Canada is more capitalist than socialist. The nation’s economy is classified as a mixed market economy with a robust social safety net.
This means that Canada has influences from both socialism nor capitalism. It is a mix of the two. Many people call this model “social democracy.”
According to the Economic Freedom World Index, Canada ranks as the 14th most free economy in the world, making it a nation strongly influenced by the capitalist ideology.
Socialism vs Capitalism
Definition of Socialism
Socialism is an economic model wherein the means of production are controlled by the people and administered by the government. In practice, this means that the economy is centrally planned by the government rather than administered through market forces, which comes with a range of pros and cons.
In pure socialism, also known as communism, no one is allowed to run their own business, and all means of production are controlled by the government.
However, there are no true democratic communist nations because the communist and socialist ideologies severely restrict freedom to pursue personal wealth. Furthermore, a pure socialist or communist state would have no competition within it, which severely disincentivizes hard work.
Canada does have some areas of public life that are controlled by the government. For example, libraries, the police force, and the healthcare system do not operate within a free market. Instead, they are operated as public goods and their budget are paid for through general taxation.
Definition of Capitalism
Capitalism is an economic model wherein the means of production are controlled by individuals and corporations.
In this model, government intervention is seen as a brake on productivity. According to capitalist theory, the most efficient way to govern an economy is to allow competition and market forces to allow the best companies to win and the worst ones to fail.
While capitalism has many benefits, including low cost of goods and market efficiency, the downside is that it leads to increased inequality.
The people who are the winners in a capitalist system can make a lot of money while disadvantaged people tend to get left behind, are undervalued, and are trapped in poverty.
Canada has elements of capitalism because it encourages private business and has a thriving free market economy.
Is Canada Socialist? (Socialism in Canada)
There are several examples of the socialist political ideology in Canada. This occurs when the Canadian government decides that market forces are insufficient for protecting the wellbeing of the Canadian people.
Below are four of the most prominent examples.
1. Free Healthcare
Like other mixed-market economies such as Japan, healthcare is provided as a right of citizenship in Canada. The 1966 Medical Care Act guarnteed all Canadians universal access to healthcare that is free at the point of service.
This approach was taken to ensure all Canadians, regardless of wealth, would have healthcare covered. The Canadian people determined that healthcare should be a right and that even people who could not afford healthcare deserved it.
As a result, the healthcare system needed to be removed from the capitalist marketplace and provided as a social good.
2. Police Force
As with most nations, the Canadian police force (called the Royal Canadian Mounted Police) provides domestic security protections to everyone in Canada for free.
Police services are paid for out of taxation revenue. In return, all Canadians are guaranteed access to protection from the Police, and they can call the Police service at any time to request protection or report incidents.
This is an example of socialism in Canada because there is no market competition between Police services. There is just one Police force that holds a monopoly over the service. This means that the Police do not need to operate at a profit or compete against other services to become the cheapest or most efficient.
3. Fire Fighting Services
Like police services, the Canadian people have decided that the fire fighting service needs to be socialized for the good of all citizens.
The first fire fighting service in Canada was established in Halifax, Nova Scotia, in 1754. Today, there are fire fighting departments in all provinces of Canada.
The budget for fire fighting comes out of general taxation. This makes the fire services free at the point of service, and all people in the country can call on them in an emergency. They also provide emergency medical responses in many situations.
Because there is a government monopoly over the fire service, no market competition, and the service is run at a governmental level, we can consider this to be an example of socialism in Canada.
4. Free Libraries
Libraries are also offered free of charge in Canada. They are run at the city level, with multiple branches in large cities like Vancouver, Toronto, Ottawa, and Montreal.
Because they are run by cities, the funding for libraries comes from city budgets and paid for out of city-level taxation.
Like most other socialist programs in Canada, ibraries are considered essential public services. They provide free access to information, computers, and the internet. They also act as hubs for the dissemination of services for the homeless, new immigrants, and other people in need in the community.
Is Canada Capitalist? (Capitalism in Canada)
There are many examples of capitalism in Canada. The below examples demonstrate how the forces of the free market govern large swathes of the Canadian economy.
1. People Can Start Companies
It is legal to open a business in Canada for all Canadian citizens and permanent residents.
Major privately owned corporations in Canada include the Royal Bank of Canada ($43 Billion annual turnover) and George Weston ($41 Billion annual turnover) which operates the Loblaws grocery chain as well as several real estate assets.
In order to compete internationally, Canadian governments have successively lowered corporate tax rates in Canada. Federal corporate taxation for Canadian owned companies can be as low as 9% of profits.
2. People Can Buy and Sell Houses
Unlike communist nations, Canada has a thriving private real estate market. About two thirds of Canadian adults own a home, a figure that is among the highest in the world.
Citizens, permanent residents, and even foreigners are allowed to buy and sell real estate in Canada.
The marketplace for homes in Canada is an example of Capitalism because ownership of real estate assets belongs to individuals, not a government entity. Furthermore, market forces control the price of homes across the country.
3. Privatized Railway System
While the Trans-Canadian railway was largely built by the government, it is mostly privatized today.
Canadian National (CN) and Canadian Pacific (CP) are the two largest publicly-traded railway services in the nation.
However, there are still some parts of the railway system in Canada that are yet to be privatized. The Via Rail corridor between Toronto and Quebec City, for example, is still government owned.
Debate about whether to privatize the system demonstrates the core battle between socialist and capitalist ideologies.
Capitalists argue that privatization lowers prices because customers can vote with their wallets to choose the best and most affordable service.
Socialists, on the other hand, believe privatization will lead to higher prices because shareholders would demand a percentage of profits that wouldn’t be skimmed from consumers if rail remained a not-for-profit government service.
Some nations, like Canada, have decided to privatize, while other nations like Spain maintain socialized railway systems.
4. Privatization of Air Canada
Another example of the march of Capitalism in Canada is the privatization of Air Canada in the late 1980s.
Shares in the national airline were first made available in 1988, with 45% of shares offered to the public. The rest were released in 1989.
The privatization of Air Canada means that the nation’s flagship airline is exposed to market forces and needs to operate at a low cost in order to remain in competition with other airlines that fly in and out of Canada.
Air Canada’s major competitors include American and international airlines including United, Qantas, and American Airlines.
Socialist Political Parties in Canada
- The New Democratic Party of Canada leans socialist. It supports strong government intervention in the economy including government takeover of the pharmaceutical industry.
Capitalist Political Parties in Canada
- The Liberal party of Canada is a center-left party that supports free markets and free enterprise. However, it also supports government regulation of markets and socialism in parts of the economy, including in healthcare.
- The Conservative party of Canada is strongly capitalist. It is traditionally the party of low taxes, small government, and small businesses.
There are both market and non-market forces operating in various sectors of the Canadian economy. While some essential services such as healthcare and security are publicly owned (and therefore have the hallmarks of socialist programs), most of the economy is privately owned.
Private business operations are encouraged by the Canadian government, as demonstrated by the low taxation rates for businesses. This stimulates economic growth as it creates jobs for residents. However, there remain concerns that capitalist influences increase inequality in Canadian society.
Overall, Canada is mostly a capitalist society, but the nation have democratically decided to keep some small sectors of the economy in public hands.
Dr. Chris Drew is the founder of the Helpful Professor. He holds a PhD in education and has published over 20 articles in scholarly journals. He is the former editor of the Journal of Learning Development in Higher Education.