WHAT'S GOOD FOR THE WEST ...
John F. Fraser, President and Chief Executive Officer Federal Industries Ltd.
April 14, 1988
Chairman: Ronald Goodall, President
The idea that fortunes could be made in the West seems to have been with us forever. Even I went west! The West seems to have always exerted a magnetic attraction. Perhaps the reason for this idea arose from stories about the successes of the 49ers in the California gold rush or from stories about the fortunes made by Charley "The Lucky Swede" Anderson and by Big Alex "King of the Klondike" McDonald in the last years of the 1890s.
Even Giacomo Puccini heard these stories and the opera The Girl of the Golden West was written in 1905, a story set in the California gold rush about the love of Minnie, the owner of a saloon, for Dick Johnson, a bandit. Eventually, Minnie saved Dick from the gallows and, I believe, they lived happily ever after. Robert Service heard these stories too and we now have "The Shooting of Dan McGrew" and "The Cremation of Sam McGee"
Perhaps as a further reminder of these stories, atop the dome of Manitoba's legislative building stands Golden Boy, a five-ton, 131/2-foot statue. Golden Boy resides, of course, in Winnipeg, the home of our speaker, and the home of Federal Industries Ltd., the maker of a new fortune in the West.
I must draw your attention for a few moments to the remarkable success story of Federal Industries, due in no small way to our speaker today. Incorporated in 1929, Federal Industries was a major grain-handling company which sold its grain elevators for $90 million cash in the late 1960s. The company invested those monies and became a management company. In the late 1970s the company needed fresh leadership and in 1978 our speaker was brought in to turn the company around and sort out its investments. Since that time revenues have risen from $100 million to $1.6 billion. Subsidiary and investee companies include such well-known names as Cashway Building Centres, Direct Film, Jelinek Sports, Willson Stationers, Chromalox, Russelsteel, Canadian Motorways, Thunder Bay Terminals, The White Pass & Yukon, and Golden West Steel. The company has the objective of becoming "a great Canadian company."
John Foster Fraser was born in Saskatoon, and earned a commerce degree from the University of Saskatchewan. Shortly after graduation Mr. Fraser, along with a university friend, acquired a truck transportation company in Saskatoon. He served as president of the company over a nine-year period of rapid growth until the company was sold in 1961. Mr. Fraser moved then to Winnipeg, ignoring the theory that all should travel west to make a fortune, and acquired Hanford Drewitt Ltd., a local retailing business. In 1969 he became president of Norcom Homes Ltd., a manufacturer of recreational vehicles, mobile homes and factory-built housing. He has been described as "the consummate CEO in Canada - he can run anything"; he has been named as one of Canada's important business decision-makers; and his ability to drive a hard bargain in corporate acquisitions has been noted. The 1986 acquisition of Canadian Corporate Management Co. Ltd. earned Mr. Fraser inclusion in the top 10 newsmakers of 1986 by the Financial Times.
Mr. Fraser is a director of a number of companies including the Bank of Montreal, Investors Group Inc., Canada Development Investment Corporation, Inter-City Gas Corporation and Thomson Newspapers Limited. Mr. Fraser is currently the chairman of The Council for Business and the Arts in Canada. He serves as a director of The Conference Board of Canada, the Canadian Council for Native Business and is on the policy committee of the Business Council on National Issues.
Mr. Fraser is active in cultural and community affairs. He received the Manitoba Chamber of Commerce Outstanding Business Achievement Award for 1984 as Business Citizen of the Year. He is past president of the Manitoba Theatre Centre and a member of the Cultural Policy Review Committee of Manitoba. In 1980 he was appointed one of six trustees responsible for the restructuring and reorganization of the Winnipeg Symphony Orchestra, a restructuring made easier by a 10-year interestfree loan of $150,000 from Federal Industries.
Mr. Fraser and his wife, Valerie, have two children, John, Jr., and Lisa Ann.
Ladies and gentlemen, please welcome John Foster Fraser, President and Chief Executive Officer of Federal Industries Ltd., who will address us today on "What's Good for the West ......
Members of The Empire Club are to be envied. You have had the privilege of hearing some of the great speakers of our times - world leaders, international statesmen, the bright lights of business, science and the arts. With all this experience, you are probably Canada's greatest authorities on speeches. Better than anyone, you know the classical structure of a speech - tell them what you're going to say, say it, and tell them what you said.
I'm going to turn the tables on that today. I'm going to start off by telling you what I'm not going to say. I'm not going to say that free trade is vital to the future of Canada. It's not that I don't want to say it. And it's not that I don't believe in it passionately. l do. It's just that after I had accepted your Club's very flattering invitation to speak to you today, I proposed the free trade agreement as my subject - and I was graciously, but quite firmly, deflected from that course. To quote your President, Ron Goodall, "The Club has been inundated with free trade speeches lately."
And right up front, I must admit this deflection really took the wind out of my sails. As chairman of the Manitoba Committee for Free Trade, I was enthusiastically looking forward to making my pitch to this very prestigious and influential audience. It was, however, quite clear that another speech on that topic would not be widely appreciated.
So I am not going to question why Ontario - the one province in Canada with the most to gain - would be opposed to the free trade agreement. And I am not going to point out that 90 per cent of Ontario's exports are to the United States. Nor will I mention that Ontario has been the one province that has benefited tremendously from our first attempt at free trade - the Auto Pact. I won't even express my puzzlement as to why Bob White - the leader of the union that has gained most from free trade - would be opposed to the new agreement..And I certainly won't tell you that most westerners find David Peterson and Bob White an "odd couple" - to say the very least.
I won't even mention that most Canadian industries are ready for the challenge - or that our important resourcebased industries would benefit. You've heard that before.
And finally, I won't say that the prospect of a loss of sovereignty is nothing but a red herring - as witnessed by the undisputed sovereignty and individual cultural identity of the European nations in the free trade bloc of the EEC.
I won't say any of that. And it's too bad, really. Because I have no doubt that it would have been a great speech - a real barn burner. I might have reached such heights of eloquence that the few people in this room who may still be skeptical about free trade would have leapt to their feet, tears in their eyes, ready to storm Queen's Park and confront David Peterson in his lair. After all, I've made a number of pro-free trade speeches in Manitoba - and you all know what happened to Howard Pawley. But David Peterson can stop shaking in his boots since I will bow down to the wishes of The Club. Ron Goodall suggested that you might like a perspective on the West - and to prevent any confusion, that's Western Canada - not the other side of Spadina.
I'll set the stage with a brief overview of the current economic situation in the western provinces. I'll then move on to the political arena and give you the news you've all been waiting for - the outcome of the next federal election. And finally, I will give you my impression of the broader, more fundamental issues concerning the West today - and their implication for the future of Canada.
To start with the positive - I'm pleased to report that the strong economic recovery so evident in central Canada during the past several years is starting to spread throughout the West. It now appears that the growth in 1988 in most western provinces will exceed the national average.
British Columbia avoided any post-Expo slowdown and enjoyed strong economic growth in 1987. That positive momentum seems to be carrying over into 1988. The lower Canadian dollar and the strong housing market in the United States have given a solid boost to the lumber and pulp and paper industries on the West Coast. While U.S. housing starts are coming off somewhat - and the recent increase in the value of the Canadian dollar is worrisome to all of our exporting industries - there is still reason to be confident that strong growth will continue in B.C. through '88.
As you know, as go oil prices, so goes Alberta. This is the one province in Western Canada that has suffered the most over the past several years. However, assuming oil prices stabilize in their current range and gas prices don't deteriorate further, the very encouraging recovery that started last year in Alberta should continue through 1988. Having said that, the Alberta economy still has a long, long way to go before it even comes close to the level of activity achieved in the early 1980s.
The economy in Saskatchewan has been hit hard by a triple whammy-the depressed agriculture, potash, and oil and gas markets. But with the potash countervail threat now resolved, oil prices apparently stabilizing, and the farm sector being aided by subsidies, the province can look forward to at least modest economic growth in 1988.
That brings us to Manitoba which has, in recent years, had one of the highest rates of growth of any of the western provinces. Unfortunately, this above-average growth has been largely the result of massive public expenditures. The huge hydro development in northern Manitoba and the North of Portage development in downtown Winnipeg have provided a strong stimulus to the Manitoba economy. But, as these publicly funded projects wind down and the agricultural sector remains depressed, we can expect lower rates of economic growth in Manitoba over the next few years.
However, the overall economic picture in the West is brighter today than it has been for five years. You may therefore wonder why the political picture is so murky. If things are looking up economically - why does western alienation still colour the political landscape? Surely, economic growth should wipe out discontent with the political and economic leadership of Canada. Unfortunately, that does not appear to be the case.
I'm sure the great majority of you are sick and tired of hearing about "western alienation" - and, indeed, I am too. But it is a reality - and it is certainly an important wild card in the next federal election. So we cannot afford to ignore it. While it may not be as intense as it was during the great oil price battles between Alberta and Ottawa, western alienation is alive and well. And, believe me, it is very deep-rooted.
For many decades, the perception in Western Canada has been that the federal government has catered to Quebec and, to a lesser extent, Ontario, at the expense of the West. As the Liberal government was in power for so long, the apparent central Canada bias was previously perceived to be the exclusive property of the Liberal Party. There was, therefore, a strong and long-held belief that if we could just toss the Liberals out of power in Ottawa, the West would finally get its long-overdue "fair shake." Indeed, the massive Tory victory in 1984 was the cause of great jubilation in Western Canada. We believed - obviously naively - that all the past wrongs and injustices, real or perceived, would be immediately set right.
You can therefore imagine the disillusionment, puzzlement, and finally anger that developed in the West as the perception spread that the Conservative government in Ottawa was really not much different than the Liberals - that is, they were apparently continuing to cater to central Canada at the expense of the West. The CF-18 fiasco left deep, deep feelings of betrayal in many western Canadians. Understandably, the reaction was most intense in Winnipeg, echoing the hostility and anger over the move of Air Canada's maintenance facilities from Winnipeg to Montreal in the 1960s.
These developments have, unfortunately, led to great feelings of frustration - many people are asking "where do we go now?" While the majority of western Canadians are, by nature and background, small "c" conservatives, their present disillusionment with both the old line parties could well lead to increased support for the NDP in the next federal election. At least that seemed to be the way the wind was blowing as recently as a few months ago. Normally, that might not seem all that important. The CBC generally predicts a winner before the polls even close in the West. But given the lack of overwhelming support for either the Liberals or Conservatives at the moment here in central Canada, the unthinkable could happen.
The West might finally have the opportunity of determining the outcome of a federal election! On election night, some people in Ontario may actually have to stay up late to watch the western polls come in - someone besides John Turner, that is.
However, before you start buying pink neckties - and betting on which of our major banks will be nationalized - I should quickly mention that there has been a recent and potentially important "shift in the wind" that appears to be altering the political landscape in the West. The new factor is the great free trade debate. Forgive me - I know I said I wouldn't speak of it. But describing current politics in the West without discussing free trade is like describing the Toronto skyline without mentioning the CN Tower.
Without question, free trade is a very major and high profile political issue in the West. In fact, feelings are so intense that the NDP and the Liberal positions on free trade appear to be undermining their support - and this development is working to the benefit of the Tories in Western Canada. Historically, the great majority of western Canadians have been free traders. Further, Premiers Vander Zalm, Getty and Devine are all in favour of the free trade agreement, and they are promoting it actively. The one naysayer in the West was Howard Pawley, and his voice is clearly in the wilderness now.
So, my fearless prediction is that the combination of the underlying support for free trade in Western Canada, the present disarray of the Liberal Party in the West, the active support of most western premiers, and a new Tory government in Manitoba (yet another fearless prediction), will lead the federal Conservative Party to a comfortable victory in the West. They might lose a few seats, but I don't think it will be too many. And given my earlier prediction that the outcome of the next federal election will be determined in the West, you can draw your own conclusion. Let me add that I think it will be a majority. Slim, perhaps, but a majority nonetheless. Tell Allan Fotheringham you heard it here, first!
As interesting as it is to speculate on these scenarios, they are as changeable as the chinooks that befuddled the world at the Calgary Olympics. I would now like to look beyond the short term to the more permanent, fundamental and underlying currents of the West. Because life will go on, one way or another, after the next election. The question is - where is it going on to?
That's the question that really concerns me. In fact, it's the reason I am so hot on free trade just now. You see, I firmly believe that western alienation is much more than just discontentment with the government in Ottawa. Or that it could be quickly solved by having a more western-oriented government in place. Indeed, l believe that western alienation is the symptom of something much deeper. It is a symptom of the fact that there is a fundamental problem in the very nationhood of Canada - with the shape, structure and strength of this country.
That problem can be summed up in one word - imbalance. And I am afraid that the main source of that imbalance is located right here within the reach of the shadows of the towers at King and Bay.
Before you get alarmed, let me assure you that I am not about to spoil your digestion by indulging in gratuitous Toronto-bashing - a sport that frankly ranks with CBCbashing and fed-bashing as a favourite western pastime. I am simply going to take this opportunity to point out that Toronto's incredible ascent - in terms of power, clout and size - is not necessarily a good thing, whatever it might have done for your housing market.
With the growing concentration of population in the region, there is growing political power. Then, there is the growth in economic power experienced during the last 10 or 20 years.
To those two factors we can add the extraordinary concentration of corporate power now centred in Toronto. This will - in time - have serious and adverse economic and political ramifications. There is nowhere near as great a percentage of major head offices in New York as there is in Toronto. Further, the U.S. has many important and growing centres of commerce in addition to New York - Chicago, Boston, Dallas, Denver, San Francisco, Los Angeles immediately come to mind. But in Canada, as Toronto continuously expands its commercial dominance, Montreal, Winnipeg, Calgary, and Vancouver steadily decline in relative importance. Companies like Federal Industries, with a Winnipeg base, are increasingly rare. And I think this is a very ominous trend that, if allowed to continue, will further distort the already unequal economic and political balance of our country.
In short, the reason that Toronto's otherwise admirable growth and strength are neither good nor healthy is the simple fact they aren't being matched anywhere else. All other cities in Canada have been dwarfed in comparison. Toronto is a vortex that has sucked in a disproportionate share of the head offices, the capital, and the bright young Canadians looking for a future. Imbalance of this nature threatens Western Canada - not to mention the other regions. That trend, if allowed to continue unabated, will finally weaken Canada. And - here's the rub - eventually it will weaken Toronto as well. To paraphrase - and correct - one of your great, if misguided, phrasemakers, a certain Mr. Kwinter, what's bad for Canada is bad for Ontario, and bad for Toronto. Without question, the absence of reasonable economic growth in other regions of Canada will, over time, have a very negative impact on Toronto.
But before you start to bemoan the decline and fall of the empire represented here today, let me give you some encouragement. At this moment in our history, there are two initiatives pending that potentially represent the most fundamental shift in the Canadian economic and political landscape since Confederation. And, in combination, I believe they will result in the first real opportunity for the rebirth and rebuilding of regional power that is so essential to the restoration of political and economic balance in this country.
I believe that the combination of the Meech Lake accord and the free trade agreement might just do the trick. Now I certainly realize that there is considerable opposition to both of these important initiatives - much of it understandable and some of it justifiable. Certainly many thoughtful, conscientious and dedicated Canadians are concerned about the impact of one or the other of these two agreements-and, in some cases, both. Indeed, it would be virtually impossible to introduce initiatives of such magnitude and long-range importance without having some negative impact.
However, I genuinely believe that the serious regional disparities and resulting regional alienations are much more negative and threatening to the future of Canada. Whatever their flaws, these two initiatives are the best shot we have at correcting the existing imbalance.
To begin with, the Meech Lake accord - by giving more power to the provinces -should help to equalize our present heavy central Canada political orientation. Certainly, it will result in a more even spread of political power across the country and, in a nation as regionalized as Canada, I believe that is a very good thing. As I understand it, the Meech Lake accord will permit the regional governments to be more responsive to the very distinctive characteristics, attitudes and aspirations unique to each region. Such a development will, in my view, result in a stronger, better balanced and more harmonious Canada.
Just as the Meech Lake accord will start to address our political imbalance, the proposed free trade agreement will do much to correct our long-existing regional economic disparities. It will do more than just give the entire country an economic boost. It will also help the regions develop and gain strength - not only from their own regional markets but from the large and rich markets that stretch from coast to coast just south of the border.
Let's just take Winnipeg and Manitoba as an example. Winnipeg was once one of the most important business centres in Canada. But over the years, its relative commercial power has been diminished dramatically. Many of its homegrown and well-respected companies have either been acquired by large, national corporations headquartered in Toronto, or they have themselves moved there.
The two major problems that have been impeding Manitoba's economic development are the barriers to the U.S. market and the high transportation cost involved in reaching major markets in central Canada. These two factors have forced Manitoba-based companies to exist on the relatively small markets of Saskatchewan, Manitoba and Northwestern Ontario.
But the free flow of goods and services across the border south of Winnipeg would open up the large and growing markets of the U.S. Midwest - including the dynamic markets of Minneapolis and St. Paul located just across the border. There are over two million people in these cities alone - more than the populations of Manitoba and Saskatchewan combined! Those markets are just a few hours south - compared to the next closest markets of two million people which are a thousand miles either east or west of Winnipeg. Geography is a fact of life in Canada and transportation is a major cost of doing business.
I can readily foresee strong economic ties developing between Winnipeg and Minneapolis, Omaha, Denver, and Dallas. Here's something to remember for the next time you play Trivial Pursuit - Winnipeg is closer to Dallas than it is to Toronto. It is much more efficient for Vancouver to ship to Seattle than to Edmonton ... much more efficient for New Brunswick to ship to New England than to Toronto. The natural transportation corridors for Canada are north/south as well as east/west. And so is the natural flow of goods and services if the barriers to trade are removed. All roads don't necessarily lead to Toronto.
At the same time, the flow of duty-free manufactured goods from the United States into Manitoba will have a positive impact on the future growth and viability of the province's important transportation, manufacturing, and mining industries. Such positive developments in the region would not weaken central Canada, as any loss of western markets could quickly be replaced on the other side of Lake Ontario. And, ultimately, as regional markets get stronger and become truly thriving, that will enhance central Canada's market growth prospects in this country once again. Other strong and growing regions will not diminish the centre. Other strong and growing provinces will not diminish Ontario. Other strong and growing cities will not diminish Toronto.
Indeed, I am convinced that the combined impact of the Meech Lake accord and the free trade agreement will launch Canada into a new and sustainable period of balanced economic growth - and will result in a political structure that recognizes more fully the regional nature of the country. Last, and perhaps most important of all, the successful implementation of these two initiatives will reduce much of the antagonism, alienation and disharmony that has distressed and distracted our country for the past 20 years.
When I began my remarks today, l promised that I wouldn't say that free trade is vital to the future of Canada. l didn't, and I won't. But I did say - and I will say it again - that the rebirth of regional power is vital to our future. And free trade is one of the things that is vital to that.
By the time you have sorted out what I did and didn't say today, I hope one message comes through loud and clear. By moving forward together, in harmony and with confidence and optimism, to take full advantage of the exciting opportunities soon to be available to us, we have a great deal to gain - as Westerners, as Easterners, as Canadians. Thank you.
The appreciation of the audience was expressed by Frederic L. R. Jackman, a Director of The Club.