, Japan and Ukraine, all of which the White House has shunned.
Canada's parliament cut regulations too. A "Jobs, Growth and Long-Term Prosperity" act, passed this year, reformed labor laws and pension costs, again enabling businesses — and household wealth — to grow.
Canada also has kept government meddling to a minimum. Unlike in the U.S., there's no Community Reinvestment Act to foist mortgages on people who can't afford them. That has kept the country out of crisis, while the U.S. housing crash slashed household wealth 30%.
Our northern neighbor also has leaders who recognize the global revolution in energy production and have decided to ride the wave, not fight it. Canada's total oil and natural gas output is soaring. In 2011, output hit 3.3 million barrels a day, but that's expected to double by 2030. [My emphasis. B.]
By contrast, the Obama administration is doing all it can to halt U.S. energy production, stopping the Keystone XL pipeline from Canada, demonizing oil companies and putting much of federal lands off limits.
Canada's success is so obvious to the rest of the world that it's becoming a safe haven for investment. Its bonds are drawing buyers, and its currency, known as "the looney" is rising. Even tiny Iceland is thinking of adopting the Canadian dollar as its own currency.
The cumulative reality is that these policies translate into wealth for an entire country. Canadians are richer, bolder and face a brighter future because they have quietly abandoned socialism and embraced free markets and free enterprise. We obviously need to relearn the lesson our neighbors are teaching: When free markets are embraced, we all do well.
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