Canada is not the U.S.

MADELAINE DROHAN

GLOBE AND MAIL UPDATE

OCTOBER 2, 2008 AT 6:23 PM EDT

OTTAWA You don't have to be a fan of Prime Minister Stephen Harper or his economic policies to agree with his assertion that Canadian economic fundamentals are essentially sound and that Canada is not in the same predicament as the United States.

He has not said Canada is totally immune from the train wreck on Wall Street (and I'm not about to say that either). Nor has he said that the Canadian economy will emerge without a scratch, which really would be wishful thinking.

Yet acknowledging that unemployment remains low, that the economy is growing, that the federal government still has a budget surplus and that there is no financial meltdown in Canada has become the equivalent of heresy. Anyone who dares point to these numbers risks being labeled a Harper lackey.

Yes, I know we are in the midst of an election campaign in which every utterance by the party leaders, not to mention their choice of attire, is carefully crafted for political advantage. It is a time of spin and exaggeration. Still, these are all numbers that people can easily check for themselves, dispensing with the political filter entirely.

Politics only goes so far in explaining why there is broad resistance to the idea that the national economy is not in bad shape and is a good deal healthier than that of the United States.

Exposure to the U.S. media, our own media's love of disaster stories, the false belief that Canada is always hit harder than the U.S. by economic crises, and the fact that much of the economic commentary is from people working in the very industry being hit hardest by the turmoil, likely account for the rest.

Turn on the TV, listen to the radio, check the latest headlines on the Internet, and you will be bombarded with stories about U.S. financial chaos and, more recently, the attempts to contain it.

The collapse of the housing bubble and mounting foreclosures south of the border are a staple of U.S. news programs, which many Canadians watch. Who is to blame and what to do next has become a central issue in the contest between Barack Obama and John McCain, which Canadians are also tracking closely. It is inevitable that Canadians will be infected by the mood of doom and gloom that has descended on the U.S.

This is especially true if it is not being contradicted by positive news about Canada. And yes, there has been some lately, although you might have missed it because it was not given the same play as the bad news.

Take for example, the latest figures on economic growth released earlier this week that indicated the Canadian economy picked up steam in July after minimal growth in June and a retraction in May.

Normally, news about the economy is played up, but these figures were dismissed as old news and quickly discarded. While it is true that the most spectacular financial busts in the U.S. took place in September, the U.S. financial system has been in trouble for more than a year and its housing market even longer, so it is relevant to see how the Canadian economy fared in July.

Then there was the completion of the Teck Cominco takeover of Fording Canadian Coal, in which Teck secured loans from banks worth a whopping $9.8-billion(U.S.). This would seem to refute the idea that banks were refusing to lend money to businesses, something that is happening in the U.S.

In another bit of good news, sales of new vehicles in Canada rose 1.7 per cent last month, compared with the same month a year ago. In stark contrast, they fell 27per cent in the U.S. Canadian consumers are still in the mood to spend and have access to credit.

But as neither this, nor the surprising economic growth in July, nor Teck's ability to secure massive bank loans fit with the favoured "we're all going to hell in a handbasket" idea, none of these events was heralded as evidence that things might not be as bad as we imagined.

And yet when Merrill Lynch Canada and then U.S. economist Robert Shiller suggested that Canada might suffer a housing bust, these dire warnings received more attention than the good news that preceded them. Both play to the erroneous belief that whenever anything negative happens in the U.S., we will be hit even harder. That is sometimes true. Still, there have been instances in the past when the U.S. experienced a recession and Canada did not.

Let's be clear. I am not suggesting that if the U.S. economy tanks, Canada will remain completely unscathed. It remains our most important trading partner and it is inevitable that there will be repercussions here.

Saying Canada's fundamentals are sound does not mean they won't deteriorate, only that we have a better chance of weathering what many people reckon will be a massive economic storm in the U.S. The latest figures back this up.

Call me a Harper lackey if you want.