A street running through the heart of Woodlawn in Birmingham, Alabama, on Feb. 5. Canadians enjoy higher life expectancy than Americans and lower levels of crime.Charity Rachelle/Supplied
Is Canada really poorer than Alabama? It is, if you are willing to take some rather dicey economic calculations at face value. Those calculations have attracted a lot of attention lately and purport to show that a one-time backwater has sped past us on the road to prosperity.
It’s understandable why this comparison triggers so much dismay. However, before you demand that Ottawa do something – anything! – to remedy Canada’s economic crisis, you might want to check in on how the rest of the developed world is feeling.
What you will find is a remarkable unanimity: Just about everyone, everywhere, is convinced they’re falling behind, economically speaking.
In Britain, the Office for Budget Responsibility, a government fiscal watchdog, warns of the country’s “persistently weak” economic growth and deteriorating finances.
The London-based Financial Times is blunter. “Britain is inviting its companies to emigrate,” thunders one recent headline. “How to get the U.K. out of its economic hole,” reads another.
Out of nowhere, Canada became poorer than Alabama. How is that possible?
The mood is even darker across the channel. Credit agencies slashed France’s debt rating last year. François Villeroy de Galhau, a former governor of the Bank of France, warned that the republic faces “gradual suffocation” from its high levels of public debt.
Germans are worried, too. They are watching the rise of far-right parties and debating Kaput: The End of the German Miracle by Wolfgang Münchau, a scathing indictment of the country’s recent economic missteps, which was published last year to great applause.
The continent’s downbeat vibes are summed up in an apocalyptic 2024 report on European competitiveness written by Mario Draghi, a former European Central Bank president and ex-prime minister of Italy. The European Union faces an “existential challenge” unless it can boost its productivity, Mr. Draghi declared in the report’s opening page. “The only way to become more productive is for Europe to radically change,” he added.
Mr. Draghi’s report lamented how far Europe has fallen behind the mighty U.S. prosperity machine. Yet in the United States itself, there is little sense of victory.
Just the opposite. Make America Great Again, the movement that carried Donald Trump to power, has a name that says it all. It implies the United States has slid a long way from its glory days. Many Americans appear to agree. The Wall Street Journal reported last month that they are leaving their country in record numbers. “The new American dream, for some of its citizens, is to no longer live there,” according to the WSJ analysis.
All of this adds up to a baffling state of affairs. We seem to be living in a Bizarro version of Garrison Keillor’s mythical Lake Wobegon. In this world, everyone is convinced they’re below average.
Why so much angst? It could reflect the general slowdown in economic growth in many developed countries over the past 50 years. It might also be rooted in growing inequality and increasingly unaffordable homes in many countries.
It’s possible, though, that the real economic issues are being amplified by statistical malpractice. This malpractice relates to gross domestic product per capita, the workhorse figure that everyone refers to when comparing the wealth of different countries. According to most calculations of GDP per capita, the U.S. is far wealthier than anyone else.
The numbers should be treated with caution. For starters, GDP per capita says nothing about how wealth is distributed within a country. When used to compare prosperity among several countries, GDP per capita becomes even more problematic. To calculate it, statisticians have to convert various currencies into U.S. dollar equivalents, then adjust them for different price levels in different countries.
This process is not as straightforward as you might wish. Ask Scott Sumner, a U.S. economist who publishes a Substack newsletter. Last year, he wrote a charming account of his 16-day trip to Canada. Mr. Sumner – who was raised in Wisconsin, taught for decades at a Boston-area university and retired to California – was struck by how similar many parts of Canada are to the U.S. He was befuddled, though, by the official statistics from the International Monetary Fund (IMF).
“Canada is obviously a very rich country,” he wrote. “But that’s not what the IMF says.” According to the IMF, the U.S. had US$89,100 per capita GDP in 2025. Adjusted for purchasing power, Canada ticked in far behind at US$65,700. “This seems crazy to me,” Mr. Sumner writes. He would peg Canada’s relative wealth far higher.
Why do the official stats seem so odd? There are wonky technical issues with how prices are adjusted to reflect product improvements. There are also deeper conceptual issues with what is included.
Erik Fossing Nielsen, a Danish economist and former IMF staffer, points out that the GDP of the U.S. is inflated by its massive but unproductive spending in key areas. It splurges far more on health care as a percentage of GDP than other developed nations; it also expends far more on housing its huge prison population. Yet life expectancy in the U.S. is shorter than in any other Group of Seven country; the U.S. is also far more violent.
Put it all together, and life “is better in Europe than in the U.S. for at least 90 per cent of the population,” concludes Mr. Nielsen, who has lived in both the U.S. and Europe.
Canada has a similar case to make. We enjoy higher life expectancy than Americans and lower levels of crime. (The Canadian advantage looms even larger when stacked up against Alabama specifically.) Our net government debt is far lower and our international investment position is far better. Yes, we have serious work to do in some areas, but that doesn’t make us losers. It makes us entirely typical.