Up until about 20 years ago, the most advanced economies were those strongest in manufacturing. Extracters and exporters of natural resources were dismissed as hewers of wood and drawers of water. It was rare that there was heavy demand for all Canada’s wide range of natural resources at the same time.
But then, beginning in the 1980s, almost all but the most sophisticated manufacturing was outsourced to cheap-labour countries, and annual economic growth rates among the 40% of the world’s population in China and India ratcheted up from 6% to 10%, after centuries of stagnation. Demand for energy, base and precious metals, forest products and agriculture — Canadian strengths, all — rocketed upwards.
The theory arose that service industries could absorb everyone displaced by fugitive manufacturing. Many service industries, such as software, have a high value-added and export potential, and are essentially intellectual manufacturing. But the endless increase in the number of lawyers, financial-transaction facilitators and consultants has become a self-indulgent add-on to prosperous production economies. Like luxury goods, they become much less affordable in sluggish economic times.
The strongest economy is one that is balanced between strengths in all sectors, as the United States has generally been almost since the end of the U.S. Civil War in 1865. What went horribly wrong in the last few years was that U.S. private-sector borrowing was applied to buy foreign goods in unsustainable quantities; while government policies pushed Americans into commercially artificial home-ownership. The resulting crash affected the world economy.
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Some pretty amateurish commentary from Conrad here. He says:
“It is time, gently, to start disentangling Canada from its long bear-hug with — though it remains a great and generally benign country”
OK fair enough, but we’re supposed to do that by:
“Canadian winter tourism in the West Indies rather than Florida.”
Come on Conrad, get real. That isn’t going to disentangle us. What we need is:
- Growing an investor class ( create more wealth instead of redistributing it) and to stop relying on US owned subsidiaries that are capitalized and run by a brain trust south of the border. For example, while the Canadian subsidiary President of “Acme USA Inc” pretends he’s a real mover and shaker, in fact all he is, is a general sales manger for the HQ in say Pittsburg. Canada can’t develop globally competant executive talent that way.
- We need real R&D to take place in Canada, not just some university government subsidy of research that critiques US research and then submits it to Ottawa as part of a request for another grant to explore what has already been invented elsewhere.
There is hope however because PMSH and the Premiers (even McGuinty) have recognized the multiplier impact of low corporate taxes (ours will be 25% while Obama’s are 40%, the highest in the world and because of his hate on for wealth, he’ll probably raise them) which will make Canada a much more attractive place to invest and that will be the key “to start disentangling Canada from its long bear-hug” with the USA.
Brilliant analysis! Perhaps his current situation gives Lord Black the ample opportunity required to generate his ‘Addison & Steele” type of essay, in any case we are much the wiser. Thank you for your indomitable will and penetrating wisdom while peeling away the veils surrounding popular political views.