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Canada’’s Growth Owes No Debt to Socialism

Christopher Sands

Success has many fathers, the saying goes. If only there was a paternity test to sort out the claimants of credit for the Canadian economy.

Canadian author Stephen Marche is the latest to weigh in, with a short opinion piece published on Bloomberg.com. Marche argued two points: first, that Canadian household net worth had surpassed U.S. household net worth; and second, that this was due to Canada’s uniquely “hardheaded socialism”—a combination of fiscal discipline in the management of a magnanimous social welfare state.

Reihan Salam questioned the household income claim in a piece for National Review Online, noting that U.S. household net worth fell largely due to the housing crisis and Canada failed to fall rather than gain ground. Clive Crook agreed in a piece for The Atlantic.com and suggested that better regulated banks and a more conservative mortgage market were more important than socialist policies.

Marche’s “hardheaded socialism” thesis is a contrarian interpretation of Canadian fiscal policy rather than banking or financial market regulation, and as such, it fits with other similar analyses such as Fred Barnes’ April 2011 article in National Affairs which credited the Liberal Party of Canada—which led in the establishment of Canada’s social welfare programs—for taking responsibility for their reform. Chris Edwards at the CATO Institute contends that Canadian fiscal reform resulted in cuts to the size of government.

All this may sound like the typical circular firing squad of academic debate. But for Americans, it matters tremendously. Canada’s example is important in the context of an American debate about the role and financing of government in society that is marked by sharp polarization along ideological lines. The average voter looks at the theoretical claims of both sides, and craves the practical example of a country that is doing well as proof that solutions are possible.

Marche offers the beguiling hope that if Washington D.C. could act as a better steward of taxpayers’ money, the social welfare system in the United States could be saved, and growth would return in the form of rising household net worth. In short, that the United States can have greater socialism if its leaders will just be more hardheaded about it.

This is a false hope. Canada’s fiscal hardheadedness and pro-growth economic policies, along with its tremendous resource wealth, are the real examples that the United States can and should follow (the United States has great resource wealth too, thankfully). Then perhaps, like Canada, we can better afford some socialist policies that we have now, or that voters may desire in the future.

Socialism, based on economic redistribution, requires growth so that there is money to redistribute, just as philanthropy relies on prosperity.

Canada was hardheaded in promoting growth, not in simply managing redistribution, and this is why it has enjoyed better results than most countries since the 2008 recession began.

Socialism is not the father of Canada’s success, but its progeny.

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