Oh, Canada! Americans' Northern Neighbors Are Now Richer
The U.S. may bill itself as the land of opportunity, but right now, Canadians are making out better.
That's according to a column in the Toronto-based Globe and Mail, which reports, "Over the past five years, net worth per Canadian household has exceeded net worth per American household (total combined value of liquid and real estate assets minus debt) for the first time."
According to Environics Analytics, a Canadian marketing and analytical services firm, the average household net worth in Canada was $363,202 in 2011; the figure for the U.S. was $319,970. That means the average Canadian household is more than $40,000 richer than its American counterpart.
"And these are not 60-cent dollars," The Globe and Mail notes, "but Canadian dollars more or less at par with the U.S. greenback." Making matters worse for the recession-ravaged U.S., these figures do not take into account the public sector debt that will someday come due for citizens of both countries; government debt as a percentage of GDP is higher in the U.S. than it is in Canada.
The reasons for the disparity in wealth are as depressing for Americans as the news itself: Instead of "a sudden surge of productivity or entrepreneurial genius" north of the border, the paper cites "the 2008 economic crisis and the collapse of the U.S. housing market."
Indeed, the crash in U.S. home prices means that Canadians own real estate that is on average worth $140,000 more than that held by Americans. They also own twice as much property and have nearly four times as much equity in it after mortgages are taken into account.
Public policy may be in part to blame: As The Globe and Mail points out, "Canadian leaders rejected mortgage interest deductibility," making it somewhat harder for citizens to get so deep into mortgage debt. Moreover, subprime mortgages -- those ignes fatui of the American economy -- did not catch on in Canada the way they did here.
All of which leaves our "thrifty, socialist neighbors to the north" -- who have long eschewed both the dynamism and the risk of the American system in favor of higher taxes, greater regulation and a sturdier social safety net -- looking pretty clever right now. Still, it's worth observing, as The Globe and Mail does, that Canadians are "taking on more debt than [their] supposedly more spendthrift American cousins."
Early this year, it was reported that economic mobility -- the centerpiece of America's self-image -- is actually greater in Canada and Western Europe than in the U.S. According to The New York Times, "The mobility gap has been widely discussed in academic circles, but a sour season of mass unemployment and street protests has moved the discussion toward center stage."
"It's becoming conventional wisdom that the U.S. does not have as much mobility as most other advanced countries," said one economist. "I don't think you'll find too many people who will argue with that."