APRIL 1, 1976
The New Society: New Title, Same Old Debate
AN ADDRESS BY Gerald E. Pearson,
PRESIDENT, CANADIAN CHAMBER OF COMMERCE
CHAIRMAN The President,
H. Allan Leal, Q.C.
Ladies and gentlemen: We bid you a cordial welcome to this luncheon meeting of The Empire Club of Canada.
Since this is April 1, it is perhaps permissible to quote oneself. In an address to this club about two years ago, in a rare flash of genius, I observed that the time had arrived to make some fundamental decisions and critical choices involving the type of society we wish to maintain or build in this country and to put an end to our predisposition to continental social drift. In making a mental review of the program of topics and speakers of this year, I believe it has been singular, at least to this extent, that we have addressed our minds, or had them addressed, to the identification and implications of our serious problems. It is not the function of this club to resolve them, but we have assumed a self-imposed obligation to air them, and in that I believe we have discharged our responsibility in an acceptable way.
Our distinguished guest and speaker attends today as the worthy representative of a substantial interest group in this dialogue and his topic, "The New Society: New Title, Same Old Debate", preserves the continuity whilst rejecting any claim to novelty.
Mr. Pearson was born in Alberta and was educated both there and in Ontario. He is a graduate in Commerce from the University of Alberta. In private life he is a chartered accountant and a partner of Clarkson, Gordon & Company in Edmonton. In 1972 he was elected President of the Edmonton Chamber of Commerce; subsequently he served as a Director of the Alberta Chamber, as Chairman of the Prairie Regional Committee of the Canadian Chamber and as a Director of the Canadian Chamber. He was elected National Vice-President in 1974 and President in September, 1975. In a real sense, therefore, it can be said that Mr. Pearson has risen through the ranks of that 125,000 member organization and is eminently qualified to speak for them.
I am privileged to call upon Mr. Gerald E. Pearson, President, Canadian Chamber of Commerce, to address us.
Mr. Chairman, ladies and gentlemen: Thank you sincerely for your warm welcome, and for an extremely generous introduction. I can only conclude that such a build-up, followed by my modest performance, may constitute one of the better April Fool jokes of 1976.
I was very flattered to receive an invitation to address this distinguished group. I was assured in advance that my comments could safely verge on the esoteric. In fact, someone pointed out that this would be one of the few audiences before which I might use the term "esoteric" without someone assuming that I was referring to a subsidiary of Imperial Oil.
However, notwithstanding this preamble, my remarks will be relatively plain and straightforward, for my topic inspires blunt talk. Heaven knows, we have already heard enough intellectual sermonizing . . . in fact, that may well be the heart of the problem.
In my travels this year, as President of Canada's largest voluntary, non-political association, I have devoted a great many talks to government intrusion, and to the right of the businessman to run his own business.
I have stated my passionate conviction that it is to the benefit of all Canadians that entrepreneurs maintain a positive innovative spirit, and major control over their own affairs. While there has been, and always will be, a degree of government regulation and involvement in the marketplace, that intrusion must not ever become of such proportions that it dampens initiative, or threatens democratic rights or civil liberties.
On several occasions in recent months, I have expressed some doubt as to the ability of the private sector to survive the compounded impact of restrictive legislation, increasing government intervention and competition, and expansive government spending. On more than one occasion, we have suggested that, barring corrective action, it was not inconceivable that business might some day be put out of business.
Recent trends and actions, most notably the Prime Minister's musings with respect to the collapse of the "free market system", have brought this issue into focus, and it is to this topic that I wish to address my remarks today.
Those of you who have been following closely the development of the national debate over the "free market" will be aware that "things have not been unfolding as they should".
Part of the difficulty is semantic in nature. Some segments of Canadian society truly believe that the national debate hinges on a choice between "capitalism" and "socialism". I do not share this belief, nor do I believe that Mr. Trudeau sees the situation as a comparison between absolutes.
In fact, I believe that we would do well to stamp out the term "capitalism", for it is too frequently used in reference to 20th century North American business activities where it does not apply. In the first instance, capitalism exists all over the world, in scores of different forms. Secondly, the term has a negative emotional charge as a result of the abuses perpetrated during the Industrial Revolution, abuses long ago remedied and totally irrelevant to the present context.
Having dispensed with "capitalism", what more reflective term can we employ to describe the private sector in 1976? In point of fact, what we have is a "mixed economy" with a large government influence. For some time, "free enterprise" was the term in vogue; however, the system long ago ceased to be "free"--if it ever truly was, and "free enterprise" is therefore also subject to misinterpretation as a term.
I was interested to read recently that, in a survey of Ontario university campuses, 82% of those students inter viewed disapproved of "free enterprise" as it currently exists, although the vast majority approved of the theory of free enterprise. "We approve of free enterprise", they said, "but where is it?"
A parallel exists in the story of the Canadian who was asked by an American friend: "What do you think of Canadian culture?" The reply was: "Darn good idea!"
To return to my theme, we operate in a "mixed economy" in Canada and, in my view, all of the rhetoric boils down to that basis. No matter the talk of "new societies", "free market systems" and "power groups", we are embarking on a new and more public round of the same old debate, which might more aptly be entitled: "The mixed economy--how mixed will it be?"
At the risk of treading a well-worn path, I would like to pause momentarily to recap a few of the more important phrases used by Mr. Trudeau in calling for the national soul-searching.
On December 18th, the Prime Minister said, in announcing the federal spending cuts, that Canada had entered "a new economic era" and that a "new kind of society" must be created.
On December 28th, in a CTV interview, he expanded on the thought, admitting that we must "even change our institutions". "It's a different world", he said, "and you can't live in a different world with the same institutions and the same values you had before."
He admitted that the controls program represented "a massive intervention . . . telling Canadians that we haven't been able to make the free market system work . . . Our problem is how do you deal with bigness? That means the government is going to take a larger role in running institutions."
With these words and other phrases of equal clarity and precision, Mr. Trudeau called upon all interested parties to contribute to a discussion of Canada's future economic mix and direction. The national reaction to his call ranged from boredom to outrage. Significantly, both labour and business leaders questioned the true intent of his comments, and wondered aloud whether the Prime Minister's mandate embraced an overhaul of the values of Canadian society.
Mr. Trudeau addressed the Canadian Club and the nation on January 19th in an endeavour to clear the air.
"We are living in a new economic era," he repeated; adding that "We haven't been able to make even a modified free market system work in Canada."
"Much public comment has accused me of wanting to kill free enterprise," he admitted. "This is a phoney issue . . . I made absolutely no mention of free enterprise. I spoke about the free market. There is a difference."
Free market system . . . free enterprise . . . mixed economy--no matter the terminology, most Canadian business people understood the message quite clearly.
The total of the Prime Minister's comments represented not an invitation to dialogue but an assertion, followed by a call for views, and followed immediately by a preconceived verdict.
"This is a new economic era," he said. "We haven't been able to make the system work," he added. "How do you deal with bigness?" he asked. And then he answered his own question: "Government will take a larger role. "
Sam Hughes, the Executive Director of the National Chamber, reacted to Mr. Trudeau's remarks o national television. His words echoed the thoughts of many people in the private sector.
"Mr. Trudeau has called for a national debate," said Hughes, "but I'm not sure who the judge and jury will be.
The focal point of the debating exercise has therefore become not a series of possible options, but the pros and cons of a specific solution already advanced by the federal leadership: namely, more government.
The Prime Minister has suggested that traditional solutions will no longer suffice, and what he appears to have in mind is more government intervention in the public interest.
I'll debate that premise for what it's worth.
I won't go into the difficulties of defining and interpreting the "public interest". Suffice it to say that many undesirable things have been done in what was perceived by somebody to be in the "public interest". On the other hand, the "public interest" certainly does exist, and it needs to be protected.
The view of the Chamber of Commerce has always been that the public interest is best served by a system which protects individual freedoms, is subject to market forces and is fueled by incentives to those who demonstrate initiative and hard work. By contrast, we feel that our current economic ills are attributable in large part to too much government, an administration living beyond its means, and undermining the health of the productive sector of the economy.
If this view is valid, then the statement that our economic health can be restored by still more government just does not make sense.
The assertion that another stiff dose of government will settle a system already disrupted by public-sector meddling gains no more sympathy from me than did the small English child who, several years ago, killed his parents and then pleaded for mercy from the court because he was an orphan.
I believe that Mr. Trudeau's assumption that we have entered a new economic era also requires some evaluation.
There has never been a time in recent history when the forces of change have not been at work. In fact, it has, for many years, been said that change is the only thing that is permanent.
No one would deny that our world is undergoing massive changes. No one can deny the impact of OPEC, the multi-nationals, the floating exchange rate, and the masses of currency passing through the international banking system.
Yet, are these changes any more fundamental than, for instance, the rise of the trade union movement, the emergence of instantaneous communications, the advent of the computer or of nuclear technology?
Our current economic system has shown an amazing capacity for adapting to new conditions. Is there any reason to suppose that it is not equal to the challenge posed by the most recent set of upheavals?
Of course, the argument will be made that the present changes are not differences in degree, but differences in kind. Yet surely this is word-play. Certainly, the evolutionary cycle continues--but can we isolate this moment as "a new era"?
Call this a new economic era if you will, but it is subject to the same old economic facts of life.
We don't need a new debate with a catchy title, or an economics degree, to enunciate the economic commandments:
1. Government, like everyone else, must learn to live within its means.
2. Money supply should match the trend of the economy.
3. Labour should be responsible in making wage demands, and should take into account basic realities such as productivity, the employer's ability to pay and the need to compete in world markets.
4. Business must be allowed to prosper if the necessary jobs and wealth are to be created.
5. If you want someone to do something, give him an incentive to do it.
6. It is unwise, if not fatal, to discourage the producers in our society.
7. You cannot consume more than you produce.
8. There is no such thing as a free lunch.
9. Governments are never as efficient at redistributing wealth as a booming economy.
Somehow, in our headlong rush to meet our political destiny, some of us have forgotten the simple economic facts of life. Until we get back to the textbook, we will have no grasp of the extent of the problems that are home-made, as compared to the residue of difficulties that have been the result of fundamental changes in world conditions.
The Prime Minister has said that it is a "phoney issue" to blame our economic ills on excessive government spending, undue increases in the money supply and excessive intervention in the marketplace. In support of this, he has pointed out that every industrialized country in the world is suffering from the same economic problems. Quite unintentionally, he may have said a mouthful.
It may well be that the governments of other industrialized nations have also been spending excessively, increasing money supply unduly, and over-regulating their economies. But does unwise government policy elsewhere legitimize similar action here at home?
I suggest that if we were to take the lead in reintroducing sound economic thinking in the administration of our affairs, we might well gain a tremendous advantage in world trade.
Has Canada's moment come to assume the mantle of international leadership, if only momentarily? Or shall we maintain the cautious route behind others, paying the price when they stray from the path of wisdom
If there is nothing new in the "new economic era", there will be even less that is new in the "new society", if what it implies is more government intervention and more government control.
The extent of government intervention and control has been increasing alarmingly for many years, and has now been drastically accelerated by the price and income controls program.
The "new society" is supposed to feature government intervention in order to ensure that concentrations of power do not harm the public interest. To recall a quotation I mentioned earlier, "Our problem," said Mr. Trudeau, "is how do you deal with bigness?"
I find that statement particularly significant in that it has a pejorative connotation: bigness is apparently assumed to require restraint. Quite apart from the fact that it is an assumption that I cannot accept, I fear it has implications for the work of the Royal Commission on Corporate Concentration.
The Royal Commission was brought into being in order to study the impact of concentrations of corporate power on the public interest. Its mandate, however, contains no bias, and the government went to some lengths, at the outset, to make it clear that it had no preconceived notions as to either the positive or negative implications of size. The Prime Minister's recent statements, however, appear to be inconsistent with this apparent lack of bias. Some would suggest that his remarks presume a verdict that is, a need for control--even as the commission's hearings go on.
The very fact that corporate power has been singled out for study is indicative of the anti- business bias that now exists in Canada. The stark reality is that businessmen are a minority group, and because of the prevalent cynicism, and the many popular myths and misconceptions, the appointment of the commission represented good politics. On the other hand, it is also a classic case of biting the hand that feeds, since the 80% of the workers employed in the private sector support the 20% in the public sector, and support them very well.
The "new society" musings and the Bryce Commission on Corporate Concentration are not unrelated, it would seem.
As president of a major organization of characteristically low-profile business people, I empathize with General Custer who is reported to have gathered his few hundred men around him and, scanning the ten thousand Indians gathered on all sides, quipped: "Men, don't take any hostages."
In the grand debate for Canada's future, we hold few winning cards.
Our jury, the Canadian public, has heard the criticisms of bigness, of power, of the corporate elite, of profit and greed, and of wealth built on the backs of oppressed labour. They have too seldom heard our reply, and in our silence we have been presumed guilty in the past. There is a backlog of misinformation that we have unwittingly reinforced.
We have a massive education job to do with the Canadian public and with our judges on Parliament Hill who will not only render, but legislate a verdict that will shape Canada's destiny. The conventional apologies for avoiding the public spotlight offer no escape in the present circumstance. We must stand up and be counted, or we, and the business system with us, will surely be counted out.
Some will ask, if the arguments in favour of the competitive enterprise system--the mixed economy--are so strong, why is the system under attack, by government and also by the public, both of whom are beneficiaries of the system?
The answer, reduced to simple terms, is that the system has not been judged by the criteria of success, but on the level of idealistic values and emotions--the irrational passions of man. Ironically, the success of the economic system is undermining its chance of survival.
Who will defend the competitive enterprise system? The general public? No, for in their minds there is no perceived connection between their affluence and the system, and they do not really understand an economic system as such. They are much more aware of their daily frustrations and insecurities under the system than they are of the long-term gains derived from it. And, to an increasing degree, they and many politicians are brainwashed by intellectuals who resent the system and its central figure, the businessman.
Then who will defend the competitive enterprise system? The businessmen? Unfortunately, most businessmen have shown neither the capacity nor desire to capture the imagination of society. They lack charisma, sex appeal. They may be honourable, but they are not heroic.
And so the competitive enterprise system has stood as an undefended fortress. All that was required was someone to attack it, and this too has been provided by the system in the form of intellectuals who have more leisure time than ever before in which to do it, time granted by the efficiencies and progress of that same system. The renowned economist, Dr. Joseph Schumpeter, had his own definition of an intellectual:
Intellectuals are people who wield the power of the spoken and written word. One of the things that distinguishes them from other people who do the same, is the absence of direct responsibility for practical affairs. The critical attitude arises no less from the intellectual's situation as an onlooker than from the fact that his main chance of asserting himself lies in his actual or potential nuisance value."
The growing affluence of the mixed economy has permitted a continuing expansion of higher education, to the point where there are more intellectuals available than there are suitable jobs to put them in. Many of them blame the system, and their favourite target is the businessman. They say the businessman got his money by luck, by monopoly, by exploitation or by dishonesty, among other things.
Some intellectuals identify with the trade unionists, because of their anti-business attitudes.
Government bureaucrats have a natural alliance with intellectuals, with whom they share a common educational background. On the one side, there are the bureaucrats who are increasingly involved in anti-business legislation, and on the other side, the unemployed intellectuals who are only too happy to get a job with decent pay and indecent amounts of power over others.
Professor Benjamin Rogge, a lecturer in political economy at Wabash College, addressed this phenomenon in a recent article. He asked:
Do we or do we not have a surplus of intellectuals? Are they or are they not critical of the businessman and the business system? Do these critics largely control the world of the academy, the media, the pulpit, or the stage? Well, when did you last see a businessman treated sympathetically in a novel or play? He has two choices; he can be a knave or he can be a fool. Whose name is better known to the American people--Ralph Nader's or the President of General Motors?
One might wonder if there is any hope that, with the opening of this economic debate, the businessman will finally sense the danger to himself and to the system of which he is a part, and rise to meet the challenge?
This is the critical question.
It has been written that "The report that a given ship is sinking is not defeatist, only the spirit in which this report is received can be defeatist. The crew can sit down and drink. But it can also rush to the pumps." Those Canadians who understand the mixed economy from practical experience as participants now have little choice but to rush to the pumps.
We have been invited to convince a doubting administration and a questioning public that the nation has been well served by the current mix of private and public enterprise, and that it is not time to tear down a productive yet imperfect mechanism in favour of an idealistic abstract of planned perfection operated by remote control from Ottawa.
Although business people may not be heroes, they do know a lot about hard work and persistence, and they have had to learn to become good salesmen. Those talents could be of inestimable value in the days ahead. The task is, quite simply, to safeguard freedoms and to stave off further government intrusion into a delicate mechanism already seriously upset by government meddling.
As it currently stands, government sees the economy as its patient. The cabinet believes it is the only medical team in town, and it has the added distinction of having inflicted most of the diseases. We are involved, one might say, in an intellectual malpractice suit.
Yet there are some hopeful signs. Businessmen are becoming more aware and vocal. Not all intellectuals are critics of the system. Many of the new studies in economics support the mixed market position.
Adam Smith sounded a hopeful note in 1776, which may give us hope today. He said:
The uniform, constant and uninterrupted effort of every man to better his condition ... is frequently powerful enough to maintain the natural progress of things toward improvement, in spite of both the extravagance of government and the greatest errors of administration. Like the unknown principle of animal life, it frequently restores health and vigour . . . in spite, not only of the disease, but of the absurd prescriptions of the doctor.
I am happy to report that the patient is suffering, but he is still very much alive--and kicking.
Our distinguished speaker was thanked by Mr. Ian Jerrold Collins, a Director of The Empire Club of Canada.