
David Olive
BUSINESS COLUMNIST 18th February 2009See Video at http://www.thestar.com/Business/article/589123
Ahead
of his brief Ottawa visit tomorrow, Barack Obama is getting the message
from influential U.S. voices that Canada – and Toronto in particular –
are models for the American social and economic renaissance the new
U.S. president is pledged to bring about. "If President Obama
is looking for smart government, there is much he, and all of us, could
learn from our quiet – okay, sometimes boring – neighbour to the
north," writes Fareed Zakaria, bestselling author (The Post-American World) and chief international columnist for Newsweek.
Zakaria notes that, in the industrialized world, only Canada has experienced no bank failures or government bailouts.
Canada's
Big Five banks made a combined profit of $8.2 billion (U.S.) last year,
while the top five U.S. banks lost a total of $8.3 billion.
"One
of the things that I think has been striking about Canada is that in
the midst of this enormous economic crisis," Obama told the CBC
yesterday, "Canada has shown itself to be a pretty good manager of the
financial system in the economy in ways that we haven't always been
here in the United States.
"And I think that's important for us
to take note of, that it's possible for us to have a vibrant banking
sector, for example, without taking some of the wild risks that have
resulted in so much trouble on Wall Street."
For 2008, the World
Economic Forum ranked Canada's banking system the healthiest in the
world. The U.S. ranked 40th, and Britain 44th.
In advance of
the next Group of 20 summit, in April in London, a G20 working group
headed by Tiff Macklem and Rakesh Mohan has been asked to devise a
blueprint for more robust regulatory supervision and greater
transparency to prevent future global banking crises.
The
selection of these two co-chairs is telling. Macklem is Canada's
associate deputy minister of finance. Mohan is deputy governor of the
Reserve Bank of India, another nation whose banks did not load up on
subprime, or junk, mortgages; collateralized debt obligations (CDOs);
and other "toxic waste" now crippling world banks.
The
record-sized U.S. housing bubble that burst in 2007 originated with
Bush-era policies intended to help people realize the American Dream of
home ownership. Regulatory laxity earlier this decade gave rise to a
proliferation of subprime mortgage lending. U.S. homeowners also
benefit from the longstanding U.S. policy of tax deductibility of
mortgage interest, a middle-class entitlement program in everything but
name that costs the U.S. government about $100 billion (U.S.) a year.
As a result, 68 per cent of Americans own their homes, but that figure
predates the millions of home foreclosures anticipated this year and
next. In Canada, without those inducements, the home-ownership rate is
68.4 per cent.
But Zakaria points to many other things the
Great White North is getting right. A more open-door immigration policy
than its "brain-dead" U.S. counterpart that welcomes rather than shuns
skilled émigrés. A reformed national pension system now in robust
fiscal health compared with a near-insolvent U.S. Social Security
system.
And "Canada has been remarkably responsible over the
past decade or so," Zakaria notes, citing 12 years of federal budget
surpluses. Which means Ottawa "can now spend money to fuel a recovery
from a strong position." The U.S., by contrast, braced for a $1
trillion (U.S.) federal deficit even before Obama yesterday signed into
law a $787 billion (U.S.) economic stimulus package.
Looking
further ahead, Richard Florida, the urban economics guru, sees Toronto
angling for the same global heft as Chicago and Tokyo. "I sense we are
in great shape to move up in the global ranks," says Florida, now based
at the University of Toronto's Rotman School of Management. Florida
followed the example of his mentor, the late urbanologist Jane Jacobs,
in relocating two years ago to Canada from his native U.S.
Like
New York and London, Toronto is a finance, media and entertainment
centre, forecast to be among the fastest-growing business sectors over
the next generation. Unlike those cities, Toronto also has an abundance
of technological research, and more social stability and ethnic
diversity. And in recent years the city's cultural amenities have
expanded considerably.
Florida readily concedes that stubborn
problems like income inequality and a deteriorating basic-industry
sector have yet to be tackled. But in a cover-story essay in the
current Atlantic magazine, the venerable U.S. public issues
journal, Florida identifies Toronto among fast-growing "mega-regions"
most ideally suited to rapid growth. Atlantic gave Florida's
article four covers, showing the skylines of North American cities with
the best prospects for sustained prosperity – Toronto, New York,
Chicago and San Francisco.
Yet Florida discourages U.S.
comparisons. "Stop looking south for models," says Florida, based for
17 years at Pittsburgh's Carnegie Mellon University. "They ain't there.
The U.S. is in very deep crisis. It's time for Toronto to break out and
lead."
For Zakaria, health care is likely Canada's high card.
"Canada's health-care system is cheaper than America's by far
(accounting for 9.7 per cent of GDP, versus 15.2 per cent here),"
Zakaria writes, "and yet does better on all major indexes."
Obama once said if he was designing a U.S. health-care system from
scratch, it would be modelled on Canada's universal single-payer
formula. But that model is too easily demonized in the U.S. as
"socialized medicine" to be politically viable.
So Obama is
instead pushing a clumsy public-private hybrid designed to at least
provide coverage for the 46 million Americans without health insurance.
Still, Obama finds the "socialized-medicine" bogeyman risible. In an interview in the liberal U.S. journal Nation three years ago, the then-U.S. senator from Illinois was asked if the single-payer option "is revolutionary or reformist."
"Anything that Canada does can't be entirely revolutionary, it's
Canada" Obama laughed. "When I drive through Toronto, it doesn't look
like a bunch of Maoists."
David Olive writes on politics and business. He can be reached at dolive@thestar.ca.
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