Economics of the USA & Canada

*The United States and Canada are each the other’s largest trading partner.  Both nations are particularly bound to each other and to Mexico by the North American Free Trade Agreement, which allows many good produced in those countries to be traded across their borders without any tariffs. 

*Both the United States and Canada are basically market economies, in which people can own their own businesses, work how and where they please, and charge the prices they want, more or less. 

*In both nations the government does control the market somewhat, and has laws regarding safety, discrimination, and other treatment in the workplace.  The government is also a large purchaser of many important products (like military equipment, especially aircraft).  Thus, both nations have mixed economies, particularly Canada.

*In Canada, the government also owns and manages health care to a much greater degree than does the US government.  This is known as socialised medicine.  It means that everyone gets access to medical care, but sometimes it means that the quality of treatment is lower than in the United States.

*One way to measure a country’s productivity is through its Gross Domestic Product.

*GDP is defined as the total value of final goods and services produced within that a country during a specified period (or, if not specified, annually). 

*GDP is determined by adding the value of everything consumed (that is, bought and used), everything invested (in theoretical economics, investment means the purchase (and thus the production) of capital goods - goods which are not consumed but instead used in future production), and everything exported from the country, then subtracting the value of everything imported to the country. 

*Although not the only way to figure out how much a country produces, or how wealthy its people are, GDP is often seen as the best way to do so over the long term.

*The United States produces almost $12.5 trillion per year (#1 in GDP).  Canada produces just over $1 trillion, making it the 9th most productive nation in the world.

*The wealth of a nation is also often measured in GDP per capita, or per person.  This is done by dividing total GDP by a nation’s population.  In theory, this shows how much each person is worth, in economic terms, on average. 

*The United States has the 8th highest GDP per capita ($41,917), and Canada has the 18th (34,028).  However, many of the nations with a higher GDP per capita also have higher costs of living, so the effective GDP of the US is 3rd highest in the world, and Canada’s is 8th:  many wealthy nations are expensive to live in  (like Switzerland).

*The US and Canada were founded by farmers (and fur trappers), but today farming does not employ many Americans or Canadians.  Only about 2% of the US population still works on farms, and only 4% of the Canadian.  On reason so few people farm any more is that so much can be done with tractors, fertilisers, and other technological improvements to agriculture.

*The United States and Canada are major producers of beef, milk, eggs, corn, wheat, and soybeans (in fact, the USA is the world’s largest single producer of soy beans).  Corn is the USA’s largest crop by both value and volume, even though in most parts of the world (including the US) it is used mostly for animal feed.

*About 20% of Americans and Canadians work in manufacturing.  For the most part, Americans and Canadians produce complex machinery such as aircraft and automobiles, as well as highly technical electronic equipment; producing processed materials like steel is mostly done elsewhere now.  Both countries also do a lot of food processing.

*Canada and the US also produce a lot of oil, although the US now consumes most of what they produce, and, in fact, import a lot of oil and natural gas from Canada.  Canada is also a major producer of lumber.

*The majority of American and Canadian workers are employed in service industries—about 75% in both countries.  Service industries include government work, teaching, the media, tourism, health care, banking, real estate, scientific research, and other jobs that do not directly produce finished goods.  This is one reason that the both countries’ manufacturing turns out so much high tech stuff:  Anglo-America has devoted itself to quality rather than quantity (in part because the costs of labour are so high in the US and Canada).

*Overall, both countries have post-industrial economies.  That means that both countries have moved beyond the point where most of their income comes from factory workers.

*The United States exports more good than any other single nation in the world, although the all the nations of the EU combined do export more than the US alone:  over 10% of the world’s exports come from the USA. 

*However, the US imports goods worth even more than those they export, creating a trade deficit.  Some see this as bad, because it seems to make the US economy dependent on foreign nations, and also means that the US sends out more money than it takes in.  Others see this as good, because the US receives tangible products in return for fiat money.

*Canada has a trade surplus, in large part because it is able to sell so much oil, natural gas, and electricity to the USA.

This page last updated 28 August, 2005.