Canada’s State-Stable Economic System

Back in December 2013, I gave a presentation of Native American/First Nations Socioeconomics (prelude to that paper here), where I claimed that First Nations use a state-stable economic system. This is where upper limits are placed on consumption for the good of society. This was almost always accomplished by imposing social sanctions upon those who violated upper consumption limits.

While Canada is not a state-stable economic system (it’s capitalist), a recent report, and subsequent analysis by Statistics Canada kind of shows that people may freely choose to limit their consumption when debt gets too high. This shows at least a cursory value system of state-stable economics, even if there are no official state sanctions.

What if it were true, that you could have a state-stable economic framework – an upper limit on consumption – in a capitalist society? I suspect both Thorstein Veblen and John Maynard Keynes would roll over in their graves. I also suspect it would look something like Canada.

As we know, in the United States, consumption is everything, and it’s downright “socialist” to suggest that people (especially the 1%) curb their consumption for the good of the whole. The result was the near collapse of the banks, subsequent credit freeze, and a general depression that the United States cannot get out of (for a myriad of reasons), which is traumatizing most Americans.

Is there anything to this idea that Canadians are choosing to restrict their debt (consumption)? The best way to look at it is to compare the United States to Canada in its consumption “value” system, mostly because this is the only comparable data available. Since the so-called “recovery,” or as I call it, the post-apocalyptic world since 2009, the household debt to GDP ratio for both the U.S. and Canada look completely different.

Can Us Household debt to gdp

How exactly do the two numbers compare? The Pearson Correlation is r= -.725. This is a very high negative correlation. In other words, when Americans are increasing debt (to increase consumption), Canadians are doing the opposite – they are deleveraging, and doing so without a banking crisis. Canadians seem to know how much debt is too much, and seemingly, end up imposing their own upper limits on consumption.

Add to that the pre-apocalypse times, and you can see that the United States still had far more household debt to GDP than Canada before deleveraging began. While Canada did not face massive deleveraging, they also did not face mass consumption which leads to massive inflation. Inflation in Canada has been just as flat as the U.S.

Can US CPI

And while the Loonie has taken a recent loss against the U.S. Dollar, the Canadian exchange rate is still way lower than pre-recession levels. This suggests that the Loonie may only be taking a slight loss not because the Loonie is weaker, but because the dollar is stronger. This is especially true when viewing the super human strength of the Loonie after 2009.

canadian exchange

So there is at least some surface data to suggest that Canadians self-impose an upper limit on consumption. What would be great is a general social survey of Canadians that we can compare with a general social survey of Americans to see if this is a “social fact.” If so, then it would show that it is possible to have a state-stable economic framework under capitalism.

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