Question

It is far from the tropics, has a long border with a rich trading partner, has access to the sea, and has a disease environment that gives it a life expectancy of 79 years. During the colonial period, mortality among European settlers was only one-seventeenth of Burundi’s. While Canada lacks lucrative cash crops like coffee, cotton, and tea, it is one of the world’s premier grain producers – and some studies suggest grain endowments are better for political economy and institutional development than tropical cash crops. Canada has long been a democracy with the rule of law, has never had a civil war, and has one of the world’s best ratings on freedom from corruption. Canada’s boring rulers have perpetrated few of the egregious interventions in the economy seen in Burundi.

Discuss carefully the significance and implications of the above excerpt for economic growth and development.

Answer 1

Let us analyse Canada's economic history and characteristics in order to find how they have shaped the Canadian economy and its growth potential.

Canada is a country with a vast landmass with over 7100 sq. kms of land under agriculture. It has been a disease free environment with a low mortality rate. It is one of the largest agricultural producers and exporters in the world. Its main crop is wheat and other grains. The country lacks tropical crops like coffee, tea, cotton etc. It is a major producer of meat( fish, beef and pork). It is also actively involved in organic farming. Canada has enjoyed a strong political establishment and it is a democracy with low corruption. It has a found a strong trading partner in the United States of America and with a good access to the oceans, global trading is not a problem.

It has a strong manufacturing, mining and construction sectors which contribute to a majority of its GDP. With regard to agriculture, as mentioned earlier, Canada is one of the largest exporters of agricultural products. It has greatly benefited from the NAFTA agreement which implies that the member countries can trade freely among themselves with no import tariffs or restrictions on import. This also enables opportunities for investment in member countries and availability of foreign direct investment. Another important factor for a stable economy is a stable political dispensation. Canada has had no civil wars in the past and because of that it has not faced any major economic disasters except the 2007 financial crisis during which its manufacturing sector took a hit. It is also not a great player at a global level as most of its income is from trade with United States and cash crops are imported. With regard to food grain supply, it is self reliant and in fact it exports a large portion of its produce.

It has a large amount of Natural gas reserves and is the fourth largest producer of petroleum products. Canada with the world's second largest landmass ranks 38th in population. This means there is enough land as a factor endowment. It has abundant natural resources, technology and a large agricultural base. This has ensured the economic security of the nation. As it is an exporter of a large amount of knowledge intensive goods such as machinery, aircraft, telecommunications, engineering services etc. It enjoys gains from trade with the global trade patter shifting away from simple goods to knowledge intensive goods. The absence of cash crops is not a major concern as can import it at low prices due to relative opportunity cost advantages.

Since it enjoys easy access to sealanes it can engage in sea trade with other countries across the globe, an advantage that a landlocked country would not have. Sea trade is of great advantage as transportation by air is expensive and by land it may not always be safe. Ships can carry a large consignment of goods at a time. Its petroleum and natural gas production has greatly benefitted its largest trade partner, the US, since it does not have to rely totally on Middle eastern countries for oil. And petroleum products drive most of the economies around the world and it is not surprising that wars have been fought in order to gain control over nations with large supply of oil. "

Canada like any other advanced economy displays a slow growth rate as compared to developing economies but the trends show a gradually rising GDP growth. Solid trade deals with world nations and capture of foreign markets by means of investment in other countries could expand its growth potential. Encouraging foreign direct investment by other countries in its territory could mean reduction in unemployment and rise in consumption and more investment.