The Canadian Economy

I'm not an economist- in fact, I can barely even do math- so don't worry, this won't be too painful. Here's a simple summary of the main things you should know about Canada's economy.

Canada is one of the wealthiest nations on Earth, has one of the highest GDPs on the planet, and boasts one of the world's highest standards of living. Canada is a member of the famed "G7" and is said to possess one of the world's top ten most powerful economies. Where exactly we place in the list is hard to say. Canada does not have a huge population, so these days the big countries like India and China are starting to push Canada further down in rank. But hey, we're still clearly members of the world's economic elite.

2. Canada has a resource-based economy

Thanks to our geographic location, Canada has been blessed with a great number of natural resources. Our economy is thus heavily based around industries such as lumber, oil, mining, electricity, natural gas, fish, and water. Most of these resources are in turn exported to other nations (see point number 3) and this is mainly what drives Canadian economic growth. Sell, sell, sell! That's the motto of Canadian industry.

Canada does not have a huge manufacturing sector compared to other countries, but it does exist, and is located almost entirely within the provinces of Quebec and Ontario. The biggest sector of the Canadian manufacturing industry continues to be cars, followed by stuff like paper. The fact that we don't manufacture more goods continues to be a source of controversy within Canada. Critics say Canada still operates like an 19th Century colony in the sense that foreigners exploit us for resources because we're too primitive to figure out how to use those resources ourselves.

3. Canada's economy is deeply integrated with America's

The simple fact is that Canada's economic survival is entirely dependent on trade with the United States. Canada has free trade with the US, and 85% of all Canadian exports go to America. Every day billions of dollars worth of goods pass across the US/Canadian border.

There is also a ton of American investment in Canada, and it composes over 80% of all foreign investment in the Canadian economy. Almost all of the big American commercial chains and corporations have a presence in Canada, and most products that are sold in the United States are also sold here. Granted, these days this is happening in almost every country in the world.

What all this means is that Canada is very politically dependent on the United States. American protectionism really hurts the Canadian economy, which is why we now have free trade. There are still occasionally problems however, and when America does decide to ban a Canadian export for whatever reason, the Canadian economy suffers quite hard. There's always talk that we should expand our trade more with other countries, and thus not become so dependent on the US, but the conventional wisdom is that it's too late to change now.

4. The Canadian Government is involved in a lot of complicated money redistribution schemes

Though Canada is lucky enough to have a great deal of natural resources to sell and export, the sad reality is that these resources are not distributed evenly across the country. While the provinces of Alberta and Ontario have rich and prosperous economies thanks to their local industries, the rest of the country does not. The other eight provinces are described as "Have Nots" (this is actually the official term) and their economies remain plagued by debt, inflation, and all sorts of other concerns.

To "fix" this, the Federal Government takes tax dollars from the "Have" provinces and gives it to the governments of the "Have Nots." These are known as equalization payments, and the program is somewhat controversial, especially among taxpayers who live in the "Haves." The vast majority of these equalization payments go to the Maritime provinces, which remain the poorest regions of Canada. The official purpose of the payments is to help the provinces pay for social programs like healthcare and welfare and so forth, which are Federal responsibilities. However, in reality the transfer money is frequently given with no formal strings attached. These days you'll often read about the provincial governments squandering their equalization money on zany schemes instead of the supposedly vital social programs.

5. Canada has a "Big Government" and lots of taxes

Canada has a lot of big expensive federal social programs that tend to be getting bigger and more expensive as the years go on. There is the famous Canadian healthcare system, which funds every single hospital and clinic in the country, the education system, social security, unemployment insurance, welfare, Native reserves, the CBC, the Governor General's hairstylist, and so on.

Overall, around 50% of Canada's GDP is spent on government programs in some form or another. How is this paid for, you ask? Why taxes of course. As a Canadian citizen, you must pay the following taxes:

·GST (Goods and Services Tax)- This is a 7% tax added to the purchase of all "goods and services." You buy anything in Canada, you pay GST. I would say GST is probably one of the world's most unpopular taxes. It has forever scarred the reputation of former Prime Minister Brian Mulroney, the guy who introduced it.

·PST (Provincial Sales Tax)- Along with GST, in most provinces you must pay another 7% tax on all goods and services to help fund the provincial government. As the richest province, Alberta has no sales tax. Citizens of the four Maritime provinces pay their GST and PST together as a single tax, the so-called "Harmonized Sale Tax" or HST.

·Income Tax- Income Tax was supposed to be a temporary tax to help pay for World War I. Today it provides the majority of funding for government programs. How it works is the Canadian government takes a certain percentage of your income depending on how rich you are. This is called "progressive taxation" and conservatives hate it. The average income tax rate for a Canadian family is said to be around 20%. Then there is there also provincial income tax which can range from 5 to 15% depending on which province you live in.

Canadian Pension Plan:

- The government takes another chunk of your income for your pension, so when you retire you can get free checks in the mail while you sit around and watch Matlock. In the US I understand they call this "Social Security." If you have a good job you'll also get a pension plan from your employer as well.