Is Canada socialist? Is it capitalist? While travelling through the US as a Canadian citizen, I’m often asked about Canada’s so-called “socialist” policies.
Canada is not considered a strictly socialist country. That being said, some of Canada’s policies and programs can be considered socialist in nature.
Canada’s universal healthcare and progressive taxation are examples of this. However, it should be noted that the US also shares many of these same policies.
Below, I’ll explain what type of government and economy Canada has. Then, I’ll outline some of the key differences and similarities between Canada and the US regarding socialist policies, the economy, healthcare, taxation, and other issues.
The word “socialist” is often thrown around in the news and on social media by politicians, economists, journalists, and the general public. However, the term is often used out of context, and many people are unaware of the true definition. So let’s start there:
Socialism: “a set of political and economic theories based on the belief that everyone has an equal right to a share of a country’s wealth and that the government should own and control the main industries.”Oxford Learners Dictionary
Looking at Canada, it’s very clear that Canada is not completely socialist. Otherwise, the government would be in full control of every major industry, and there wouldn’t be an upper, middle, and lower class.
However, Canada does have policies that can be considered socialist (or at least social democratic), such as:
- Free healthcare
- Free public education
- Progressive taxation to reduce income inequality
- Employment insurance
- Federal pension plans
- Affordable housing programs
- Childcare benefits (such as the Canada Child Benefit)
Just because a country adopts some socially democratic policies, though, doesn’t make the country itself socialist.
Next, you may be wondering whether or not Canada is capitalist. Again, let’s start with a definition:
Capitalism: “an economic system in which a country’s businesses and industry are controlled and run for profit by private owners rather than by the government.”Oxford Learners Dictionary
By definition, Canada is capitalist.
Although federal and local governments may regulate industries, Canada has a strong private sector and a free market driven by basic laws of supply and demand. In fact, Canada is home to some of North America’s largest fintech companies, many of which have expanded into the United States.
The mainstream media often refers to Canada as “socialist” and the US as “capitalist.” However, the reality is that both are capitalist countries that have implemented some socialist policies.
Now that you have a better idea of what socialism and capitalism truly mean let’s take a closer look and compare Canada to the United States.
Both Canada and the United States have a primarily free market economy. This means that private companies are, more or less, allowed to operate as they please, providing that they operate within the bounds of the law and adhere to tax laws.
Neither country has a completely free market economy, though.
Both countries regulate private companies in areas such as:
- Labour laws and employment equality
- Company buy-outs (i.e., the formation of trusts and mega-companies)
- Mandatory social welfare contributions (EI in Canada and Social Security in the US)
The market is more regulated in Canada than in the US. Canadian workers have more protections than in the US, and Canada’s unionization rate is 31.8% compared to 13.8% in the US.
Income inequality occurs when the gap between a country’s top and lower earners grows. In an unregulated free market, income inequality could hypothetically grow to an unsustainable level.
To prevent this, both the United States and Canada have implemented a progressive taxation system. This means that lower-income earners are taxed less than higher-income earners.
This system gives the lower and middle classes more breathing room, allowing them to afford basic necessities without drowning in tax debts while taking more taxes from wealthier individuals who earn more.
Here’s a look at Canada’s tax brackets:
|Income Earned||Federal Taxes|
|$53,359 to $106,717||20.50%|
|$106,717 to $165,430||26%|
|$165,430 to $235,675||29.32%|
Now, let’s take a look at the tax brackets in the United States:
|Income Earned||Federal Taxes|
|$0 to $11,000||10%|
|$11,001 to $44,725||12%|
|$44,726 to $95,375||22%|
|$95,376 to $182,100||24%|
|$182,101 to $231,250||32%|
|$231,251 to $578,125||35%|
|$578,126 or more||37%|
The US has a greater number of income tax brackets compared to Canada. It also taxes its wealthiest income earners more than Canada. That being said, the middle class in Canada pays slightly more income taxes compared to the middle class in the US.
Overall, federal income taxes are very similar between the two countries.
Canada’s tax-funded universal public healthcare system has no equivalent in the US.
Canadian residents have free access to most basic healthcare and emergency services they may require. The only downside of this is that public medical facilities can get backlogged, and patient wait times may be longer than in the US.
The US has a primary private healthcare system, requiring its residents to purchase their own private health insurance programs to avoid falling into medical debt. Some companies may also offer employer-sponsored healthcare to their employees, saving them money compared to purchasing their own plans.
The US offers free or low-cost healthcare programs to lower-income families and seniors, such as Medicare and Medicaid, but these programs don’t cover the majority of the population.
In short, Canada’s publicly-funded universal healthcare system is more socialist than the largely-private healthcare system in the United States.
Both Canada and the US offer free public education for children, from kindergarten all the way up through secondary school (referred to as high school in the US). In this way, both countries are nearly identical.
That being said, college can be far more affordable for Canadian residents than US residents. US residents can save on college by applying for government grants and scholarships, but Canada offers a greater number of tax-subsidized grants to Canadian students.
The result is that Canadian residents attending a Canadian college pay roughly one-third of the tuition costs compared to US residents attending a US college.
As far as public education goes, the US and Canada are nearly identical. However, Canada offers more tax-subsidized grants for college students, making college more affordable for Canadian residents.
Canada and the US both offer social welfare programs, but Canada has a more comprehensive safety net.
In addition to universal healthcare, Canada provides its residents with generous unemployment benefits, childcare support, and parental leave policies.
The US offers less extensive unemployment benefits and only limited family support.
A great example of this is how Canada offers paid maternal leave and job security, while the US does not require companies to honour maternal (or paternal) leave policies.
Overall, Canada has more social welfare programs, emphasizing income redistribution and social welfare, whereas the US places a greater emphasis on individualism and a smaller government role in providing social services.
In the late 19th and early 20th centuries, socialist movements gained traction in the US, driven by labour unrest, economic inequality, and the influence of European socialist ideologies.
Similarly, Canada experienced a rise in socialist movements during the late 19th and early 20th centuries. The Socialist Party of Canada was founded in 1904, followed by other socialist and labour-oriented parties.
The US was strongly capitalist until President Franklin Delano Roosevelt (commonly referred to as FDR) implemented policies such as social security and social welfare after the Great Depression. This was his New Deal.
Today, in the US, the Democratic Socialists of America have gained some traction, with figures such as Presidential candidate Bernie Sanders and Congresswoman Alexandria Ocasio-Cortez making headlines for their socialist beliefs.
The Socialist Party of Canada largely dissipated by the late-1920s. However, the Co-operative Commonwealth Federation (CCF) was founded in 1932 with a platform focused on progressive policies and social welfare programs. The CCF eventually developed into the New Democratic Party (NDP).
The NDP remains one of Canada’s leading political parties and is strongly opposed by the Conservative Party.
The US and Canada share many similar socialist democratic policies, such as free public education, employment insurance/social security, and a progressive taxation system.
However, Canada offers universal healthcare and more tax-subsidized benefits for its citizens.
While Canada is still far from being a completely socialist country, some of its policies are arguably more “socialist” than the US.
Want to learn more about government grants and programs in Canada? Keep reading to see my list of the best ways to get free money in Canada!