| What Is Different about the Canadian Economy |
| To an American traveler entering Canada at one of the major border crossingsDetroit-Windsor, for example, or Niagara Fallsthe transition from one country to the other is subtle but still recognizable. Like the Canadian landscape, the Canadian economy is different from that of the United States. But what exactly are the differences? A short monograph can hardly hope to satisfy this question. Nevertheless, a few comparisons may serve as signposts on the road to a better understanding of the distinguishing features of economic life in Canada. |
| Table 1 compares some of the major economic and related statistics of the two countries for recent years. The most obvious feature is that the Canadian economy is much smaller than that of the United States. Canada's gross domestic product (GDP)the total value of all the goods and services produced within the countryis less than 10 percent of that of the U.S. This fact is striking when related to geographic features: Canada occupies a slightly larger land mass than the United States, but its population is only about 29 million people, compared with 252 million for its neighbor. The implication, of course, is that Canada has a very low population density, only 3 people per square kilometer. But this statistic masks an even more striking demographic difference, for the population of Canada is much less evenly distributed than that of the United Statesover 80 percent of the Canadian people live within a long thin band one hundred miles wide adjacent to the Canadian-U.S. border. |
| Because of Canada's longer distances, lower population density, and harsher climate, a larger stock of capitalroads, buildings, machinery, electronic equipmentis needed to produce a given amount of output with a given amount of labor than might be required in other industrial countries. These geographic characteristics, together with the fact that the relatively small domestic market affords less scope for economies of scale, help to explain why Canada's standard of living, as measured by real output per person, is somewhat lower than that of the United States. Although Canadian households tend to save more of their incomes than Americans do, capital spending in Canada has exceeded domestic saving in most years since World War II. As a result, a significant fraction of the investment that takes place in Canada is financed by inflows of financial capital from abroad, mainly from its southern neighbor. Because this pattern has existed for a long time, a relatively large proportion of Canada's industry is now owned or controlled by foreigners. In the United States, foreign ownership of industry has rarely been a significant political issue, but in Canada, foreign ownership has often pricked Canadian sensitivities and since the early 1970s it has stimulated |
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