Marching Towards Prosperity: the National and Global Challenge

November 1, 2000

Chairman David O’Brien, fellow members of the Business Council on National Issues.

When we last met as the full membership of the BCNI, it was in April of this year on the occasion of the Council’s CEO Summit 2000. You will remember that following 12 months of intensive work, we tabled a number of statements, studies and working papers. Our central policy statement, Global Champion or Falling Star? The Choice that Canada Must Make, was well-crafted and balanced, but frank and hard-hitting. Our recommendations were many in number but there was one overarching theme: government policies and business strategies had to adapt more quickly — much more quickly, to the imperatives of the global economy if Canada was to achieve higher growth levels, finance social needs, and halt the loss of our head offices and brightest minds.

Our initiative received headline treatment in the country’s dailies and broadcast media and a remarkable degree of editorial support. A lead editorial in The Globe and Mail referred to the BCNI’s recommendations as the equivalent of a 911 call to the Prime Minister. At BCNI headquarters, we were buoyed by a flood of support and it was clear that we had zeroed in on the right questions: why had Canadian after-tax incomes stagnated for so long?; why had Canada’s currency been in a twenty year decline in relation to the American dollar?; why had Canada’s share of foreign direct investment fallen so sharply?; why were the country’s brightest leaving in such great numbers?; why were our head offices leaving?; why were Canadian companies such easy takeover targets?

The reaction to our initiative was not overwhelmingly positive, far from it. We were attacked, in some cases quite viciously, as "fat cats" obsessed with the need for tax cuts and debt reduction, and as enemies of the country’s social agenda. A great deal of the criticism was misinformed, some of it driven by ideologues determined to halt and roll back a corporate juggernaut that they claimed had achieved in effect a silent coup d’état over Canada’s policy agenda.

While the BCNI chose to lead with flags flying high, we were not alone in advancing our concerns. Other business organizations were on side. Think tanks such as the C. D. Howe and Fraser Institute and The Conference Board of Canada generated convincing analysis. A number of gifted and outspoken academics, some of them advisors to the BCNI on the Canada Global Leadership Initiative, warned of the dangers of incrementalism. Sailing with this armada for change were some of the country’s prominent dailies, The National Post most notably among them. As well, the Reform Party and its successor the Canadian Alliance, deserve a great deal of credit for the consistency and tenacity with which they pursued their goals of tax relief and debt reduction. Finally, there were many of you who individually and bravely stood up and argued for all to hear that change was necessary and urgent.

In this crusade for change, we all benefited from the presence of a silent partner whose influence was decisive. I am referring to the transforming power of globalization and its principal engines — technology, capital and information. As much as some might try to ignore its reach, they struggled in vain.

Change is now broadly accepted by Canadians as necessary and I am pleased to say that business leaders are helping to lead the charge. Even more significantly, Canada’s political class has experienced a collective conversion. The need for personal, corporate and capital gains tax relief is now firmly entrenched in the dogma of mainline political parties. Debt reduction has become the sensible thing to do. New economy principles are now the rage. Free trade commands widespread support.

A dramatic example of this conversion can be seen in the federal Liberal government economic statement and budget update of October 18. Eighteen months ago, Finance Minister Paul Martin stood among us here and while applauding our objectives, he said that our expectations in the context of tax relief and debt reduction were far too ambitious. In April of this year, the Liberal government was quite brutal in its dismissal of the recommendations flowing from the CEO Summit 2000.

But then something happened — and it was far more significant than an election in the offing or a Canadian Alliance threat. The dam holding back the powerfully accumulating surge for change began to crumble. The first sign was Finance Minister Paul Martin’s address to the Toronto Board of Trade when he talked of the new economy with unprecedented passion, and declared incrementalism dead. The dam finally broke on October 18 when in his economic statement and budget update Mr. Martin announced a fiscal package highly consistent with what the BCNI had recommended only six months earlier at the CEO Summit. Yes, an exploding fiscal surplus was a critical factor — but it was more than this — much more. The mainstream of the Liberal Party came to see the world as it really is — a Canada which is doing well but falling increasingly behind.

Since then, a national election is underway and in the spirit of non-partisanship that has always guided the BCNI, I will not comment on the merits of various party platforms. But I will say this. Despite the rhetoric of the two principal protagonists and some misguided policy positions that would not serve the interest of Canadians, I believe that their broad direction is consistent with advancing Canada’s ability to embrace change and with the need to make Canadians more globally oriented. My principal concern remains that as a country and as a people we are still not embracing change quickly enough.

In the months to come, the BCNI will build on the legacy of the Canada Global Leadership Initiative. We will intensify our work on the issues of productivity and innovation. We will continue to push for a level of tax competitiveness that aims to give us a margin of advantage over comparative jurisdictions in the United States. We will push for faster debt reduction. We will deepen our assessment of public spending priorities and options. We will extend our coverage of health, education and environmental issues. We will continue to review what it takes to make our Canadian-based enterprises more globally competitive. We will consider options and strategies for advancing our effectiveness as a world trader. We will focus in particular on the future of our relationship with the United States.

But I also will be encouraging us to shift more of our attention and resources in the direction of the global economy and global issues. Here is why. A few minutes ago, I spoke of globalization as the powerful, silent partner that played a decisive role in helping to move the politics and economics of Canada towards a stronger market orientation. The assumption is widespread in Canada and throughout the world that this is now an unstoppable force, that the tide is running only one way. Thomas Friedman in his provocative book, The Lexus and the Olive Tree, refers to the inevitability of the globalizing culture as the "Golden Straight Jacket".

Snuggly contained in the jacket are the essentials of success in a market-driven world: law; order; good governance; high quality, universal education; a shared sense of community; a willingness to accept newcomers; an open economy; an entrepreneurial culture; and a celebration of knowledge.

Since the adoption of the historic Canada — United States free trade agreement a little more than a decade ago, Canada has moved progressively closer to this way of thinking and of doing things. But can we be sure that the economic and social culture that is being shaped by globalization and of which Canada is a major beneficiary, will be sustained? Let’s have a closer look.

Globalization has produced both winners and losers. There is overwhelming evidence to support the view that the winners far outnumber the losers. Still, the costs associated with change have been significant. In some cases, they have been terrible. To ignore them would be foolish and immoral.

In the face of globalization’s stunning successes, the plight of the disadvantaged becomes all the more apparent. The facts are sobering.

• about one quarter of the world’s population lives on less than $1 per day;
  
• one in five is illiterate;
  
• the top 20 percent of us consume roughly 85 percent of the world’s goods and services;
  
• in 1960, the world’s 20 richest countries had 30 times more income than the poorest 20 percent. Today, the wealth gap has grown to 24 times;
  
• children rank high among the casualties; over eight million die each year because of polluted water or dirty air; six million die from malnutrition;
  
• in the rush for development that globalization in part encourages, the environment is often ignored; frequently, the justification for environmental despoilation is that there is no choice — one must pollute or be poor.

As hard and as frightful as these realities are, it is wrong to conclude that globalization is a destructive force. In most parts of the world, with the notable exception of Africa, standards of living have risen enormously over the past half century. Many countries, including China and India which are home to the greatest number of the world’s poor, are making important progress in defeating the scourge of poverty.

Around the world, significant middle classes have emerged where none before existed. Infant mortality on a global basis has fallen drastically. Education is much more widely available than in the past. In contrast with several decades ago, the majority of governments are democratically elected, and human rights are much more widely recognized. In the words of United Nations Secretary General Kofi Annan, "there is poverty in the world not because of too much globalization but because of too little".

The sad fact is that in most cases, poverty, misery and conflict are man-made: the results of corrupt and incompetent governments; of naked protectionism; of failed public policies; of cronyism; of ruling corporate and governmental elites with no sense of responsibility; of tribalism.

Nevertheless, there is a growing backlash against globalization and we in Canada are not immune. Klaus Schwab, President and Founder of the World Economic Forum, has urged world political and business leaders to use every ounce of creativity to respond to the growing backlash against globalization or risk seeing many of its benefits rolled back. Financier, George Soros, has warned of the dangers to world order in the working of unbridled market capitalism. Federal Reserve Chairman Alan Greenspan has voiced his concerns as well. At a recent meeting at Jackson Hole he said "should recent positive trends in economic growth falter, it is quite imaginable that support for market-oriented resource allocation will wane and the latent forces of protectionism and state intervention will begin to reassert themselves in many countries including the United States".

The threat is real and its grass-roots appeal gives it added strength. The first major alarm bell went off in Seattle in November of last year when 50,000 protesters rallied against the WTO. I was there amidst the mayhem and the tear gas. The message emerging from Seattle was sobering: grass-roots movements are now newly empowered by the Internet. Lori Wallach, one of the chief organizers of the Seattle protests, boasts that tens of thousands of anti-globalization forces are being recruited and marshaled thanks to online planning. International Trade Minister Pierre Pettigrew hit the nail on the head when he said of the Seattle protestors, "The irony is that they came to decry the very movement that brought them there".

Another lesson of Seattle is that governments are not prepared to champion globalization. The failure to launch the WTO round in Seattle was not due to the protestors as they boldly claim. It was due to governments failing to agree on how to advance the global agenda. The differences are deep not only between the advanced and the developing world. There are serious differences among the major players such as the United States, the European Union and Japan.

What is greatly worrying about the antiglobalization backlash is that many of the protesters have decided to sidestep democratically-elected processes in favour of direct action. What started in Seattle, was continued in Washington, in Melbourne, in Prague, and only last week, in Montreal. The protests will continue. Every major meeting of government leaders and of business leaders is being targeted.

There is another disconcerting dimension to this phenomenon. A great number of the protestors are solidly middle class and the sharpest edge of their attacks is aimed squarely at business. Even the wealthiest country in the world is beginning to demonstrate some worrisome trends. Witness the September 11 issue of Business Week and the cover story — "TOO MUCH CORPORATE POWER. Even though Big Business helped create unprecedented prosperity, most Americans think corporations have excessive influence over their lives." Vice President Gore in the current presidential campaign has capitalized on this sentiment. Polls in Canada show that this growing antiglobalization backlash is linked in people’s minds to excessive power on the part of corporations.

So what are the lessons in all of this?

First, let’s not take globalization for granted. At the turn of the 20th century, there was a remarkable openness in world commerce praised as a great virtue by none other than John Maynard Keynes himself. Two great wars, the Russian revolution, the Great Depression and seventy years of Cold War stopped globalization as it was then, dead in its tracks. It could happen again.

Secondly, governments, leaders of global institutions and business leaders must work much harder at explaining the merits of globalization, of open economies and of free trade. Frankly, we are doing a very poor job.

Thirdly, we must spare no efforts at shoring up and improving key global institutions such as the United Nations, the World Trade Organization, the International Monetary Fund and the World Bank. In the words of World Bank President, Jim Wolfensohn, "these institutions are one of our few hopes in rolling back protectionism, totalitarianism, terrorism, war and chaos".

Fourthly, the business communities of the world, and in particular the business leadership of the developed world face a huge task. Yes, we must do what is most important — run our enterprises well, grow them, create jobs and value, innovate and carry our products, services and ideas to the world. But we must do more, much more. We have to become global citizens, agents of change, articulate spokespersons for a vision of enterprise and democracy that will bring immense benefits to the world at large. We will have to learn how to understand global issues and to work with the reality that local issues and national issues are invariably connected to global issues. This is the future, and it is already here.

As the CEOs of important companies operating within Canada and globally from a Canadian base, I urge you to join with me in opening a new front of thinking and action, of strategies and solutions for confronting the challenge of globalization. The BCNI family is as good a place as any to tackle these issues and in the coming weeks I will present a plan and specific proposals to Chairman David O’Brien and the members of the Policy Committee on how we might proceed.

In the meantime, we have a great deal of work to do within Canada and beyond our borders before we can attain the ambitious objective we set for ourselves and all Canadians eighteen months ago: to make this great country the best place in the world in which to live, to work and to grow.

Together with David O’Brien and all the members of the Executive Committee, we look forward to working closely with you in meeting this exciting challenge.