Canada Ranks 5th in World Ranking of Economic Freedom, US Falls to 18th

Posted on September 19, 2012 by CICS Immigration Team

Canada is now ranked as having the freest economy in North America, thirteen places ahead of the United States, the historic symbol of economic freedom in the world (NASA/GSFC)

Canada tied Australia for fifth freest economy in the world in the Fraser Institute’s annual Economic Freedom of the World report, released yesterday. Canada improved its position by one spot while the US saw its ranking drop by ten spots from last year’s index.

The Fraser Institute’s economic freedom index scores countries’ degree of economic freedom by five criteria:

Size of Government- a measure of how much government spends as a percentage of GDP, how much of the economy is directed by government-managed firms rather than the private sector, and income and payroll tax rates.
Legal System and Property Rights- the extent to which private property ownership rights are protected and contracts are enforced by an independent judiciary and impartial court system.
Sound Money- how well a country’s central bank maintains a low and stable inflation rate, and the freedom of people in a country to user alternative currencies and foreign bank accounts.
Freedom to Trade Internationally- the degree of freedom people in a country enjoy from international trade barriers set up by their governments.
Regulation- the extent of freedom from government restrictions on mutually voluntary activities. Countries with fewer regulations like minimum wage restrictions, dismissal regulations, and mandatory acceptance of collective bargaining requests score higher in this area.

The economic data used in the index is from 2010, as that is the most recent comprehensive data available, and comes from external sources like the International Monetary Fund, World Bank, and the World Economic Forum.

For the sixteenth year in a row, Hong Kong and Singapore ranked first and second place in the index. The two East Asian economies have the lowest levels of government spending in the industrialized world, at approximately half that of Canada as a percentage of GDP, and the fewest restrictions on trade, labour and business activities of any of the 144 countries and territories included in the index.

Like most industrialized countries, Canada received a low score in the Size of Government component, ranking 73rd in the world, due to high levels of government spending and high marginal tax rates, but ranked near the top of the index in the areas of Legal System and Property Rights (12th), and Regulation (6th), thanks to a strong rule of law providing secure rights to property, and few regulatory barriers in credit markets and on labour and business activities.

The US’s overall ranking suffered due to an increase in government spending, and a reduction in its scores in the areas of Rule of Law and Freedom to Trade Internationally.

Edmonton and Calgary to Have Fastest Economic Growth in Canada

Posted on September 18, 2012 by CICS Immigration Team

Suncor Energy Centre in Calgary, Alberta. Edmonton and Calgary are expected to have the fastest economic growth in Canada according to the Conference Board of Canada’s Metropolitan Outlook-Autumn 2012 (Chuck Szmurlo)

The Albertan metropolises, Calgary and Edmonton, will have the fastest economic growth in Canada this year, followed closely by Regina, Saskatchewan, according to a forecast by the Conference Board of Canada’s Metropolitan Outlook-Autumn 2012, released today.

Alberta is expected to benefit from high levels of energy-industry-related investment for the next four years, which will help fund economic growth of 3.8 percent in Calgary and 4.6 percent in Edmonton in 2012.

Saskatchewan’s cities, also enjoying a resource-sector-led boom thanks to the province’s large oil and gas, potash, uranium, and lumber resources, will see strong growth over the next four years according to the report. The provincial capital, Regina, is expected to lead the province with economic growth of 3.6 percent in 2012.

Perhaps surprisingly given the city’s real estate slowdown, Vancouver is expected to have one of the best performing economies in Canada in the coming years, with economic growth of 3.1 percent in 2012, and average annual economic growth of 3.3 percent forecast for the next four years.

Iranian Immigrants Being Singled Out For Extra Scrutiny by Canadian Government

Posted on September 14, 2012 by CICS Immigration Team

Iran's largest car manufacturer, Iran-Khodro, is one of the hundreds of companies sanctioned under Canada's Special Economic Measures Act (SEPA). An employment history with the firm can potentially cause difficulties for Iranians seeking to immigrate to Canada.

Immigration Minister Jason Kenney said this week that Iranians applying for immigration to Canada are being “rigorously” screened by the Canadian government for links to the Iranian political leadership.

Kenney cited the Immigration and Refugee Protection Act (IRPA), saying it bars any one linked to “the Iranian Revolutionary Guard … the Basij or senior members of the regime” from immigrating to Canada.

This week the Harper government placed Iran and Syria on its list of state sponsors of terrorism, and section 34 of the IRPA which Kenney referred to deems members of organizations believed to be engaged in terrorism to be inadmissible to Canada.

A number of Iranian-Canadian human rights and dissident group activists have for years urged the Canadian government to prevent individuals linked to the Iranian regime from immigrating to Canada. They say that senior members of the Iranian government have managed immigrate to Canada and worry that they will be able to extend the reach of the Iranian government into Canada and intimidate Iranian-Canadians who oppose the regime.

Prominent Iranian-born human-rights activist and former Miss Canada Nazanin Afshin-Jam, who is married to Canadian Defence Minister Peter MacKay, said in July that the Iranian embassy in Ottawa should be shut down, saying it “has no purpose here” and is used to spread “propaganda”.

The Harper government has heeded their calls and put in place two rounds of sanctions against Iran, in July 2010 and November 2011, as well as shutting down the Iranian embassy in Canada and the Canadian embassy in Tehran and putting Iran on its list of state sponsors of terrorism this week.

The punitive actions have affected many with no links to the regime however. The closure of the Iranian embassy in Ottawa this week left thousands of Iranian students without consular services in Canada and no where to turn to receive them.

Likewise, Canadian economic sanctions, ostensibly put in place to prevent the Iranian government from funding its nuclear program, resulted in a major Canadian financial institution, TD Bank, shutting down the bank accounts of over 100 Iranian-Canadians.

It has also led to a few cases of Iranians with no relationship to the Iranian government having their application for immigration to Canada rejected in the last phase of the selection process. The reason given was that they had an employment history that included positions at companies sanctioned due to their links to the Iranian government.

For Iran’s professional class, avoiding employment at firms with links to the Iranian government is nearly impossible in some cases, as Iran’s government and Revolutionary Guard have major stakes in almost every large commercial entity in the country, so the effect of these sanctions is to prevent many of Iran’s best and brightest, who have no political links, and are seeking a better life in a new country, from being able to immigrate to Canada.

Would-be Iranian immigrants have also been facing extra difficulties in the immigration process due to the effects of financial sanctions imposed last year, which require any one wanting to send their money from Iran to Canada to first acquire a special permit from the federal government that can take any where from four to eight weeks to issue.

Federal Government Imposing Visa Requirements on St. Lucia, St. Vincent, Namibia, Botswana and Swaziland

Posted on September 13, 2012 by CICS Immigration Team

The tropical Caribbean island nation of Saint Lucia was one of the countries that lost its visa-exempt status in Canada on September 12th due to what CIC said were high levels of asylum claims and unreliable passports

Citizenship and Immigration Canada (CIC) announced this week that citizens of St. Lucia, St. Vincent and the Grenadines (St. Vincent), Namibia, Botswana and Swaziland will require a visa to travel to Canada, effective 12:01 AM EDT on September 12th.

Individuals who held passports from these countries were previously visa exempt, but due to what CIC says is unreliability in the authenticity of travel documents from these countries, the exemption is being repealed. It was found that citizens from these countries were able to legally change their names and acquire new passports, allowing them to re-enter Canada with new passports after being deported from Canada as security risks.

Visa requirements were also imposed due to the excessively high number of asylum seekers from St. Lucia, St. Vincent and Namibia. The worst offender was Namibia, from which an astonishing 71 percent of those who visited Canada claimed refugee status in 2011, according to CIC.

Commenting on the visa imposition, Citizenship and Immigration Minister Jason Kenney said: “These changes are necessary because all the countries concerned have an immigration violation rate of over thirty percent, well above the level we deem acceptable for countries benefiting from a visa exemption.”

CIC said that the Canadian government regularly reviews the visa requirements it places on other countries, and that countries are aware of the conditions they must meet to receive a visa exemption.

In Surprising Move, Harper Gov Orders Expulsion of Iranian Diplomats and Closes Canada’s Embassy in Iran

Posted on September 7, 2012 by CICS Immigration Team

The Harper government ordered the Canadian embassy in Tehran, Iran, picture above, to be closed and has given all Iranian diplomats five days to leave Ottawa, Canada.

In a surprise announcement today, the Harper government said that it is closing the Canadian embassy in Tehran and expelling all Iranian diplomats from Canada.

Many political commentators were puzzled by the abrupt decision, as there have been no recent public developments in the Iranian-Canadian relationship that seemingly could have motivated the move.

Foreign Affairs Minister John Baird, a known anti-Iran hawk and supporter of Israel’s hard-line Likud government, said that “[Iran] routinely threatens the existence of Israel and engages in racist anti-Semitic rhetoric and incitement to genocide” to explain the cause of the closure. Baird also said the closure was motivated by worries about the safety of Canadian diplomats in Iran.

One potential explanation for the timing of the closure is that the Harper government is facing a deadline from the Justice for Victims of Terrorism Act, legislation it passed in March that makes countries on a special list exempt from immunity to lawsuits for culpability in terrorist attacks worldwide. The deadline for the compilation of that list was six months after the passing of the legislation, a date coming up next week.

Reacting to the news, the Iranian Foreign Ministry spokesman Ramin Mehmanparst described the Harper government as having a “radical foreign policy” that placed Israel’s interests ahead of those of Canadians. A message on the website of the Embassy of Iran in Canada said:

“According to the hostile decision of the Canadian government, the Iranian embassy in Ottawa has been closed and inevitably any consulate services for fellow Iranians has stopped. Please avoid sending any consulate affairs documents. The Embassy is closed”

Many in Canada’s large Iranian-Canadian community expressed shock at the decision. The termination of diplomatic relations will affect the many Iranian-Canadians who regularly visit family in Iran by eliminating consular services on both sides of the trip.

Most Canadian consular services for Iranian nationals were already moved to the Embassy of Canada in Ankara, Turkey when the Visa and Immigration section of the Embassy of Canada in Tehran was closed in April, so the effect of the closure will be more pronounced for Iranian consular services in Canada than Canadian consular services in Iran.

Several Iranian pro-democracy activists also expressed concern about the termination of diplomatic contact as they said it would close off the most important avenue through which the Canadian government exerts pressure on the Iranian government to release Iranian-Canadian political prisons and commute death sentences.

Finance Minister Wants Corporate Canada to Spend its $525 Billion in Cash

Posted on August 27, 2012 by CICS Immigration Team

The headquarters of the TSX, Canada's largest stock exchange. (Mike Russell)

Canadian Finance Minister Jim Flaherty says the Canadian economy needs Corporate Canada to start spending the $525 billion in cash and other liquid assets that it has on hand.

Since the financial crisis of 2008, Canadian corporations have been increasing their current assets in an effort to create a larger liquidity cushion to mitigate the risk from possible future economic volatility. The Finance Minister says spending or paying out as dividends some of the half a trillion dollars in cash and cash equivalents would boost the economy at a time when growth is lacklustre.

Bank of Canada Governor Mark Carney backed Flaherty’s view last week, telling a Canadian Auto Workers union audience that the corporate cash reserves are “dead money” and that “[the corporate executives’] job is to put money to work and if they can’t think of what to do with it, they should give it back to their shareholders.”

Not every one agrees with Mr. Flaherty and Mr. Carney’s assessment. Mark McQueen, President & CEO of Toronto-based Wellington Financial, and a regular contributor to financial analysis website SeekingAlpha, provided his dissenting view in an article published yesterday:

The international financial crisis is still a very recent memory for most in business, and it cannot be denied that Greece, Spain and Italy currently appear to be the sovereign versions of Bear Stearns, Lehman Brothers and Morgan Stanley circa August 2008. Telling a CFO to “get out there and spend” with that backdrop is kind of like advising a heart patient who recently went through an angioplasty procedure that he should rush headlong back to Bardi’s Steakhouse for his favourite 24 ounce Rib Eye.

Then there’s the specific details of these allegedly high corporate cash levels. … When you tally up the debt figures, it tells a different story. None of these poster children have net cash on hand. Whether or not they are underlevered or overlevered entities depends upon their business fundamentals: such as trailing and forecast EBITDA, net income and free cash flow. Those metrics, and their sustainability in the face of a global recession, are the only way to truly gauge whether or not these three media examples are cash rich or digging their way out of an earlier debt hole.

Canadian non-financial corporations have historically held cash with a combined value equivalent to 10 percent of GDP, much less than the 30 percent of GDP that it is worth today.

Three Canadian Cities in Top 10 in World Liveability Ranking

Posted on August 15, 2012 by CICS Immigration Team

Vancouver placed third in the Economist's annual liveability ranking for the second year in a row, after spending most of the last decade in first place

The Economist’s annual liveability ranking was published on Tuesday and it placed three Canadian cities, Vancouver, Toronto and Calgary, in the top 10.

Vancouver placed third for the second year in a row, failing once again to regain the first place position that it had held in the rankings for nine consecutive years until 2010. Ahead of Vancouver is Melbourne, Australia, which came in first, and Vienna, Austria, which placed second.

Other Canadian cities also placed well, with Toronto coming fourth and Calgary tying Adelaide, Australia for fifth place. The ranking, created by the Economist Intelligence Unit, evaluates a city’s liveability according to five indicators:

stability, which includes threats of crime and war,
the quality and availability of private and public health care,
culture and environment, which includes qualities like absence of social and religious restrictions, average temperature/humidity, number of cultural events, and the availability of goods and services,
the quality of public and private education
infrastructure

The index does not factor in cost of living, which worked in favour of Melbourne, as it placed 15th worldwide in Mercer’s annual cost of living survey this year, far ahead of Vancouver and Toronto which placed 63rd and 61st worldwide respectively.

Canada’s Real Wage Growth Stagnant For Last 30 Years -Report

Posted on July 27, 2012 by CICS Immigration Team

Average hourly wages increased by only three dollars from 1981 to 2011 after adjusting for inflation

A report published last month as part of Statistics Canada’s Economic Insights series finds that average real wage rates increased by only 14 percent in Canada from 1981 to 2011.

According to the report, real hourly wages, meaning hourly wages after adjusting for inflation, increased from approximately $20.70 in 1981, to $23.70 in 2011, a $3 wage gain in 30 years. Median real hourly wage growth was even more meager, increasing by approximately $2, to $20.90, between 1981 and 2011 -a 10.6 percent increase over three decades.

Different rates of wage growth were observed in the earlier and latter halves of the last 30 years, with average real hourly wages rising by only 4 percent in the 17 year period from 1981 to 1998.

After deep spending cuts by the federal government in the mid-1990s, which brought total government spending levels down from 53 percent of GDP in 1992, to 43 percent of GDP in 1998, the rate accelerated, with wages increasing 10 percent in the 13 year period from 1998 to 2011.

Much of the developed world has experienced wage stagnation over the last four decades. Explanations for the slow down include:

the break-down of the Bretton-Woods system, which pegged the world’s currencies to gold, in 1971, and the subsequent increase in monetary inflation, resulting in nominal wage hikes not keeping up with inflation
globalization and corporate outsourcing to low wage countries
an ‘innovation saturation’ as economies mature
the entrance of women into the work force increasing the supply of labour
an increase in government spending levels diverting economic output from private sector investments

Nominal wages in Canada increased by 1.1 percent in 2011, substantially less than last year’s annual inflation rate of 3.2 percent.

Crime Rate in Canada at 40 Year Low, Still Above 1962 Levels

Posted on July 26, 2012 by CICS Immigration Team

Canada's crime rate is now at a 40 year low, after eight consecutive years of declines in the incidence of police-reported crime (UNODC)

Statistics Canada reported this week that the incidence of police reported crime declined 6 percent in 2011 from the previous year, and is now at the lowest level it has been since 1972.

The Crime Severity Index, which measures the severity of crime, also fell 6 percent, while the Violent Crime Severity Index, which measures the severity of only violent crimes, dropped 4 percent, continuing a two decade long downward trend in crime rate metrics.

Canada’s crime rate was 3,000 incidents per 100,000 residents in 1962, but then rapidly increased through the 1960s and 70s. The increase in the crime rate slowed in the 1980s and finally reached its peak in 1991, before beginning its 20 year decline to the present.

The current rate of 6,000 incidences of crime per 100,000 residents is 40 percent lower than the 1991 peak, but still double the rate in 1962, a fact that the federal Public Safety Minister, Vic Toews, stressed on his Twitter account after announcing the milestone.

“Rate is still 208% above 1962 levels, more work for our gov’t to do,” Toews tweeted.

The Statistics Canada report showed Manitoba and Saskatchewan with the highest Crime Severity Index among the provinces, and Ontario the lowest.

Much of the violent crime in Manitoba and Saskatchewan is concentrated in the provinces’ sizable native communities which have been racked by high rates of alcoholism and violence for decades.

Canadians Now Wealthier Than Americans, Mostly Due to Housing Prices

Posted on July 25, 2012 by CICS Immigration Team

Condo construction in Canada. The crash in the US housing market was the main cause of the average net worth of households in Canada surpassing the net worth of households in the US (Raysonho)

A report that first surfaced on Canada Day stating that Canada now has higher average household net worth than the US set the news media on both sides of the border buzzing. Advocates of robust government intervention in the economy pointed to this development as vindication of their faith in their economic ideology, while Republicans blamed the news on Obama’s term in office.

The real cause of the switch in household net worth standings is much more mundane: a drop in housing prices in the US. As the National Post’s Andrew Coyne notes, home prices declined by nearly one-third in the US from 2006, when the US was ahead in household net worth, to 2011, when the wealth comparison used in the report was done, while they remained steady in Canada, and this accounts for almost all of the drop in the average household net worth in the US relative to that in Canada. A commodity boom driving up the value of the Canadian dollar also helped Canada’s relative position.

The key policy decision in the US that caused the divergence in the wealth of American and Canadian households was the goal the American political establishment set in the early 2000s to purposefully encourage a boom in the housing market using the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, and low interest rates from the Federal Reserve as the tools.

As far back as 2001, popular American pundit Paul Krugman, in classic Keynesian economic fashion, trumpeted the benefits a housing bubble could provide for the US economy and proposed the means of creating it:

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

The Federal Reserve obliged and sharply lowered interest rates and kept them there for the next three years.

The GSEs did their part and expanded their volume of purchases of privately issued mortgage backed securities from $20 billion in 2000 to over $150 billion at the height of the housing bubble, in 2006.

In contrast, the Canada Mortgage and Housing Corporation (CMHC), a crown corporation which has a role somewhat similar to that of the GSEs in the US, remained conservative in the type of mortgages it insured, while the Bank of Canada kept its overnight lending rate a full two percentage points higher than the Fed’s, and consequently, no bubble formed in Canada’s housing market.

Whether the US economy would have been spared a housing bubble in the absence of the expansion of GSE subsidies and lowering of the Fed’s lending rate is a matter of much scholarly debate. At the very least, the decision by the American political establishment and Federal Reserve authorities to expand government mortgage subsidies and keep interest rates low for three years, respectively, did nothing to prevent a bubble from forming, and made the one that did form worse than it otherwise would have been.

The real story that emerges in Canada overtaking the US in average household net worth is the superiority of a more prudent approach to economic intervention that emphasizes sustainable economic development over one that focuses on boosting GDP in the short term at any price.