For the first time in history, Canadians are richer than Americans.
First reported in The Globe and Mail on June 30 — the day before Canada Day — the news is making waves. To many Americans, Canada is the land of onerous taxes, inefficient healthcare and unseemly cultural compromises with French speakers. Yet their portfolios are fatter than ours.
The development leads Bloomberg commentator and Canadian citizen Stephen Marche to pronounce the shift a victory for Canadian socialism. In an article published on July 15, Marche writes:
The difference grows starker by the month: The Canadian system is working; the American system is not. And it’s not just Canadians who are noticing. As Iceland considers switching to a currency other than the krona, its leaders’ primary focus of interest is the loonie — the Canadian dollar.
According to the Globe and Mail, net worth per Canadian household, or total assets minus debt, now exceeds the net worth of American households.
A Canadian dollar coin, commonly called a “Loonie,” and an American dollar bill. (Reuters)
Citing figures produced by Toronto-based Environics Analytics WealthScapes, the newspaper says that last year the net worth of average households in Canada was $363,202, or $40,000 more than that in America.
Job figures released in both countries in early July tell a similar story. Canada’s unemployment rate fell to 7.2 percent while the U.S. remains at 8.2 percent, Bloomburg noted.
How did this happen?
The Globe and Mail blames the collapse of the American housing market:
Because house prices in the U.S. have plunged, the real estate held by Canadians is now much more valuable than that held by Americans (worth over $140,000 more on average). In fact, Canadians hold more than twice as much real estate as Americans and, once mortgages are factored in, have almost four times as much remaining equity in their real estate. Americans’ liquid (non-real estate) assets are still greater than Canadians’.
Marche’s takeaway is that Canada’s financial system was more resilient after the 2008 financial crisis and thus Canadian real estate is now more stable. He explains that Canada’s prime minister for much of the 1990s, Paul Martin, pursued a “hardheaded (even ruthless), fiscally conservative form of socialism” that stopped Canadian banks from merging and concocting the exotic financial instruments that helped precipitate the Wall Street crisis.
Marche also notes that Martin slashed spending on social programs. But, of course, Canada still has a social safety net that’s far broader than America’s. “Social programs and robust capitalism are not, as so many would have you believe, inherently opposed propositions,” writes Marche. “Both are required for meaningful national prosperity.”
More regulation and more wealth? Somebody tell the Tea Party.