Canada is America’s largest trading partner. The reasons Canada has come out of the 2008-2009 recession virtually unscathed is murky to most Canadians and all Americans. Some of it was dumb luck and/or the holding back on innovations.

Space limitation allows for a thumbnail sketch only of the differences in style of business in Canada vis-a-vis the United States.

Banking Industry

Canada’s five major banks, with thousands of branches, pleaded with the government to be allowed to merge, evolve into 2 or 3 multibillion dollar banks able to underwrite big deals, big enough to match Wall Street’s behemoths. The government said, “No, you’re likely to close unproductive branches in rural areas.” The banks tried to con the finance minister, claimed they would keep all branches open. The federals wouldn’t budge. The banks got lucky.

Royal Bank of Canada, Toronto Dominion, and CIBC went into the U.S. market anyway. CIBC got badly burned in the Enron fiasco where it settled with the SEC for $1 billion dollars. RBC and TD have had better luck, with TD expanding with commercial branches in the northeast and southern United States.

The Housing Market

There doesn’t seem to have been a single foreclosure in Canada. Prices are still rising in some locations, dipping in others. In the United States, folks don’t care to build up equity since mortgage interest is tax deductable. Furthermore, availability of a 30-year mortgage allows one to get by with minuscule amounts of principle being paid. When home prices rose, the tendency was to apply for a second mortgage treating one’s home like an ATM machine. In Canada, to buy a home, a substantial down payment is required, and credit worthiness is a prerequisite. One is offered a fixed rate (amortized over 20 years) mortgage for up to five years only. Interest is not deductable. The mortgage is insured for a small fee by the Canadian Housing Authority and is held by the issuing bank to maturity. All in all, it was an old fashioned way of doing business.

Living Standard

A little known fact is that, in Canada, a good three-quarters of the population is middle class. While per capita income is lower than the United States, the social safety net, including the National Health Plan, offsets the difference. The fabricated stories of mistreatment, waiting periods, death panels, and more, are just that: malicious rumours spread by those interested in maintaining the U.S. status quo. What puzzles many visitors to Canada is an absence of slums.

Climate

A good many Americans from above the Mason Dixon line retire, and establish permanent residence in the sunbelt. Naturally, Medicare services in such locales are strained, increasing costs. Canadians who wish to avail themselves of the Health Plan stay at home. There is no sunbelt to retire to, and no trailer parks. The benefit of this lower mobility is more stable home prices and adequate medical staffing.

Immigration and Government

Major cities in Canada, (about six), are a polyglot of nationalities. There are no racially segregated areas in Canadian cities, just segregation by housing costs. There is little friction, perhaps because, with the exception of some parts of the Maritimes, Canada is a country of immigrants. Canada does not have a land border with an underdeveloped country. Illegal immigrants that get in, usually by air, can apply for asylum. While they wait for an immigration panel to adjudicate their case, they are free to find work and obtain some subsidy, if needed. A costly affair, but it does provide for peaceful society.

In the recent era, governments of all political stripes, to stave off defeat in a vote of confidence, which brings on an election, managed Canada’s affairs from the center. The current right-wing, minority government is no different. Partisanship is mostly rhetoric. A law passed by the House of Commons (component of Canadian government of elected officials) gets an easy pass from the unelected Senate. There is little drama, and few surprises.

Manny Drukier is a columnist for the Epoch Times. His weekly feature, “The Practical Entrepreneur,” appears every Thursday in the Business section.

Related posts:

1. Alberta’s economy to lead Canada in GDP growth A recently released report by Scotiabank says that Alberta will experience a sharp economic rebound during 2010 and will  lead all of the Canadian provinces in terms of GDP growth at 4.1%. In general, all provinces have rebounded strongly, and the report forecasts Canadian output growth to average 3.6% this year, the strongest advance in [...]...
2. Canada won’t fall victim to foreclosure wave by John Shmuel, Financial Post Canada’s housing market is expected to cool off this year and next, but isn’t at risk of falling victim to a U.S.-style foreclosure crisis anytime soon, according to a new report by debt-rating firm DBRS Ltd. DBRS said in the report that Canada will continue to fare well in comparison [...]...
3. Why the Bank of Canada cannot be blamed for rising mortgage rates According to a recent statement by the Canadian Bankers Association, many Canadian consumers are confused by the relationship between the central bank and commercial banks. The Bank of Canada’s rates have very little to do with mortgage rates, the association has explained: “The Bank of Canada does not set consumer interest rates. While the Bank [...]...
4. Home prices in Canada to surge to new highs in 2010 A rush to buy, sparked by expectations of higher mortgage rates and the pending harmonized sales tax in Ontario and British Columbia, is fueling an ever sharper rebound in the real estate market. Already an extraordinary turnaround story in the wake of the recession, new home construction is picking up and resale prices are now [...]...
5. How cautious Canada has avoided the financial pitfalls of the U.S. by Nouriel Roubini and Rachel Ziemba Forbes.com Canadian banks were conservative enough to avoid the excesses of their U.S. counterparts in recent years, due in part to a consolidated financial sector and strong regulation. Armed with strong balance sheets, these banks continued to lend throughout the recession and helped keep financial stresses in Canada from [...]...

Tags: America, Banking Industry, Government, housing market, Immigration, Living Standard