Canada a mixed economy Although the trend followed by most nations nowadays tend to favor mixed economies, the question about planning versus free market still resurfaces every now and then. Throughout history, people have established different types of economic systems that best represent the cultural and social values of the society as a whole. By definition, an effective economic system is believed to be the kind of system that will meet the entire society’s needs and wants. It is also the system that will solve many of the nation’s economic problems. In Canada, years after the free trade agreement with United States and Mexico has been signed, non-conformists and naysayers continue to question the effectiveness and ramifications of the agreement. Whether a more socialist society or a more capitalist point of view leads Canada to economic prosperity, the question whether these systems corresponds to the expected function of an effective economic system lies uncertain considering the fact that economists argue that it is still too early to make accurate economic analysis of Canada’s economic system. However, judging from Canada’s present economic condition, it could be proven that Canada is better off having a mixed economy rather than being either one of the two systems. In fact, looking at the key characteristics of both systems can substantiate this advantage for Canada. As generally known, planning is a key characteristic of a socialist system. Government planning is the principal concept believed by followers of socialism. In a socialist economy, the government regulates most of trade and businesses. This means that government ownership is widespread and that an individual has little to say about the direction of the economy. Socialists also believed that there should be no extremes or inequalities of wealth or poverty and of power and influence. They are confident that through government planning, these extremes in social status could be minimized. They wanted the government to make economic decisions and also to control the basic resources of the country. They also argued that poverty was brought about by capitalism by allowing wealthy individuals to dominate much of the resources making it possible for them to become more prosperous than the other members of the society. In socialist societies, the government owns most of the services such as transportation, airlines, telephone services and others. The government also provides education, health care and public housing. Although they own major industries, some private ownership is also allowed. The government monitors the activities of these businesses through taxation and governmental policies. The level of government control over the whole economy guarantees that socialism promotes government planning as opposed to the free enterprise characteristic of capitalism. Some influences of socialism in Canada can be observed in many aspects of the Canadian economy. For example, the government regulates the transportation system (in Toronto, the TTC) as well as the railroads (Canadian Pacific Railroad) and airports. The federal government is also responsible for main industries such as agriculture and fisheries. There are also some direct and non-direct government enterprises, which include crown corporations such as Petro Canada, Canadian National Railways (CNR), and Canadian Broadcasting Corporation (CBC). These crown corporations provide a significant portion of Canadian economic output. All provincial parks are results of planning by provincial governments who also have ownership of forests in Canada. One main argument of socialists against capitalism is that capitalism widens the gap between the upper and lower classes. The socialists answers to this by narrowing the gap between the rich and the poor through the implementation of social services such as security for seniors, hospital insurance and laws requiring young people to attend school until they are 16 years of age. The funds used to cover these services came from taxation on businesses, employed individuals, and other revenue sources. Like the other nations who practice socialism, the government also provides public education and health care. Canada also offers social welfare programs such as welfare, employment insurance, disability compensations and public housing that serve to narrow the gap between upper and lower classes. These are only a few of the major influences of the socialist theory in Canada. As government planning serves as the main socialist mechanism, free enterprise is a characteristic of a capitalist system. Capitalism developed during the 1600’s and 1700’s when England, France, Spain and other European countries used to have economic systems based on mercantilism, which was a controlled economic system. Mercantilism restricted expansion because the government set regulations that limited the growth of major industries. This resulted to many groups wanting freedom from government control. In 1776, Adam Smith published a book called “An Inquiry Into the Nature and Causes of the Wealth of Nations” to criticize government intervention in Britain. He stated that a free market economy would allow citizens to use their own self-interests in business. One main characteristic of the capitalist system is the establishment of individual freedoms, whether they may be political, religious or economic in nature. These individual freedoms guaranteed that the rights of the citizens are protected and that they will have a part in making major economic decisions. Capitalists also believe that the government only have few responsibilities such as defending the nation, providing a stable currency and keeping law and order (economic security). This was called laissez-faire capitalism from the French term that means, “Let the people make or do”. Through limited government interference and freer trade laws, domestic industries strive to achieve increased efficiency in able to compete with internationally produced products. As a result of increased competition, higher productivity is achieved. Thus, capitalists believe that self-interest and competition is important towards economic success. These characteristics of capitalism are evident in Canada’s free enterprise market-based economy. Like countries who practice capitalism, Canada values establishment of individual freedoms. The Canadian Charter of Rights and Freedoms is unique because it applies not only to Canadians but also to other residents in Canada. This allows economic freedom which means that individual and businesses are free to pursue their own economic interests and that they can also play a role in making sovereign decisions about the direction of the Canadian economy. One of the advantages of freer trade laws is that it allowed Canada to specialize in what they can produce most efficiently. Specialization did not only encourage increased efficiency but it also challenged domestic industries to be competitive internationally. In most cases, it was advantageous to trade rather than be self-sufficient especially for food products such as mangoes and bananas that are grown in tropical countries. According to the theory of comparative advantage, specialization leads to increased production, which is beneficial because this also results to the increase of international trade and at the same time, promises a higher standard of living. International trade is proven to be a very important aspect of the Canadian economy. For example, forestry was the main source of revenue for Canada from 1985, 1987 and 1989. During the 1980’s, Canada’s merchandize trade gradually increased. More products were exported than imported and Canada gained a trade surplus as a result. About 75% of Canadian export went to the United States and the rest to the European Community, Japan and other nations as seen in the chart below. The chart shows that from 1980-1989, Canada’s exports remain to be greater than imports. The result of this is trade surplus every year. These trade surpluses helped in strengthening the Canadian economy and they also helped in increasing the country’s standard of living. With the help of these charts, the importance of exports and trade in Canada is clearly established. Therefore, free trade and individual freedoms are the highlights of capitalist influence in the Canadian economy. In many ways, having both a socialist influence and capitalist ideals have created an effective economic system for Canada. By the mixture of two systems, Canada is able to solve many economic problems and meet the definition of a truly effective economic system. For example, the gap between the rich and the poor, which is believed to arise as a result of capitalism, is minimized in Canada through its social programs such as social security, health care and welfare. The social services increased the standard of living and provided Canadians a feeling of security and stability. The Canadian government also allows private ownership and use of self-interests that encouraged the growth of many businesses. By allowing private ownership, individuals and businesses are able to take part in controlling the direction of the economy. As a result of free trade, competition, increased the efficiency of producers in Canada and also increased productivity (output per worker). Free trade also gave way to specialization in Canada that led to a more efficient use of resources and also prevented it from spending too much by being self-sufficient. Moreover, the combined individual freedoms and social services made residents of Canada feel secured and protected. By realizing that capitalism and socialism fill in each other’s disadvantages and by not having critics constantly contemplating about the pros and cons of planning and free trade, the more likely that everyone will work with the present economic system for the prosperity of Canada’s economy as a whole.