Economic Freedom and Wealth

(Part 2)


Canada’s Economic Freedom


In the 2011 Index of Economic Freedom, Canada passed the US for the first time in the history of the Index. Businesses in the US have been stifled by the regulatory uncertainty following the economic crisis caused by financial scandals and the sub-prime mortgage crisis. Government spending and borrowing in the US is also out of control following the economic crisis while Canada has been able to maintain fiscal soundness in their stimulus measures. Canada boasts an efficient and transparent regulatory framework that promotes entrepreneurship and commercial activity.

Business freedom in Canada is highlighted by strong policies that encourage entrepreneurship. The rate of start-up companies within the country currently exceeds the rate of business closures. Manufacturing is currently exhibiting high growth rates indicating that the country is developing innovative products and processes. Business start-ups in Canada are currently experiencing high survival rates after both one and five years which means that these firms are able to maintain a competitive advantage within their markets. (Fisher and Reuber, 2010, Pg. 24)

Canada experiences high levels of trade freedom and the foundation of the Canadian economy is foreign trade. Approximately 75% of the country’s exports are to the US. Total foreign trade accounts for approximately 45% of Canada’s GDP. The country’s main exports include oil, minerals, manufactured goods, and forest products and are one of only a few developed nations to be a net exporter of energy (TradingEconomics, 2011). Canada has aligned their trade laws to be more in line with the laws of its major trading partners.

Canada’s position on the Index of Economic Freedom has been rather stable over the last several years. Unemployment increased from 2008 until now due to the worldwide economic downturn. However, the country was able to weather the crisis fairly well with only a 5% of GDP increase in government spending. Canada has been operating within a net trade deficit since the economic downturn in 2008. However, in the most recent year, prices in all sectors of imports, except energy, experienced price increases while actual volumes decreased slightly (TradingEconomics, 2001).




Government interference beyond levels necessary inhibits individual’s ability to create and maintain economic prosperity. Countries with greater economic freedom experience higher GDP rates. Government stimulus efforts have actually decreased the economic freedom and wealth in many nations. Instead of increasing government spending, better results will be achieved through regulation reforms aimed at improving entrepreneurial activity that create opportunities for job growth.




Fisher, E. and Reuber, R. (2010, February). The State of Entrepreneurship in Canada. Retrieved October 31, 2011 from

Lam, E. (2011, September 20). Canada tops America in economic freedom. Financial Post [Electronic Edition]. Retrieved October 28, 2011 from

Miller, T. (2011). The Limits of Government. Retrieved October 28, 2011 from

Miller, T. and Kim, A. B. (2011) Defining Economic Freedom. Retrieved October 28, 2011 from

The Heritage Foundation. (2011). 2011 Index of Economic Freedom. Retrieved October 28, 2011 from

TradingEconomics. (2011, October 13). Canada Balance of Trade. Retrieved October 30, 2011 from

TradingEconomics. (2011). General Government Final Consumption Expenditure (% of GDP) in Canada. Retrieved October 31, 2011 from