WhatFinger


Canadian Mediocrity – Part One

Our Neutered Industrial Sector



I was recently asked to write a piece on Canada and frankly, as an adventurous writer, I quickly realized how incredibly difficult it would be to spin a reasonably interesting article out of utter banality.
For two centuries thinkers and writers have grappled with defining Canada’s identity. Yet identifying - let alone explaining and understanding - “Canadianism” remains as elusive as the mysterious and storied creatures rumored to dwell in our great forests and waterways. Shame may be fairly cast upon our so-called intelligentsia for not dropping intellectual breadcrumbs for us simpletons to follow on our quest for existential introspection. But not understanding one’s society, their place in it and one’s role is to utterly fail as a responsible and concerned citizen.

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Perhaps it is our indifferent attitude towards defining our culture that is our primary disadvantage. As such it may be meaningful to wrestle this elusive sociological Ogopogo to the ground and lay bare the Canadian experience for critical analysis. Given the sprawling nature of the topic this article will be presented in multiple parts covering business, academics, heroes/role models, amateur sports and government in no specific order.

A Nation of Followers and Socialists

No other country in the world can match Canada for the sheer scale of human capital squandering. Rather than embracing our inherent potential and exceptionalism, our vast intellectual and natural resources, we’ve become little more than self-professed victims with purchasing power. We prefer to abdicate our most basic individual responsibilities by shrouding ourselves in layers upon layers of government agencies and bureaus to provide custodial care for our most basic of needs, be it caring for our children, elderly, our health, education and public safety. It appears that in spite of our “wilderness” image our peoples aren’t rugged, free or individualistic. Rather our citizens have been pickling in a brine of socialism for the last thirty years and a tough skin has formed that is all but impenetrable to individualism and independence. While living in a zombie-state may not, prima facie, be too bad a thing – it is after all easier to follow than lead – but for anyone yearning for freedom, liberty, excellence, inspiration or opportunity, Canada, in its current collective state, offers little hope. How is it that a great country like Canada can wilt to the level of nanny state, where the citizens have enormously indebted themselves in order to build government edifices instead of wealth generating free markets and strong pockets of capitalism? America has Silicon Valley, we have Industry Canada. America has a space program while Canada has a long gun registry. Even great cities like Toronto and Montreal, once engines of our economy, have been razed by socialist hoards, now have-not provinces eagerly panting for table scraps that the benevolent Federal government doles out in the form of transfer payments. How many more welfare cheques for eastern Canada may be wrung out of the Tar Sands – all the while enduring endless environmental complaints and attacks from the Left? Seems the only going concern in Canada is government and our way of life has become little more than one giant centrally planned government program. Nowhere else is the tragedy of government meddling and the pall of dullness it casts more evident than in our neutered business sector.

Strangling Private Sector Wealth Creation and Inventiveness

Any sane and rational human being outside of government knows the private sector is the primary driver of economic growth and wealth creation. Yet governments on all levels do everything in their power to undermine businesses; just ask any entrepreneur about their experiences with government when launching or operating a business. According to a 2005 Canadian Federation of Independent Business’ study, which surveyed over 7300 member organizations across Canada, the cost of annual government regulatory compliance was an astonishing $33B. 65% of CFIB members (and there are 108,000 of them) reported government regulation and the paper burden were the greatest concern only second to overall tax levels. What kind of a business environment do we have in Canada where government is the single largest issue weighing on the minds of industry leaders? If you doubt those numbers, compare a 2007 Frazer Institute study (here, and here) which estimated regulatory compliance costs to be between $16B and $25B annually for business with an additional $2.7B to $5B being incurred by government (in other words taxpayers). We can only imagine how many people could be hired, how many new factories could be built, how much new equipment could be purchased or how many new products could be developed if this mountain of waste could be used more productively. Perhaps even more meaningful for consumers would be lower prices for the products and services we purchase or higher returns on our equity investments. Instead all that squandered wealth is going to paper shufflers in the hundreds of government departments that leach off of businesses in Canada. In addition to lost opportunity costs, future earnings and life improvement potential are also being squandered. Consider inventiveness or a nation’s capacity to generate new ideas which have the potential for global success. In 2006 the World Intellectual Property Office (WIPO) published a list (4) of the top 15 countries ranked by patent filings and Canada ranked an abysmal 12th behind South Korea, Sweden, Netherlands and Italy. In another 2004 WIPO report which organized patent fillings according to “per million population”, Canada had 125 patent filings per million people; well below the 148 average among other industrialized nations. Canada doesn’t even appear on the top 15 lists of inventiveness when organized around “patent filings per million people” or “patent filings per billion dollars of GDP”. It’s not that Canadians are incapable of inventiveness – consider the light bulb, canola, stem cell technology, the telephone, pacemakers, insulin and many other wondrous discoveries which were made or heavily influenced by Canadians. In today’s tax environment, however, research, development and hard work are ruthlessly penalized so there is little incentive for businesses to assume the inherent risks associated with research and innovation. Instead of hiring scientists or engineers firms must retain huge legal departments with armies of lawyers just to appease the onerous tax and regulatory burdens that governments impose. Add in racist and sexist affirmative action programs which base hiring on genitalia and skin colour rather than merit and hard work, and we have a system that Karl Marx would be proud of. As if all these impediments to success weren’t enough an additional nail is driven into the coffin through a regressive tax system that punishes productivity. The more hours workers put in the higher their income tax bill. The more profits a company earns the higher their tax burden while shareholders are punished by higher capital gains taxes imposed on their equity investment returns. Unionization contributes further by driving labour costs up and removing competitiveness within the workforce, measuring worker value solely on seniority rather than merit and hard work. The net result is a reinforced status quo which offers little incentive for growth, improvement and progressiveness.

Government Meddling and Market Failures

Historically export-based companies in Canada have enjoyed a competitive advantage when shipping to our largest trading partner, America, based on the higher value of the Greenback when compared to the Loonie. In other words American importers had enormous purchasing power when acquiring Canadian goods so there was a great deal of incentive to import from Canada. As of 2011 the two currencies are at par so this major source of competitive advantage for Canadian exporters has all but evaporated. Given the onerous tax burden, regressive regulations, upside-down reward system, crushing unionized labour costs and poor monetary policies, Canadian companies in increasing numbers are moving their operations to tax and regulation havens overseas, taking with them jobs, capital, infrastructure investment, talent and brain power. Yet the government’s grand scorched earth industrial plan wasn’t quite complete so they brought in their ultimate weapons of mass job destruction; corporate welfare and free trade. The success of capitalism is based on competitive evolution. Similar to natural selection which weeds out weak species so the strong can survive, a healthy competitive business environment, free of government intervention, yields similar effects. If a company doesn’t produce products that are in demand, if it makes poor business decisions and isn’t driven by demand and market forces, it fails. Normally this competition is healthy as it leads to lower prices, improved quality and relentless improvement driven by research and development. The propensity to prop up failing so-called 
“too big to fails” in socialist nations through bail-outs and corporate welfare schemes has resulted in unfair competitive advantages given to firms that should rightly fail. In nature, if we were to eradicate all predators, the populations of animals lower on the food chain would burgeon, casting the delicate ecological balance into disarray. Unlike nature which has an infinite capacity to bring itself back to equilibrium, societies with intense government intervention in its business sectors have no such balancing factors, other than closure or flight to more business-friendly jurisdictions. Aside from the moral hazard and unfairness that government bail-outs create, rewarding failure can only lead to complacency and mediocrity. There is something terribly wrong when failing companies are rewarded while successful ones are penalized by transferring their wealth to the failing companies through bail-outs and corporate welfare. Government intervention inevitably sends the message that companies are not responsible for their own failures and irrespective of how lousy their business is, the taxpayers will bail them out. As we have seen our industrial sector is the first casualty of our grand socialist experiment. Canadians are paying with their jobs, private property and quality of life in order to subsidize the bloated government they seem to love. Without a strong and vibrant industrial sector we can expect even more misery and poverty. We give companies no financial incentives and our identity vacuum precludes even tenuous notions of national pride, patriotism and loyalty to stem the emigration of our industries. In our next installment of Canadian Mediocrity we’ll examine our education system, and another piece of the Canadian identity puzzle will hopefully be revealed.


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Tom Barak -- Bio and Archives

Tom is a Canadian-based freelance marketing consultant and writer and has been a long-time member of the Conservative movement. He received his MBA accreditation from the University of Manitoba and splits his time fundraising for community centres and mentoring and consulting with local and national businesses.


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