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Froma Harrop
Froma Harrop
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Regulation Made Canada Fat and Happy


Suppose the U.S. government had posted a budget surplus in 12 of the past 13 years. Suppose not a single major American financial institution had failed or needed a government bailout. Suppose the U.S. economy grew at an annual rate of 6.1 percent in the first quarter of this year, rather than at 2.7 percent.

Wouldn't that make you happy?

These cheering economic indicators happen to be reality in Canada. They did not come about because Canadians are more virtuous or they don't have subprime mortgages (they do) or they didn't keep interest rates very low (their rates were much like ours). What Canada had was a civic culture that wanted government to regulate financial activity.

What we have is an elite willing to risk everyone else's economic security to enable a few hotshots to win big at the casino of recklessness and fraud — while maintaining a variety of taxpayer backstops to reduce their risks. The joint never gets closed, also thanks to the large numbers of ordinary citizens trained to holler "socialism" every time the government tries to set a ground rule. A satanic belief in the rightness of free markets to punish the unsophisticated almost halted the creation of a Consumer Financial Protection Bureau.

Canada has long had its Financial Consumer Agency, which stops the craziest of lending practices. Canada regulates mortgage terms so that borrowers — be they greedy, reckless or plain suckers — are less likely to crumple when, sometime down the road, an interest rate jumps.

Yell all you want about Americans who borrowed beyond their means. Canada had rules that stopped people from borrowing beyond their means. As a result, Canada was spared a U.S.-style housing bubble, which was fed in part by the ability of little people to borrow big and use the money to bid up home prices.

By the way, Canadian home prices rose almost 14 percent in May from a year earlier.

And the World Economic Forum now ranks Canada's banking system the safest on earth.

There are differences in the two countries' situations that do give Canada an advantage. One is Canada's enormous wealth of natural resources, especially oil. Another is the United States' role as keeper of global security — a job that other countries are all-too-pleased to give us. This greatly cuts the amount Canada must spend on its defense.

But Canada's smart government regulation is its own creation. That may make it harder for a few financial wizards to score a quick fortune, but it keeps the economy on an even keel. Merchants, manufacturers and other economic players don't have their customers hauling off huge cartloads of stuff one year and then filing for bankruptcy the next. They can plan for the future.

Canada's health-care system likewise makes budgeting for operating expenses far more predictable for employers. The Canadian single-payer system is not my health-care ideal. I prefer the multi-payer setup in France — or the emerging American health-care system, if the reforms can control costs. But the vast majority of Canadians are content with their medical care.

So how are Canadian businesses doing these days relative to ours? It's true that the Standard & Poor's index of 500 large U.S. companies has done pretty well this year. But the Toronto exchange's index of large-cap Canadian stocks did 27 percent better.

Periodic booms and busts don't have to be Americans' fate. Some people get very rich off them. But for ordinary folk, slow and steady wins the race. Support for letting government install some speed bumps to enhance their financial stability has left Canadians fat and happy. We could live the same way.

To find out more about Froma Harrop, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at




6 Comments | Post Comment
Froma - You points are applicable however you neglected to mention that their population is 1/10th ours, their GDP is 1/10th ours and Canadians pay significantly higher taxes than ours. More importantly, their defense budget is 4% of ours, which, as you mentioned, gives them an advantage. So before you go overboard praising Canada (although I personally like Canadians too), don't underscore the advantage they enjoy by having the U.S. picking up the tab as leader of the free world.
Comment: #1
Posted by: Charles
Thu Aug 12, 2010 6:18 AM
Your whole argument is based on a false premise. The U. S. mortgage market is not a "free" market. Once the government began guaranteeing mortgages, you lessen the risk for the lenders. Therefore the market forces that would ordinarily bring discipline to lending practices are lessened and you get the mess that was created by the government's policies.
Comment: #2
Posted by: Gordon Ginn
Thu Aug 12, 2010 10:18 AM
Your argument is based on a false premise, i. e. the U. S. mortgage market is a "free" market. Once the government began insuring mortgages it lessened the risk of the lenders. When lenders were able to pass the risk on to the tax payers, market forces no longer at play to instill the discipline necessary to prevent "over borrowing," as you put it.
Comment: #3
Posted by: Gordon Ginn
Thu Aug 12, 2010 10:24 AM
How nice! A weak intelligence permits this authoress to gloss over 20 years of a crappy Canadian Trudeauian economic disaster as if it never occurred. Does this recent economic surge make up for those years? No way.

Change of government, change of fortune.

A country that refuses or is incapable of defending itself engenders no respect. What does Canada defend: Lake Nippissing? Manitoulin Island? That Americans taxpayers are paying Canadian defense costs count for nothing, Froma? That lets Canadians purchase substandard healthcare in all its glory. Need an immediate operation and up to date meds? Come to America. As those few canadians who can afford to do so, do.

The culture of Canada has long depressed its growth. No risks, no rewards. No cap in hand Americans begging for rights from the upper crud, as has been the Canadian wont. Personal responsibility, even the right to screw up one's life and finances is the Americans. That is why we are fighting the Obama agenda: We don't want government to tell us what to do.

That is why we fought against the brits. and you continue to embrace them.

Canada. Visit nearly every summer. Have to help out the provincial governments with all those VAT taxes.
Comment: #4
Posted by: wolf
Thu Aug 12, 2010 11:00 AM
What a waste of your education. You obviously didn't learn much. First off, we had the mortgage debacle because our governmnet is running it and demanding that those who can't afford a home, must be able to buy one. Ouch, anyone with an ounce of sense knows that won't work. If our gov regulated like Canada and only allowed those who could afford a home to buy one, we wouldn't have this housing mess. We also have a wealth of natural resources. Our gov won't allow us to get them. Re the health care system, Canada has rationing. Why do you think so many Canadiens come to this country, if they can afford the trip, who are in need of timely health care?
They have an enormous tax bill.
They also know they are safe because our military defense will protect them, so they sit back and let us foot the bill.
You can write all you want, but it doesn't make it true.
Comment: #5
Posted by: Joanne Baird
Mon Aug 16, 2010 5:56 AM
The U.S. also has an enormous wealth of natural resouces. Canada has the will power to harvest them while our anti-capitalist regime prohibits us from doing the same. Talk to the Canadiens that come to this sie of the border to get their ailments treated. I'm sure they are not of the vast majority that like their health care system.
Comment: #6
Posted by: Rick Bonarek
Tue Aug 17, 2010 7:51 AM
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