Re-Imagination Part 3

Again with thanks to Ben Mulroney for his November 10th article that has inspired this group of posts we look at the third area of Canada that is in need of rethinking. That of our business development.

Our Government is asking us to buy Canadian. And it is telling us that they will create policies that will build .buy Canadian’ into all the major projects being considered as drivers for the future. Now certainly on the surface this sounds like a great idea, It is the same basic message coming from the United States. We will rebuild our manufacturing base by shutting out the foreign competition.

This is effective political spin, folks getting all patriotic about spending their money locally instead of buying imported goods. But does this really help Canadians? Can a buy Canadian policy help lift our national productivity to levels that begin to rival the United States? One look at the Dairy or Chicken Boards efficacy at building a more efficient system that lowers costs for consumers while at the same time improving margins for producers.

There is only one market lever that can do that, competition. And that competition goes both ways. One walk through a Dollarama store will show you that there is plenty of opportunity to build a better mouse trap. What is preventing some entrepreneurial person from renting some space, maybe the folks garage, buying some used tools and punching out cheap forks. A good friend of mine builds high speed sorting machines for the fastener industry in his garage. Not the prettiest of machines but they work significantly better than the ones from offshore. At a much lower cost.

The problem comes if my friend wants to scale up. Renting space has become expensive, material costs are the same whether building in your home or a rented space and possibly bulk purchasing lowers costs a bit. Electricity cost are significantly more costly then if you were building at home. Unless what you are building is really electric intensive this cost is mostly absorbed as a cost of living in the house and not applied to the business.

The cost of the electricity as compared to other jurisdictions must be taken into account also as Ontario used to be the least expensive place to have electricity delivered, now it’s one of the most. Labour costs similarly have risen here in Ontario and across Canada compared to developing countries. Our hourly rates equal to their weekly rates are difficult to compete with. We also have tremendous now wage employment costs, pensions, benefits, government insurance, these all add up to up.

So you think, well let’s save somewhere, we will eliminate the rent and build a facility instead. Good luck! Property values here are insane and development costs even more so.

All of these issues are impacted by the rules in place by government. Not to mention diversity rules rules with employment, green regulations and the overly cautious safety regulations. All of these limit the ability to price low in a competitive environment. All of these could be reduced or eliminated giving our businesses a fighting chance.

The US productivity numbers are so much higher than here for one primary reason. High tech. This industry generates crazy profit and incomes for investors and employees alike. This is an area where we can compete, if only the government would get out of the way. So many brilliant students graduating from our top technology schools like Waterloo University end up heading south with their skills. Our government needs to address this with industry deregulation and incentive for incubators and startup assistance. The create an environment where these fledgling tech companies can flourish here in Canada rather than be absorbed into the US tech world.

As discussed yesterday, if we properly realize the potential of our immense resources the excess tax revenues from these can flow into development funds for technology research. Then allow the fruit of research to develop into Canadian business. Our history is littered with stories of great Canadian ideas becoming amazing Canadian companies. Companies like Northern Telecom, RIM, Magna all begun as an idea that here in Canada we can do it.

Government needs to lead here. We have a nascent orbital launch industry. This needs support. Imagine the spin off benefits from developing our own space industry. For more than a decade we have been a leader in quantum computing with Steven Hawking, before his death, working as a Chair at the Perimeter Institute in Waterloo.

So what all can the government do? First thing is to reduce business taxes. Do what Ireland has done whit low corporate rates and incentivize maor corporations to headquarter here. Productivity and government revenue have skyrocketed in Ireland due to this simple change. Create a soveriegn wealth fund that reinvests in Canadian business. Money’s from Canada’s resources being plowed back into Canada. Works for the Norwegians, it would work for us.

And most importantly, eliminate all the regulations. And not just the crazy environmental regs imposed by the feds. Provinces need to be supportive of business in other provinces for the benefit of everyone. Why should the Maritimes be importing so much oil from the Middle East when we have more of here? A pipeline through Quebec would solve a lot of issues. Imagine if Alberta oil took care of all the needs of Eastern Canada and there was still plenty to ship a million barrels a day. What if Quebec became the largest export terminal for LNG in Canada because a NG pipeline flowed through from the west and Quebec started tapping the vast NG resource in their province.

What if our government ran a competition to create the next Canadian Fighter. Developed and built here in Canada. Is it possible the aerospace industry might benefit greatly from this? And just maybe we develop the next CF105. A plane ahead of its time but scrapped by the government killing our defence industry at the same time. It has never truly recovered. We could do the sme for ships and subs. Why are we looking a Swedish planes and German subs when we could just as easily develope that technology here and then sell that tech to other countries.

We have so much oportunity here in Canada if the Government would just stop picking winners and support a business ecology that drives innovation and support entrepreneurship. That understands that all business, big and small need to thrive for our country to get back on track. For governments of all stripes in Canada to just get out of the way.