Marilynn and I frequently travel back to our homeland of Canada to visit friends and relatives. But, the impact of the recession restrained our travel habits, and our trip to eastern Ontario this month was our first experience in Canada since 2006. We were amazed at the changes.
Although our 12-day motor trip to and from the Buffalo airport only included the small portion of Canada encompassing the vast area of metropolitan Toronto, this is the sector of the country exhibiting the strongest impact from the growing economy. Yes, while the United States became mired in economic distress, our neighbor to the north has maintained a steadily increasing economic growth rate. The Canadian dollar is now valued above the U.S. dollar after being valued at less than two-thirds of American currency just five years ago. What makes this Canadian growth even more remarkable is that the troubled United States is by far Canada’s biggest trading partner. Furthermore, a high percentage of Canadian companies are owned by American interests which terminated or cut back many of their subsidiaries in Canada. The huge General Motors plant in Oshawa east of Toronto is winding down production and Chrysler has closed its historic operations in Windsor, across the border from employment struggles in Detroit.
But, despite these negative impacts upon Canadian employment and productivity, this country’s economic indicators continue their upward trend. Why? I asked my knowledgeable Canadian friends during this trip. They gave me three strong reasons.
First, and foremost, Canada still relies heavily on exports of natural resources which continue to be in demand despite the American recession. Oil, of course, continues to flow from the vast Alberta oil reserves to refineries in the United States. And, regardless of the rapid decline in American home-building, Canadian timber products enjoy increasing demand in China and other Asian nations. This country’s farmers continue to export agricultural products around the world.
The second reason is based on Canada’s historic regulation of its banking industry that generated a small number of large banks with strong cash reserves, compared with the fragmented banking system in the United States that has been suffering a surge of bankruptcies resulting from the lax credit policies originating from the Reagan Administration’s relaxation of bank regulations over 20 years ago. Huge Canadian banks such as the Royal Bank of Canada (RBC) and the Toronto Dominion Bank (TD) and the Bank of Nova Scotia (Scotia) are aggressively purchasing small banks in many parts of the United States as well as in developing nations in South America and the Orient.
The third strong reason for Canadian growth in the face of American decline is immigration. One of my friends even joked that French will soon be replaced by Chinese as Canada’s second language. Despite continuing pride in its British roots, Canada has become a diverse nation of many cultures which compete for intellectual achievement and innovation, in addition to attracting investment from their former homelands in other parts of the world. A drive through central Toronto presents a kaleidoscope of international cultures pursuing their own historic traditions within the framework of their new world. While we in southern border states become embroiled in preventing migration of people unlike ourselves, the Canadian government and its people embrace newcomers from every land and religion, with full recognition that diversity is the strength of a modern nation.
Although the Premier of Ontario is reportedly adopting some cost-cutting principles of the U.S. “Tea Party” movement, development growth in this province is continuing at a pace reminiscent of our trip to China earlier this year. The drive from Buffalo to Toronto along the historic Queen Elizabeth Way now features new multi-story office buildings in continuing array from Hamilton to Toronto. Three expressways, including one automatic toll road, now serve this corridor in addition to increased service by the GO Train. It appears that this corridor will be unified urban development within this decade (over 5 million residents now live in greater Toronto).
Government investment in new and improved infrastructure is apparent throughout Ontario, and the new “En Route” way stops are particularly impressive on expressway routes. They feature a food court containing several fast food outlets and a fresh market adjacent to a large modern seat-yourself dining area. Of course, Toronto’s underground subway system has served as a model for growth in other cities around the world in attracting high-rise growth centers (Transit Oriented Development) at formerly suburban station stops. These dispersed growth centers have contributed to a more balanced vehicle traffic flow throughout the Toronto metropolitan area. The 10-lane 401 Expressway across the northern side of Toronto is equipped with more frequent electronic signs advising travelers of traffic current conditions throughout the length of this key traffic corridor.
Despite Canada’s self-sufficiency in oil consumption, much of the investment in new and improved transportation infrastructure is provided by ear-marked gasoline taxes. Thus, gasoline is considerably more expensive than in the United States, a policy that is pursued in European countries as well as Canada, thereby ensuring long-range financing for government investment in infrastructure to support economic growth (see my July blog on infrastructure).
Driving through Ontario provides a sharp contrast with American urban areas in terms of new business development supported by modernized infrastructure. Our United States government legislators might learn more about the linkage between public and private investment by a visit to Ontario (much shorter and less expensive than the trip to China that I recommended in my June blog).
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