This is not the end of American capitalism.

It's been 13 years since the editorial page of the Wall Street Journal declared Canada "an honorary member of the Third World."

At the time, free-market ideologues were pleased with the way the world was headed. Newt Gingrich and the Republicans had taken control of the United States Congress and were pulling Bill Clinton to the right. In the U.S., the recent recession had been relatively mild, but Sweden and the other Scandinavian social democracies were in the grips of a fierce economic crisis. And Canada -- with its socialist health care and high taxes -- was drowning in debt.

Laissez-faire was the mantra of the day. The state must make way for markets. Those who disobey the holy writ will surely suffer -- a sentiment expressed in 2000 by a fringe figure on the Canadian political scene. "Canada appears content to become a second-tier socialistic country," Stephen Harper told an American audience, "boasting ever-more loudly about its economy and social services to mask its second-rate status."

The world looks a little different today.

"While the United States reels from the global financial crisis," the Washington Post informed Americans last week, "Canada has remained relatively insulated. Canadian banks have not gone shaky like their American counterparts, economists and other experts said. There is no subprime mortgage or home foreclosure mess."

And that's not the half of it. The U.S. has a massive and growing deficit; we have a (thin) surplus. The U.S. has a massive and growing debt; we have a large but shrinking debt. Unemployment is surging in the U.S. and employment rates falling; Canada had record job growth in September and employment rates are stable or rising.

Oh, and Sweden? Its successful handling of the crisis of the 1990s has been an influential model for American policymakers trying to cope with the meltdown on Wall Street.
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Having endured several decades of hectoring from ideologues on the right, it's understandable that their counterparts on the left -- particularly Europeans -- are loudly and joyfully gloating. "Guardian writers and Labour politicians," noted British journalist Simon Jenkins, "have been drooling all week over what they call the 'collapse of the free market model' of a modern global economy."

Even those who aren't indulging in schadenfreude describe the crisis in similar terms. It's "the end of American capitalism," claimed a headline in the Washington Post. "Free market economics is falling into disrepute south of the border," wrote Lawrence Martin in the Globe and Mail.

With respect, what we are actually witnessing is the crushing stupidity of the stereotypes and labels we use when discussing grand-scale economics.

Imagine a country that has the second-highest corporate tax rates in the developed world. Its agricultural sector is heavily subsidized by the state. And one of its biggest industries -- with 600,000 full-time employees and another 850,000 part-timers -- is owned and operated by the government.

This country is the United States -- the laissez-faire, devil-take-the-hindmost, money-worshipping United States. (That government-owned industry? The military.)

Now imagine a country that ranks third (out of 134) on the World Economic Forum's Global Competitiveness Index. One reason for that ranking is the world-leading ease with which employers in this country can hire and fire workers. This country also boasts world-class private corporations, one of the highest employment rates in the developed world, and corporate tax rates far lower than those of the United States.

This country is Denmark -- tax-crazed, welfare-loving, nanny-state Denmark.

I don't want to push this too far. On the key measure of total tax as a percentage of Gross Domestic Product, the facts are what we would expect: Denmark is neck-and-neck with Sweden at the top of the table, with a tax bite of just under 50 per cent; the United States is second only to Japan in contending for the lowest tax bite among developed countries, at just under 30 per cent.
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The difference between 30 per cent and 50 per cent is significant. But it's a difference of degree, not kind.

Look at the world with a little historical perspective -- even a mere century would do -- and it's obvious that no country in the developed world comes anywhere close to being "socialist," at least not if that word is used in any meaningful sense. And no country remotely resembles the genuinely "unfettered capitalism" of, for example, the late-19th century U.S.

Every one of them is a liberal democracy. Every one of them has an economy built on free markets. Every one of them regulates those markets. And every one of them constantly expands, contracts and otherwise fiddles with its regulations.

It is that fiddling that constitutes the largest part of modern politics. Conservatives generally want less regulation and intervention; liberals more. Americans tend to favour less; Europeans more. In the 1990s, those on the less-regulation side usually won these arguments. Now the wind has turned.

But the essential point is that this debate all happens on the foundation of a liberal democracy with regulated markets. Neither the unfettering nor the abolition of markets is seriously proposed by any major political movement anywhere in the developed world.

Those who describe Canada -- or Barack Obama -- as "socialist" reveal themselves to be blinkered ideologues. Those who think the current crisis spells "the end of the capitalism" are delusional.

Set aside the stereotypes and labels that guide our thinking and it becomes obvious that while important changes are coming, the foundations -- liberal democracy and regulated markets -- are unchallenged.

That's good news for everyone but excitable ideologues.

You can contact Dan Gardner at the Ottawa Citizen.
E-mail: dgardner@thecitizen.canwest.com

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