The financial crisis has damaged Canada economically, but it has also highlighted the value of financial conservatism. Canada's handling of the crisis has improved its standing in the world. The Canadian banking system has been lauded for its conservative nature. Further esteem has been brought to the government for its role in building a strong, stable banking system. Many economic observers have taken notice of Canada's successes and prescribed some of Canada's regulations as a future path for their own banking systems.
Aside from banking, Canada is now showing some signs of economic weakness. The country's relatively strength, however, has caused the government to take relatively little action on the crisis. This has not enhanced Canada's international standing, but it has not hurt it either. Canada has not needed to take on a leadership role, and the government remains committed to sorting out the nation's position in Afghanistan above sorting out difficulties in the economy.
How Has the Canadian Government Handled the Crisis?
The late onset of the financial crisis in Canada, combined with an election where the crisis was not the primary focus, resulted in a delayed reaction on the part of politicians to the crisis. In the United States, the first step was a bailout of the banking sector in the wake of high profile bank failures. Canada's protected and highly-regulated banks had no need of a bailout. The second step in the U.S. was discussion of an automaker bailout, followed by the stimulus package and Fed response. In Canada, there is no Fed and the Bank of Canada does not have the same powers. There was, however, talk of an automaker bailout and in January a stimulus package was passed in the federal budget.
By late November, the Canadian government had still not made a strong move towards providing economic stimulus. Indeed, the economic statistics for October, heralding the beginning of recession in Canada, had barely been released. Thus, it was only in late November that the government first became subject to any palpable sense of urgency. The Finance Minister, Jim Flaherty, indicated in a traditional post-election economic update that a budget surplus was unlikely. The ever-opportunistic opposition parties pushed at that time for a stimulus package, but Flaherty deferred to the budget, due in late January
. This was necessary gamesmanship for a minority government. If the opposition parties were so intent on stimulus, they would need to cooperate with the Conservatives in the form of supporting the budget.
The delay was exacerbated by the fact that the House of Commons was scheduled to go on Christmas break from December 12 to January 26. Given that Prime Minister Harper had announced in a speech in Peru in November that the crisis was moving so quickly that governments did not have time to set out policy, the impending two-month delay on the part of his party was not met favorably
. The U.S. had already announced an $800 billion stimulus package and other industrialized nations were following suit, prompting criticism from the opposition
As early as November, the Canadian government had begun discussing the idea of an automaker bailout. The initial discussions surrounded the possibility of a joint Canada-U.S. bailout. As one of Canada's major export industries, automobile manufacturing accounts for some 400,000 jobs, mainly in Ontario. After the Bush administration offered a bailout to the automakers, both Canada and Ontario followed suit, in order to defend their jobs in the face of impending auto industry restructuring. The Canadian bailout accounted for roughly $4.27 billion
After the automaker bailout, the House of Commons adjourned for the holidays, picking up at the end of January with the passage of the budget, with the stimulus plan embedded. Harper's Conservatives are a right-wing party whose platform is built around economic and social conservatism. The centrist Liberal party also helped pass the budget, and they are built around economic conservatism and social liberalism. Thus, the budget contains strong elements of economic conservatism. Not only was the stimulus package relatively small, but it was based largely on supply-side initiatives, in stark contrast to the largely Keynesian stimulus package of the Obama administration.
Jim Flaherty's economic statement in late November had already indicated there would not be a major government spending spree, as he hoped that the budget would be balanced. While this would ultimately not come to pass, the stimulus package was widely criticized as being insufficient
. When the budget finally arrived, the minimalist nature of the stimulus package was evident. The total stimulus provided was $40 billion over five...
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S. banking crisis despite the relations between the two markets has informed debate for quite a while. According to OECD, the recession in Canada was not as serious as it was in U.S. And government bank bailouts as a result of bank failures were largely unheard of (42). This 'unusual' scenario is what has motivated a number of economists to suggest a number of reasons as to why Canada remained
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