John Rapley

OTTAWA, Canada:

"Yes," they reply, each time people do a double take, "It is what you think." Almost completely hidden under a balloon of winter clothing, the first black man to enter a dog-sled race is coaxing a team of huskies across the ice.

The bobsleigh team was just the start. Jamaicans keep turning up in the unlikeliest of places. This adventure started in Ocho Rios, with a pack of stray dogs pulling a push-cart. Now, the team is training for the most gruelling dog sleigh race in the world, one that will take it across the Canadian arctic. If Calgary felt cold, it will seem tropical next to this.

Of course, Devon Anderson will never win the Yukon Quest. He will only be there to train. But Canadians have been taken by the good-natured, can-do spirit of Jamaicans yet again. And it provides them with a light-hearted pause in a season of anxiety.

Dependent on the us

Despite its historical determination not to be an American appendage, the Canadian economy remains as dependent as ever upon the United States (U.S.) for its well-being. Alberta's oil industry is riding the Chinese boom and British Columbia has tied its fortunes increasingly to those of the Pacific Rim. But the rest of Canada remains heavily dependent for its prosperity upon exports to the U.S.

And American economic woes are troubling Canada. Even before the credit crunch began in the U.S., the slumping U.S. dollar was raising the cost of Canadian exports. It's a great time for a Canadian to take that Florida vacation. But for Canadian manufacturers, things are getting rough.

Avoiding the frostbite

Then came the subprime meltdown in the U.S. economy. Falling real estate values, a slumping stock market and rising interest rates all began to raise the possibility of a U.S. recession. Were that to happen, Canada would surely get pulled down in the U.S. wake.

Nevertheless, over the last decade or so, Canada made a number of structural changes that could enable its economy to sail past the worst of the storm. Like Devon Anderson, it won't avoid the bitter winds. But it may be sufficiently bundled to avoid the worst frostbite.

To begin with, the Canadian government made use of prosperous times to give itself a fair bit of slack. In the 1990s, it took the painful decision to end deficit spending and begin paying down its debts. While the Canadian saving rate is low, it did not sink into the basement into which U.S. consumers drove theirs. The consequence of all this is that Canadians have some savings to fall back on. Call it a rainy - perhaps snowy would be more appropriate - day fund.

Day of reckoning

As was the case with the government, Canada's central bank was also more prudent than its American counterpart. Alan Greenspan and company engineered one of history's biggest bubbles. Ben Bernanke might postpone the day of reckoning, but he won't prevent it coming altogether. U.S. asset markets will fall because they rose too high. The same cannot be said - at least to the same degree - for Canadian real estate.

Moreover, Canada's long tradition of more activist government - which compels 'sub-prime' mortgagers to purchase federal insurance - will shelter less well-to-do Canadians from a real estate fallout. A contagion through asset markets seems less likely.

Should a recession occur in the U.S., Canada will certainly suffer. But the wholesale erasure of wealth that is happening stateside should be mitigated, somewhat, north of the border. Canadian prudence prevented it enjoying quite the same boom of the U.S.But now, Canada will reap the benefits of that caution.

The storm may buffet Canada. But its economy will probably sail on.