The Canadian Solution
newsweek.com
newsweek.com
Canada is poor, possibly very poor. On average the amount of money available per square kilometer of land is low, lower than some 'real' third world countries.
This means that outside of the bigger population centers the infrastructure can be seriously lacking.
Trade wars with the US (under the guise of infected beef, logging rules and whatever else the US can come up with to avoid real competition with Canadians, and that all in spite of 'nafta')) have wrecked a good part of the Canadian economy.
One reason Canadian banks are in such good shape is that they have a captive audience, there is hardly any competition (there are very few banks in Canada and they all have - coincidene ? - roughly the same tarrifs for their services. They rip off their customers every chance they get, where else are you going to go ?
Canadians are pretty much enslaved to their banks, I have no other words for it. The amount of misery caused by those 'healthy' banks that I've seen first hand is nothing short of unbelievable and I really would not wish the Canadian banking system upon anybody.
Some facts plagiarized & reworded from a variety of sources: (And just to make things easier, and less prone to stock market crashes I've leaned towards 2005/2006 numbers. Things just get worse for Americans as you bring that year forward.)
- 1 - As of 2005, the median family in Canada was worth US$122,600, according to Statistics Canada, while the U.S. Federal Reserve pegged the median American family at US$93,100 in 2004.
- 2 - In Canada the average amount of personal debt per person is US$23,460. In the U.S. it's a whopping US$40,250. (2005 numbers)
- 3 - In Canada the average amount of personal debt per person is US$23,460. In the U.S. it's US$40,250. (2005) Here many people view non-mortgage debt as a unwieldy burden that needs to be paid off right away. $23k is not really that much in the grand scheme of things.
- 4 - The average Canadian worker puts in 35 hours of work per week, while Americans put in 38. Only 30 per cent of Canadians work 45 hours a week or more, compared to 38 per cent of Americans. (2004) Now I happen to work more than 45 hours a week, and I don't find it a problem at all, but when you're looking at standard of living you have to take this into account. Also we get almost 17 vacation days a year, and we take, on average, nearly 16 of those days. In the U.S., the average is 14 days, but Americans only take 11.
- 5 - Our future obligations are funded (mostly), while America has $55+ trillion (net present value, meaning this will be much higher in the future with interest) or $184,000 per man, woman, child in total FEDERAL obligations, let alone state debt and future obligations as well as a crumbling infrastructure.
- 6 - There are plenty of banks in Canada for Pete's sake. See for yourself: http://www.yellowpages.ca/search/si/1/bank/Toronto,+ON To say that we are 'enslaved' by our banks is just irresponsible internet talk; unless you mean we actually make our payments on time, which we do.
- 7 - Our student loans are much more under control too. Average Canadian student debt, among those who borrow AND graduate from four-year programs, regardless of how long it takes to actually graduate: $22,700
Now don't get me wrong, there are somethings that really, really bug me about Canadians (drug use here among people under 30), but when it comes to our financials we are on (relatively) solid ground.
On paper it looks pretty good, but from the ground it really shocked me how bad it is. Especially the older generation that depends on their pensions, man do those people have it hard. Worse than eastern Poland in places and that is saying something. And the climate is even harsher...
Drug use is indeed quite a problem and one that will come back big time in 15 years or so when the presently growing up generation will be the one to earn the bulk of the income.
Unemployment is sky high in places, people move all across the country just to improve the chance of getting a job. $6.50 per hour or whatever it is right now to work a 12 hour day to bring home just enough for two people to survive is not a walk in the park. 70 year olds working physical labor to augment their pension so they can pay their heating bills. I could go on for days, but really it depresses me, no point in reviewing all the stuff I've witnessed in my time in Canada.
The one thing that I did notice is that almost without exception Canadians are very friendly and would drop anything they're doing to help out someone else.
The cities are well above average, the countryside is well below, at least in my experience.
Currently: Brampton, ON (almost urban)
The thing about the countryside folk (remember, I was one of them) is that we didn't need new trucks or huge houses or new shiny tools. We fixed our own stuff, planted vegetable gardens, worked long, hard, fun days in the summer and read and learned in the winter.
We had gravel driveways and, some of us, blue painted houses, but we had fresh food awesome neighbors, excellent schools. I knew some farmers that had it real bad, mostly because they got injured so they couldn't work and had to mortgage out the farm for cash, but most of them loved life and their families and felt very blessed.
Things aren't what they seem from the outside. Our run down mechanic shops all had snap-on tools (for those that don't know, snap-on are very expensive unlimited warranty tools) our old broken cobble main streets had farmers markets on Saturdays, it was awesome.
Where I live now is more glitzy, but most people I talk to are lonely, or drugged up on either legal or illegal drugs. It's starting to be a real problem, and this is coming from a libertarian. Friends of mine from high school and university that used to be active with side projects/exercise now just sit and watch TV and spend all their money on getting high. It messes up their relationships too. But even those people aren't in that much debt.
One thing I will say is that the Native Canadian Peoples are in really, really bad shape. I was exposed to that in Winnipeg, and ya. It is bad. Also, Windsor, ON is horrrrrible. They are the Detroit of Canada.
I supposed, statistically speaking, it is possible that you and I fell on different sides of the bell curve to what we were exposed to, and that the truth may be somewhere in the middle, but I love it here and I'm looking forward to moving back to the sticks when I have enough money to build up some acreage.
As I said, fantastic people, especially in the rural areas.
I've lived on St. Josephs Island ON for two and a half years and in Toronto for two and a half years, I clocked well over 200,000 km while in Canada on roadtrips taking me from the far east (Cap Chat in Quebec, and Halifax) all the way to Vancouver BC, and I spent quite a bit of time just talking to people and getting to know the country.
I still have an 80 acre farm in Northern Ontario.
The huge wealth gap between the two is present everywhere.
The totals may be different but the gap is approximately the same in both the industrialized and the non-industrialized world.
Except that some part of the world (Japan?) just don't have any rural left!
I've never heard of the "money available per square kilometer" indicator, though I'm sure it exists. Of course that would be low, Canada is the 2nd largest country land-wise and has half the population of California.
You are correct on the state of rural infrastructure although are things much different than in rural Alaska or Appalachia? Things are at their worst on Native reservations, but again I don't know if that is any different from the American experience.
On the banking front, I bank for free, although it is not with one of the "big six" banks mentioned in the article (you are correct - they operate as an oligopoly) but there is choice in the Canadian market.
http://www.econbrowser.com/archives/2007/01/the_distributio....
It is a very good indicator of infrastructure and standard of living.
The reason why SA banks are so strong is that there is simply no competition. The banks ask what they want to and have an unspoken rule not to compete.
Not that they're in such great shape now, but Joe (or Jacques) Canadian would probably be a lot better off if RBS, HSBC, Citibank and Santander had been allowed to roll up the regional banks.,
Unless you're making the facile observation that government support includes not breaking up monopolies, there are natural monopolies that require no government support - namely, industries with very high fixed costs and little or nothing in the way of marginal costs. Consider in particular utilities which maintain expensive distribution networks.
I only know of the big 6 national banks and the credit unions.
Laurentian Bank (Quebec)
Canadian Western bank (Alberta, the West)
Vancity/Citizens (organized a bank outside of B.C.)
How big are these compared to the 5 majors ?
Stephen Harper, the current Prime Minister, is much closer to Bush than anyone else and is governing with 35% popular support. Many Canadians also find the election of Obama inspiring given their government.
This isn't the right place for a debate about Canadian politics, so I'll just say this and leave the topic here: There's considerable disagreement about whether the Chretien/Martin Liberal government was responsible for the country's strong fiscal situation or whether they merely reaped the benefits of the policies (e.g., NAFTA and GST) put in place by the preceeding Conservative administration.
I think it would be irresponsible (and in some ways is on the part of Zakaria) to not include the impact of Canada's social infrastructure which acts as both a limit to growth, and is supportive in harsh times as these.
See http://www.cbc.ca/money/story/2008/10/10/flaherty-banks.html
Aside: Southern Ontario, especially, depends on Detroit for much of its industrial base.
Along the Highway 401 corridor from Whitby/Oshawa area on to Windsor there are many factories that produce one part or other that goes into your minivan.
It is reasonable to believe that Canada will only start feeling the effects this year of the US spending slowdown.
In addition to that, with oil prices lower (affects Alberta mostly) and construction down (affects Canadian lumber producers), one can expect that Canada will see some of the same problems that are already affecting the USA.
This rule tells me that, on the whole, the US is a better place for people than Mexico. It also says that CA is becoming less attractive than the rest of the US.
Which direction is net-migration between the US and Canada?
1. They are shorter term -- no longer than 7 years.
2. They are always adjustable.
Both these items mean that banks can react much more quickly to market changes.
See: http://www.ingdirect.ca/en/mortgages/index.html For just one quick example of mortgages that go up to 10 years fixed.
The main difference with Canadian mortgages is that they force you to pony up some capital AND there is none of this variable rate nonsense. Also, no securitization of mortgages.
What do you mean here? I may just not be up on mortgage terminology but my mortgage is a 5 year fixed. How is it adjustable?
But it sounds like I'm wrong!
The government sets a goal number of skill immigrants every year and changes the points needed accordingly. At the end the number of applications approved are more or less the number planned.
I'm one of those skill-class immigrants btw.
- a Canadian in America
US 2008 real GDP growth rate: 1.4%*
Whats the point of not having bank failures when you earn less? Or another way to put it: whats the point of not loosing money if you don't have any to begin with.
A more extreme example: During the 1930s, there was one notable country which did not experience an economic depression. That country was the USSR. As it had a command economy, the planners decided against a depression and that was it. However, they could not allocate agricultural resources effectively and had a famine instead. So, back then, it was very easy to say the the USSR is great as it has no depression but whats the point when they have no food.
* Source: CIA world factbook (search google).
These numbers fluctuate from year to year, but if you look at the long term trend, you won't see any significant difference between Canadian and US GDP growth.