Canada’s Capitalism, Essay Example

While Canada’s policies have been in keeping with the ideologies of welfare state proponents, the country’s finance minister, Jim Flaherty, seems to be trying to turn the country in another direction. Flaherty’s argument that business will replace government stimulus efforts (Badertscher) is very much like that of traditional capitalists, classical liberals, and, perhaps most of all, neo-conservatives.

Capitalists argue that the nature of trade automatically results in the best outcome for both buyers and sellers. Capitalism’s father, Adam Smith, argued that men knew best what their own interests were and that they should be allowed to pursue such interests (Eaton and Jurkowski). Even though men would pursue their own interests, said Smith, “an invisible hand” would lead them to promote interests that were not their own and contribute to the common good. Free trade, in Smith’s view, allowed for the best conditions for prosperity. Therefore, it should be unobstructed.  Indeed, according to George E. Eaton, ““The consequences of this belief in a natural order is that government can rarely be more effective than when it is negative or does not interfere.” (Eaton and Jurkowski 27) Smith himself declared “Government is best which governs least.” Therefore, Smith and his capitalists supported a system of Laissez-Faire (hands off) economics.

Capitalism was enormously popular during Smith’s time, but, as Eaton notes, it seemed to have its faults. Factories exploited families and workers often found themselves slaving under horrible conditions. This gave rise to union protests and governmental intervention. As the government began to be seen as a tool for promoting the wellbeing of citizens, socialists and neo-liberals began promoting the idea of the welfare state. They create programs such as social security that would look after vulnerable citizens. But the welfare state came at a price. According to Eaton, it left nations vulnerable to fiscal crises. This happened in the 1970s, when the world went through an oil crisis and began to see problems with inflation (Eaton and Jurkowski).

Just as socialism challenged capitalism, neo-conservatism challenged the ideas of the socialists. Ronald Reagan in the United States and Margaret Thatcher in the UK began cutting taxes, deregulating industry and trying to combat inflation with “trickledown economics” policies (Eaton and Jurkowski). Reagan believed that cutting taxes for business owners would help every citizen as employers found themselves able to hire more workers and to contribute to the economy. Reagan and the Neo-conservatives believed in a “limited purpose” government, rather than in a welfare state (Eaton and Jurkowski 18). They supported a very minimalistic view of government. Finally, they argued that rather than allowing the government to try to regulate unemployment, market forces should be left free to decide. (Eaton and Jurkowski 43)

This is precisely the same argument that Prime Minister Flaherty is now making. While America is considering increasing its own deficits to pass stimulus packages, Canada is taking on its problems with deficits by ending such spending and letting business take over (Howlett 1). Canada’s move towards a more capitalistic ideology has not gone unnoticed. Indeed, Neil Reynolds of The Globe and Mail says the following:

The Heritage Foundation-Wall Street Journal’s Index of Economic Freedom 2011 says Canada has edged upward in capitalist sentiment and free-market rights in the past couple of years, thereby earning an elite ranking as a “free economy.”

Only five other nations qualify. Canada is number six on the list and has come a long way from its spot at 25^th in 1999 (Reynolds 1). Meanwhile, Terence Cochran of The Financial Post observes that capitalism is making a comeback citing tax revolts in British Columbia. Flaherty’s move gives more support to Cochran’s claims (Cochran).

Works Cited

Badertscher, Paul. “Flaherty ‘Comfortable’ Business Will Replace Stimulus.” 23 October 2010. The Globe and Mail . 27 January 2011. Online

Cochran, Terence. “Capitalism’s comeback.” 8 January 2011. The Financial Post. 27 January 2011. Online.

Eaton, George E and Diane Jurkowski. Between public and private readings and cases on Canada’s Mixed Economy . Concord: Captus Press, 2003. Print.

Howlett, Karenl Curry, Bill. “Canadian finance ministers to target debts and deficits in new year.” 21 December 2010. The Globe and Mail. 27 January 2011. Online.

Reynolds, Neil. “Canada, one of the freest (markets) at last .” 2011. The Globe and Mail. 27 January 2011. Online