For his first foreign visit as president, Barack Obama chose a country where no major banks have failed, home foreclosures pale by comparison with those in the United States, corporate and consumer debt is low, and citizens enjoy universal health care.
Canada often gets short shrift from its southern neighbor, despite its stature as the largest trading partner of the US and a staunch ally. But now, amid global economic turmoil, the financial moderation practiced by this nation of some 33 million people is being celebrated.
"These days, boring is beautiful. Prudency is a big hit," says Stephen Foerster, finance professor at the Ivy School of Business at the University of Western Ontario in London. "You might say Canada has suddenly become sexy, even if it's in an unsexy way."
President Obama acknowledged his affection for Canada during a six-hour visit Thursday to meet with Prime Minister Stephen Harper. The trip offered balm to a relationship rocked in recent years by differences over the Iraq war and, more recently, worries over protectionism. "I love this country," he said during a press conference after euphoric Canadians greeted his arrival in the capital, Ottawa, by singing Bob Marley's reggae classic "One Love" and chanting "Yes We Can."
Two days earlier, Mr. Obama hinted at the reason for his admiration. "One of the things that I think has been striking about Canada is that in the midst of this enormous economic crisis.... [It's] 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."
Among industrialized countries, Canada is the only one not to have seen a major bank fail. The World Economic Forum ranked Canada's banking system as the healthiest in the world in 2008, while the US took the 40th spot. And while Canada's largest five banks reaped profits of $8.2 billion, the top five US banks lost a combined total of $8.3 billion last year.
Stronger federal regulations and lower leverage ratios borne by Canadian banks have allowed them to weather the global banking storm. Canadian financial institutions didn't engage in the subprime mortgage lending that sideswiped the US banking industry and forced millions of American homeowners into foreclosure.
"The difference with Canadian banks is that they never succumbed to the temptation of huge profits. It also allowed them to avoid the downside of more aggressive behavior," says David Haglund, a professor of international politics at Queen's University in Kingston. "It speaks to the more conservative nature of Canadian society in general. Canadians are simply more risk averse."
Canada has not escaped the global economic crisis. Its economy tipped into recession in the last quarter of 2008. In January alone, 129,000 jobs disappeared – the biggest one-month increase in years – pushing the unemployment rate to 7.2 percent. And this week brought more bad news: Alberta, Canada's cash cow, which has led the national economy over the past several years, is also in recession, hit by a slowdown in oil prices and sales. To combat the downturn, Prime Minister Harper's Conservative government introduced a $39 billion (about $31 billion US) stimulus package, to be rolled out over two years.
But analysts believe Canada's strong balance sheet will position it better than other embattled countries to weather this recessionary storm. For 12 consecutive years, Canada has posted budgetary surpluses, compared with the $1 trillion US federal deficit – a figure that doesn't include the $787 billion stimulus package signed into law this week.
To hear the analysts tell the story, Canada appears to have been getting a number of other things right. For example, even the most ardent proponents of big business are fans of the universal healthcare system. As Professor Haglund points out, the Big Three automakers have been able to produce cars more cheaply in their Canadian plants because the government absorbs the cost of healthcare.
And healthcare costs are lower in Canada, accounting for 9.7 percent of the GDP, compared with 15.2 percent in the US.
Higher taxes or regulation and a vibrant economy aren't necessarily mutually exclusive, Haglund says. "If Barack Obama can take away any lesson from the Canadian experience, it's that things can be changed while preserving what's best in North American life."