Since the global recession hit two years ago, Canada has implemented a broad array of free market tax and trade policies. As a result, our neighbor to the north has surpassed an increasingly statist, mercantilist United States in The Heritage Foundation’s Index of Economic Freedom. More importantly, Canada is emerging from the “Great Recession” much more rapidly than the U.S. and virtually every other G-20 participant as well. How has Canada done it?

Politicians, who are always looking for plausible rationales for their insatiable spending, borrowing, and power-grabbing, had never abandoned Keynesianism, so they have been elated to find economic “experts” again confirming their self-interested inclinations. Indeed, several prominent economists, such as New York Times columnist Paul Krugman, are urging Washington to spend even more, lest the economy slow. But what does history teach?

Leaving aside the absurdity of a flat-broke nation subsidizing sketchy firms with borrowed money, stories like this have “future trade problem” written all over them. You see, cheap government loans to struggling domestic companies are a common example of an illegal (or “countervailable”) subsidy under global trade rules. And, if Solyndra and Tesla survive (a big “if” from the looks of it), their exports to other nations that produce similar solar panels/electric cars would be very vulnerable to national trade remedies cases, just like those EU and Aussie cases against US biofuels. And if those cases result in new tariffs and copycat cases in other markets (a very common occurrence), these companies will lose precious foreign market share and, in some cases, could even go bankrupt entirely unless alternative markets quickly materialize. Big problem. The US is simultaneously (i) throwing billions of tax dollars at companies like ADM, Cargill, Solyndra and Tesla through various agriculture and energy programs and (ii) pushing these companies’ exports through the NEI. As I mentioned months ago, such a combination is a recipe for trade frictions and maybe even a bunch of new investigations of - and eventual tariffs on - US agricultural and “green energy” exports. So is the Australian biofuels case, and the EU one before it, a harbinger of bad things to come or just isolated instances caused by unique market conditions?

Predictably, in response to the mess, there have been calls for more and tighter regulation on the industry. President Obama recently said he is interested in finding out who deserves punishment for the crime of the oil spill. (Maybe he can blame Congress?) Also predictably, there is scarcely a mention of the role of government intervention in the mess in any of the traditional state media. Instead, there is the standard demonizing of “unfettered capitalism” and the cries about the failure of the free market. Barely a mention is made that safety on drilling platforms has been under the purview of government regulators within the US Minerals Management Service and that the Deepwater Horizon was deemed a model for industry safety just last year.

After all, a 63-country IMF study on economists’ recession-forecasting prowess concluded that “The record of failure to predict recessions is virtually unblemished.”

Thuggery is unattractive. Ineffective thuggery even more so. Which may be one reason so many Americans have been reacting negatively to the response of Barack Obama and his administration to BP’s Gulf oil spill.