Why the recession is slightly less bad in Canada
by graeme
There’s an interesting piece in the NYT’s Economix blog today, itself an exploration of an earlier article written by Newsweek’s Fareed Zakaria. Both attempt to explain why Canada is so far weathering the economic crisis better than its southern neighbour.
The points are interesting:
- Centralized banking regulation has protected Canadian financial institutions from toxic debt and collapse in other countries;
- Our “single payer” model of public healthcare reduces complexity and per-person cost compared to the American model. More importantly, Canadian retain health coverage even if they are unemployed. In the USA, if you lose your job, you lose your private insurance; and
- Canadian employment insurance replaces more lost wages than the American system (78 per cent as opposed to 52 per cent.
Of course, none of these provisions are possible without public support. The really interesting idea in the NYT article is that the structure of Canadian society allows for greater recession resilience. Lower income inequality and norms of mutual support (linked to our multiculturalism) create public support for the measures that have so far insulated Canada from the more serious depredations of the recession. There’s a reason why you don’t see mas foreclosures and bankruptcy in Canada, and it has a lot to do with how we conduct ourselves as a society.
Anyways, an interesting read. And a little sunshine for Canucks concerned about the meltdown.
The biggest thing is Canadian banks didn’t buy into the mortgage derivative bundles. Those things proving valueless is what is killing many banks here in the US. There are other banks that are relatively fine in America, all because they avoided investing in air.
Here’s Harper talking a little about it in an interview with CNN: http://www.youtube.com/watch?v=3r-tHFxaEv8
Graeme, are we sure about the Canadian employment insurance figures? I’m getting some disputes as to whether it replaces 78% of our lost income. I know under maternity leave, the rate was around 55%. I did get closer to 75% when I was made redundant, but my wages were lower than the average Canadian’s, I think, so I’m wondering if there’s a cap-out.
I must admit to some ignorance on these numbers. I’m just going with the NYT’s figures, and I haven’t seen an up-to-date study from a Canadian source. Any light you could shed on this would be greatly appreciated.