Canada is well-known for its harsh winters, moraine lakes, maple syrup, friendly people, and, let’s be honest, unfriendly hockey players. As a developed nation, Canada is a member of the G7 group and holds the 9th largest economy globally.

The nation is established on the principles of sound governance, peace, and order, with a focus on fostering shared prosperity. Some economists contend that Canada strikes a balance between its dedication to the common good and its respect for individual freedom.

Read more: History of Canada: Significant events that led to its Independence

Canada’s free market, which depends on the wage-work relationship between owners and employees, is fuelled by private enterprise and the laws of supply and demand in a capitalist economy. As with all modern capitalist countries, Canada engages in market regulation, including state-owned enterprises. Welfare programs do not necessarily indicate a socialist ideology, although Canada’s social assistance system is praiseworthy. Instead, Canada combines government control and capitalism.

Similar to other developed nations, Canada’s economy has evolved from one centered on raw materials to one centered on manufacturing and, ultimately, on services. As is typical of developed economies, the service sector now makes up about 70% of Canada’s GDP.

The Canadian economy ranks among the top 20 countries on the economic freedom index, closely resembling Australia’s economy. Both countries are wealthy, industrialized, and experience housing bubbles, with a heavy reliance on international trade, commodity prices, and a single trading partner – Australia on China, and Canada on the US. To address this, both governments are working to diversify their economies and attract immigrants to boost growth.

Canadian Immigration Dream: A fairytale of diversity, inclusivity, and multiculturalism

Canada’s ageing population and low birth rate have created a labour shortage, making immigration a vital component of the country’s economic strategy. With 17% of the population over 65 and an average age of 42, Canada’s workforce is shrinking. The government is addressing this by welcoming skilled workers from abroad, aiming to boost economic growth and offset the impact of an ageing population.

Canada’s immigration policy is driven by economic needs rather than solely diversity or multiculturalism. Immigrants bring skills, youth, and tax revenue, contributing to the country’s prosperity. Many take jobs that locals are less likely to, use fewer social services, and have higher fertility rates, injecting foreign capital into the economy.

Foreign students also play a significant role, paying higher tuition fees and contributing to Canada’s education sector. Temporary workers fill labour gaps, and wealthy immigrants bring investment capital, influencing Canada’s housing market.

Overall, immigration has made Canada’s economy more resilient, with over 21% of the population born abroad. As Canada continues to face economic challenges, immigration will remain a key component of its growth strategy

The Love-Hate Relationship with Oil

Canada’s oil industry is a significant contributor to its economy, ranking fourth globally in oil production and sixth in natural gas production. The sector adds billions to Canada’s GDP and creates thousands of jobs.

With the third-largest natural resources and documented petroleum reserves, Canada is a major player. However, the country still imports oil due to factors like heavy crude oil production, high extraction costs, and fluctuating global prices. Canada’s reliance on imports, mainly from the US and Saudi Arabia, is also influenced by the lack of new pipelines and regional differences in energy needs.

As the world shifts towards alternative energy, Canada is exploring greener options, driven by economic interests and changing global demand. The transition aims to ensure Canada’s energy future, with some regions still reliant on oil and others embracing alternative energy sources.

At present, there is no definite response or direction. The need to diversify the economy is another reason for avoiding oil dependence. The majority of Canadian oil exports are directed towards the United States. Canada’s situation can be compared to a common idea about how economies develop called the staple thesis. 

The Staple theory, based on Canada as a model, asserts that the transfer of natural resources from Canada to other advanced nations has a substantial impact on both the economic and political frameworks. For an example, different staples like oil, minerals, forestry, fishing, etc impact the rates of settlements as well as federal provincial conflicts. 

The staple thesis is generally credited to Canadian economists Harold Innis, Melville Watkins, and W. A. Mackintosh

The Canadian economy has potential to evolve and diversify, but some argue it’ll remain dependent on natural assets. Canada relies on larger nations for resources and is influenced by proximity to bigger markets.

Economically, Canada ranks 32nd on the diversity of complexity index, though it’s more diverse than Australia. Calling Canada ‘oil-dependent’ is an oversimplification of its economy, which includes profitable sectors like construction, real estate, finance, and autos.

Looking into the Canadian Economy in more detail

Canada is the world’s largest maple syrup exporter, accounting for over 75% of global production. However, its impact on the Canadian economy is relatively small, contributing only 0.02-0.03% to the GDP. Instead, maple syrup is more closely tied to Canada’s national identity. The industry supports thousands of jobs in Quebec, which relies on seasonal labour to maintain production.

Canada also boasts the longest coastline in the world and is a major exporter of marine products, with lobsters being a top export. Interestingly, many Americans consider Canada a potential relocation destination, and they might be onto something. Canada’s economy is heavily tied to the US, with over half of its exports going south of the border. As they say, “Canada gets a cold when the United States sneezes,” but not in the financial sector.

Most Canadians live near the US border, benefiting from the proximity to a major economy and military powerhouse. Canada’s geographic location and trade relationship with the US are significant factors in its economic growth, making it a viable destination for those looking to relocate.

Canada’s minimum wage is set by each province and territory, rather than a unified national rate. With one of the world’s highest per-capita incomes, Canada seems like a prosperous nation. However, disposable income – the amount left after essential expenses – paints a different picture. Many Canadians work hard but struggle with living expenses, which can account for up to 80% of their earnings.

This phenomenon isn’t unique to Canada; many developed countries face similar issues with calculating and reporting discretionary income. While Canada ranks among the top 25 countries globally, the cost of living varies greatly depending on location.

Consumer goods are relatively expensive, and childcare costs are particularly high compared to average incomes. This complicated issue impacts many developed nations. Maybe the’real Canadian dream’ is a little more complex than it first appears.

Canada’s household debt is among the highest globally, with mortgages driving up housing costs. Household debt now exceeds 183% of disposable income, with cities like Vancouver and Toronto experiencing significant housing market growth.

The Canadian manufacturing industry struggles to compete with low-wage nations, making it more practical to import cheap goods. This has led to a decline in domestic manufacturing, with many operations relying on government subsidies.

Canada’s healthcare system is publicly funded, covering most citizens, and accounts for around 12% of GDP. While not perfect, it provides excellent services to the majority of the population. Agriculture contributes 1.6% to Canada’s economy, hindered by harsh weather conditions. The country relies on imports for cheaper food options, with some sectors, like dairy and poultry, protected by government policies to maintain self-sufficiency.

Canada’s culinary scene may not be world-renowned, but Poutine and Kraft macaroni and cheese are local favourites. The country also has the most doughnut shops per capita, with Tim Hortons being a major contributor to Canada’s doughnut obsession.

With the second-largest land area, Canada boasts stunning natural beauty, from Niagara Falls to the Canadian Rockies and over 30,000 inland lakes. Tourism accounts for only 1% of the economy, leaving room for growth.

Canada’s bilingual nature, with English and French as official languages, comes with costs. Bilingual services, signage, and advertising cost an estimated $2.4 billion annually. On the bright side, Canadian students enjoy publicly funded education, with no need for lifelong loans. The country boasts a highly educated community, with one of the highest tertiary education attainment rates globally.

Conclusion

Canada’s most difficult challenge is a shortage of skilled labour, as many educated workers immigrate to the US for better earnings, a larger audience, and a more vibrant climate. Leaving natural resources aside, a nation’s greatest asset is its people.

Canada should invest in its people by encouraging an innovative and entrepreneurial culture rather than merely giving them handouts. The nation must empower its educated and uneducated citizens to take chances and control their own lives. Because it offers a higher standard of living, Canada continues to be a very popular destination for people from all over the world.

Sources

The Fraser Institute. (2018, April 17). Bilingualism has a fresh face. Fraser Institute https://www.fraserinstitute.org/article/bilingualism-has-a-fresh-face

Johnston, M. (2023, October 4). The Economy of Canada: An Explainer. Investopedia

Staff, H. (1995, December 1). WORLD BANK STUDY Australia and Canada emerge as the richest countries. The Herald

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