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I will try to answer this and link it to the American system.
The Liberals and the Conservatives would both fall under the Democratic Party in the US, with the Liberals being the left wing and the Conservatives being the right wing. The Conservatives are NOT equivalent of the Republican party in the US, as the Conservatives in Canada are too central to be considered right wing anymore. The last Presidential election in the US, Kerry's platform was a merge of the Conservative and Liberals platforms in Canada.
One of the major differences between the 2 parties seems to be in regards to social programs. The Liberals value the programs and try to have the government provide everything for the people (ie socialized day care) while the Conservatives do not think the government should do everything for the people, and let the people make their own decisions (ie tax incentives for child care). It almost looks like the old Liberal = big government, Conservative = small government classification of the old times.
Another difference is in regards to social values is that the Liberals are left wing, while the Conservatives are right wing.....but are choosing their battles. Gay Marriage and abortion are not the political hot potatos that they are in the US. What is really interesting is that although the Liberals are pro-rights, in the current Canadian Wheat Board battle, they've come out against the individual rights of the farmer by backing the monopoly. Also, the leaning towards individual rights has back fired on the Liberals by having recent court cases allow for the right to pay for health care outside of the system, and allowing for individuals to use foreign satelite dishes because the individuals rights were violated by the CRTC not allowing certain channels in Canada.
The other three parties in Canada are the NDP....which is left of everyone, the Green Party, which is an environmental heavy party, and the Bloc, which is a party that wants independence for Quebec.
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- Great Answer and I like the way you explain the difference between the political partys of Canada (especially Liberal and Conservative Party) to the political party system of the United States.