Canada’s economy: Dull and plodding, but prudently avoiding America’s extremes

It is almost difficult to remember the pre-2008 era of impregnable optimism for the U.S. economy and with it, the global economies generally.

It was indeed a period of “irrational exuberance” as then-Federal Reserve Board Chairman Alan Greenspan put it, but was based on what were believed to be economic verities: that inflation was under control; that real estate had “sky’s the limit” prospects; that banks/loans/mortgages were adroitly attended by gimlet-eyed accountants; and that tweaks and twitches by government would resolve any peripheral economic problems.

But then the U.S. economy (along with much of the West) crashed and burned in 2008; it is still struggling to extricate itself from the mire. We are a long/long way from reaching equivalence with the economy of the mid-2000 decade.

For the United States, start-the-new-year optimism has taken counsel of its hopes. Inflation has remained low and the Fed has apparently decided to stop pumping money into the economy. The stock market has recovered from 2008 its nadir. Analysts have battened on slightly lower unemployment numbers and slightly better GNP growth projections. But these latter statistics are more chimera than reality. Lower unemployment has been driven by people leaving the workforce — just completely giving up. If we used calculations comparable to those in Europe where all individuals eligible to work but not working are counted, U.S. unemployment would be over 12 rather than seven per cent.

And the American public understands this reality. Polls continue to reflect the majority of the population believes we are still in recession. They ignore the technical parameters defining “recession” — they simply know that friends are out of work, claiming disability, or too old to get jobs paying wages comparable to jobs they’ve lost; children are still living in their basements “working” as unpaid interns; others are hiding out in graduate schools attempting to obtain credentials that will give them a start (but accumulating debt) while ruing the idiocy of their sociology-literature-philosophy-art history liberal arts degree. Too many homes are still “under water” — with mortgages greater than their residence value. Private investment remains low; the construction industry isn’t constructing. And Americans sense that Obamacare is going to send already high medical costs even higher.

And our never-ending annual budget deficit, let alone the spiraling national debt that 20 generations couldn’t amortize, is barely mentioned. If the deficit has narrowed slightly, it reflects the highly unpopular “sequestration” meat-cleaver reductions driven by Republicans.

We are caught in an existential political divide: Republicans reject higher taxes; Democrats reject recalibrating social services. And the expectation that “boomers” moving into retirement — requiring the medical assistance, pensions, and general societal support necessary for outliving their body’s design expectations — presses ever harder on an economy system can no longer deliver.

We are facing a cruel reality: the United States might be able to have the world’s greatest armed forces or the world’s best medical system, but cannot pay for both. And, in our struggles with Obamacare, and military downsizing, we are about to confront this reality.

And Canada is stuck — living alongside us where a benign symbiosis has suddenly become, not toxic, but problematic.

Canada, somewhat blithely and with a little more rooster-crowing than absolutely necessary, has done very well indeed. Almost every economic parameter has exceeded the OECD norm, resulting in gnashing-of-teeth by the opposition, which has been reduced to the equivalent of saying “we would have done it faster/better — and kept the GST as well. And Prime Minister Harper isn’t as cuddly as Just-in-time Trudeau.”

By having outsourced its defense requirements to the United States, Canada has substantially reduced what a country of its population and economic strength would normally expend. And by running a “dull” banking system, Canada avoided spectacular fiscal leaps — but also the depth-defying plunges resulting from errors of too-clever-by-half financial analysts/bankers.

Careful, cautious, prudent, dull — but correct. That is the projection of the Canadian economy as it plods toward an election with finances designed to show budgetary surplus (with some voter-attracting but still prudent spending).

If anything, Canada is almost deliberately hobbling itself by its refusal to exploit natural resources adroitly. Canadian environmentalists have never conceived of a pipeline they couldn’t excoriate. And President Obama’s continued delay in deciding to approve the Keystone Pipeline begins to appear more malicious than judicious.

We are moving again toward a bilateral relationship characterized as “best friends — like it or not.” With the subtitle of “with friends like this…”

We will thrash our way out of this morass; it hasn’t been quick or easy, but it will happen.

David T. Jones is a retired State Department Senior Foreign Service Career Officer and a frequent contributor to American Diplomacy. During a career that spanned over 30 years, he concentrated on politico-military issues, serving for the Army Chief of Staff. He is co-author of Uneasy Neighbor(u)rs, a study of American-Canadian bilateral concerns and has published several hundred articles, columns, and reviews on U.S. - Canadian bilateral issues and general foreign policy.