The world really does need more Canada.

For years, we've been told Canada's banks are too puny to survive in a globalizing world. That our governments are not sufficiently frugal. That we stint on research and development. That we have something of a monopoly on lax regulatory protections for investors.

So let's look around.

Banking: The global banking system has effectively failed. After losing upward of $1 trillion (U.S.) by taking leave of prudent practices in pursuit of a quick buck, it continues to function only by the grace of emergency government bailouts in the U.S. and throughout Europe.

Rank mismanagement has characterized the operations of the world's most prestigious banks this decade. The pantheon of the world's most prestigious banks engaged in cowboy antics. They amassed ultimately unmanageable risk, as they created and traded in "collateralized debt obligations" and other fancy new financial instruments that even the chief executives of Citigroup Inc., Wachovia Corp., Merrill Lynch & Co., Royal Bank of Scotland PLC, HSBC PLC and UBS AG either didn't understand or realize their institutions held in their portfolios.

Public finances: By now, it's well known that U.S. President George W. Bush, abetted by a Congress controlled by fellow Republicans during his first six years in office, somehow managed to more than double the U.S. national debt to about $11 trillion. No mean feat, considering it took the republic 224 years prior to Bush's first inauguration to accumulate the $5 trillion debt that Bush inherited. And about two-thirds of U.S. state governments, including California and New York, cannot balance their budgets and are appealing to President-elect Barack Obama for a bailout.

The phenomenon of spendthrift governments is widely evident in Europe, as well. Earlier this week, Standard & Poor's said Spain's triple-A ratings might soon be downgraded. S&P also issued similar warnings to Greece and Ireland. Debt-laden Italy and Portugal are expected to soon follow.

Even Britain, the most robust of European economies earlier this decade, is facing a downgrade on its government paper with the collapse of the overheated British housing market and the expense of nationalizing a crippled RBS, the nation's largest bank, and other financial institutions. Iceland is effectively insolvent, the victim of a local banking collapse brought on by reckless overexpansion.

Ireland deserves special attention. Personal-computer maker Dell Inc. last week announced the relocation of its Irish operations to lower-cost Poland. Ireland's magic elixir of huge tax breaks and corporate subsidies was for years urged upon Canadian policy-makers by right-wing think-tanks that faulted Canada for being too costly a jurisdiction to do business. Well, here's some news for the Chamber of Commerce keynoters from Belleville to Kelowna, and authors of the Fraser Institute scripts they read from: Ireland, whose own overheated housing market has imploded, is now a basket case. Out-migration of the kind James Joyce bemoaned has resumed.

R&D: American government financing of research – and most basic research in the U.S. is financed by government – has dropped every year since 2004 in real dollars for life sciences, and for much longer in the physical sciences.

The private sector – everyone from Merck & Co. to Hamburger U. at McDonald's Corp., which exploit that research – is suffering a long-term decline in global competitiveness as a result. Forty-nine Nobel laureate scientists have signed an urgent plea to Obama to restore basic-science research funding "to the levels needed to maintain the vitality and leadership of U.S. scientific research."

Investor protection: Recall that the U.S. Securities and Exchange Commission was so understaffed in the late 1990s that it could not scrutinize the flood of prospectuses from Enron Corp., WorldCom Inc. and the hundreds of upstart dot-coms. So soon after that epic loss of about $8 trillion in shareholder value when those firms collapsed, the SEC was AWOL again as America's leading banks and brokers hid ungainly risks in the same off-balance sheet devices that Andy Fastow used at Enron.

The SEC first learned about Bernard Madoff's recently uncovered $50 billion Ponzi scheme in the papers. And where was the U.S. Federal Deposit Insurance Corp. while depositors' funds were being put in jeopardy? Where was Britain's Financial Services Authority when RBS and mortgage leaders HBOS PLC and Northern Rock PLC were playing with fire?

So much for the unassailable virtues of national securities regulators.

No argument is made here that Canada is an oasis of best practices in these matters, not after the fiascos of Livent Corp. and Bre-X Minerals Ltd.

But consider: none of our Big Five banks is in the slightest danger. In fact, each is poised to pluck off weakened U.S. banks at deep-discount prices, possibly with U.S. government assistance.

Why? Because our legislators and banking regulators aren't in the back pocket of a powerful banking lobby. They're more assiduous about scrutiny. They take a dim view of mortgages with no down payment, no collateral and no proof of income. And they aren't shy about demanding that banks increase their capital to cover writeoffs, well ahead of trouble. Each of the Big Five is blessed with a stable retail-banking franchise. Each is truly national, while even after several rounds of consolidation, the U.S. has not one bank that can boast the geographic diversification of the Toronto-based banks.

And because back in 1998, then-finance minister Paul Martin killed the Big Five's ardent desire to merge. We now know that the so-called "money centre" banks on Wall Street were so preoccupied with Pac-Man acquisitions they lost sight of their basic business.

Loading... Loading... Loading... Loading... Loading... Loading...

There is such a thing as getting too big to be able to manage yourself, as General Motors Corp. has learned and Wal-Mart Stores Inc. eventually will.

"Martin should get some of the credit for the current soundness of Canada's banks," says Michael Bliss, University of Toronto professor emeritus and a leading business historian.

Bliss, incidentally, is a conservative who otherwise found little to admire in Martin at Finance or at 24 Sussex.

"Martin and Parliament stopped the banks from merging, and I would bet my house that if we had created a couple of superbanks here they would have flown high and now been a ghastly mess," Bliss said.

"Parliament and Martin rightly realized they needed to save the bankers from themselves."

Robert Kelly, chief executive of U.S. banking giant Bank of New York Mellon, spoke recently at the Canadian Club of Toronto on what to expect of the Obama administration.

The former TD Bank executive, noting the strength in product-line diversity and geographic reach of his former Canadian peers, said one of the lessons learned by the roughly 7,000 U.S. banks is the virtue of branch banking and a stable retail-deposit base. The upshot, he said, is that in post-recovery mode, the U.S. banking system will be more modelled on ours.

And what of our public finances, as current Finance Minister Jim Flaherty prepares a stimulus budget to be unveiled late this month that might push Canada into deficit of $30 billion (Canadian) or so?

To start with, it's almost quaintly modest relative to the triple-figure stimulus packages in America, Europe, China and Russia. Using the usual rule of 10s in comparing Canada and the U.S., Obama's imminent stimulus proposal should be on the order of $300 billion (U.S.), but will clock in at above $1 trillion by the time Congress lards it up. That's in addition to America's $700 billion banking bailout of late last year.

Fact is, after a decade of consecutive federal budget surpluses – a record unmatched among our G8 peers – Ottawa is in far better fiscal shape than other industrialized nations to cushion the blow for Canadians of the U.S.-originated global recession. Problems we have in abundance, perhaps none more disgraceful than the estimated 900,000 Canadian children living in poverty, the wretched conditions in many aboriginal communities, and our failure to take a leadership role in curbing global warming. But in crucial ways that other nations can only envy, this country is built on a rock.

Amid the daily headlines of a world gone haywire, the continued blessings of this country remain an untold story.





Read more about: