Canadians: Want to help your country become globally competitive? Buy American!
If that sounds like a contradiction…
For well over a decade, economists have been sounding dire warnings about the productivity of the Canadian economy. Their call can be summarized like this: “Our success is based on the unreasonably weak value of our currency, which masks an otherwise uncompetitive economy that is in dire need of restructuring. Sooner or later the dollar will correct, so act now while you can. If you wait until after our currency appreciates, it’s really going to hurt.”
We’ve heard this warning year after year. Each year, economists — seeing that the message wasn’t getting through — became more shrill and dire in their warnings. Each year, most Canadian businesses stuffed their collective heads deeper into the sand.
I’m going to digress a moment to comment on the culture of Canadian business. Despite all the claims of innovation and so on, collectively Canadian business is risk-adverse. The phrases “don’t rock the boat” and “who else in Canada has done it?” echo through the offices of so-called decision makers across the country. In one area after another the adoption of new technologies, business models, and techniques seriously lags behind the rest of the world, often by five years or more.
Running on the logic of a two year old — the assumption that what can’t be seen can’t hurt you — Canadian business has effectively become structured around having a weak currency, and now the party is over.
Has there been a sudden call to arms in the business community? Have they all built up reserve funds ready to spur capital new investment? Not bloody likely.
What has happened is that Canadian consumers have noticed that an awful lot of goods cost 30% less in the USA, despite our currencies being at near parity. Needless to say, a lot of consumers are upset.
How has business responded? Hold on, they say, offering a list of “reasons”:
- We have inventory that was priced higher when we bought it.
- The cost of doing business is higher.
- We need some time to adapt to the stronger dollar.
Let’s debunk these in order.
- The inventory excuse works for somewhere between a month and a full quarter. If inventory hasn’t turned over by then, it’s time to restructure.
- The biggest cost for just about any business is labour. Last time I looked, economists weren’t complaining about excessive labour costs, so the next source of costs is poor efficiencies. The way to fix that is to restructure.
- The dollar argument works if you lived in an information vacuum for the past five years or so. If the senior management of a business is living in that kind of vacuum, then it’s time to change top management wholesale, and then restructure.
The real question is whether or not the recent rise in the value of the Canadian Dollar is going to be enough to rock corporate Canada out of its catatonic state. Sadly, I fear it isn’t. If business can just manage to convince Canadians that their spurious arguments for higher prices have merit, then maybe they can get by without real change. Let’s hope not, because that would be disaster.
The landscape of the disaster is this: America’s reign as the powerhouse of the world economy is rapidly coming to a close, with China rising and Europe sailing fairly smoothly on its own terms. As it stands, the Canadian economy is stuck onto the American economy like a dependent suckling. Unless Canada figures out how to become competitive on a world basis, and fast, we’re going down with our host.
I’m pretty sure this isn’t a very pleasant prospect for Canadians, be they businesses or consumers. But Canadian business demonstrates a remarkable resistance to change. It looks like what they need is a real kick from their traditional isolationist ally and buffer: consumers.
So what’s to be done? Canadian consumers need to become aware of the world. We need to seek out the lowest prices, the best values, no matter where they are. Despite the irony — and thanks largely to geography — in practical terms this means buying from the USA whenever a better deal is available. If global manufacturers try to defend the status quo by refusing to sell to American businesses engaging in cross-border trade, then this means filing class action lawsuits to enforce free trade.
Harsh though it may seem, right now buying American is ultimately an act of patriotism. An honest to goodness crisis in Canadian business seems to be the only thing that stands a chance of waking people up. Unless we collectively become a lot more competitive, productive, and more active traders with other parts of the world, we’re going down with Mother Ship America. Trust me, that’s going to hurt a hell of a lot more than restructuring things now.
So get out there and help Canada, buy American!