Economic and Social Challenges Facing Canadians

Head Table Guests

Michael Linderman, Chairman, Object Oriented Committee York Technology Association and author of "Developing Visual Programming Applications Using Smalltalk"; Letizia Roppa, grade 12 student, Central Commerce Collegiate Institute; Katherine Braid, Executive Vice-President, CP Rail System; Ian Scott, President, Electrolyser Corporation; The Very Rev. Douglas Stoute, Dean, St. James Cathedral; John Campion, Partner, Fasken Campbell Godfrey and a distinguished Past President, The Empire Club of Canada;; Gerry Meinzer, President, Smart Toronto and Past President, Metropolitan Board of Trade; Paul Cantor, Chairman and CEO, National Trust Company; Douglas Todgham, Vice-President, The Canadian Institute for Advanced Research and a Director, The Empire Club of Canada; Suzanne Labarge, Executive Vice-President, Royal Bank of Canada; Courtney Pratt, President, Noranda Inc.; Khalil Barsoum, President and CEO, IBM Canada Ltd.; Tony Comper, President, Bank of Montreal; and Paul Lucas, President and CEO, Glaxo Wellcome.

Introduction by David Edmison

On February 17 of this year, Garry Kasporov, reigning world chess champion won another tournament. And while it's safe to say that chess hasn't the broad public appeal of, for instance, NFL football, this particular tournament captured the attention of millions of us around the globe. Why? Well, in this particular match the eyes of the world were focussed, not on Kasporov, the champion, but on his opponent, an unknown on the world chess stage--a tough competitor, nick-named Big Blue. As most of you know, what made this match different and so historic, was that Big Blue is a computer. And make no mistake about it, this is not your everyday PC with a hard drive full of word-processing programmes and the mandatory solitaire game. Big Blue is capable of assessing an incredible 200 million moves in one second. That notwithstanding, Kasporov won the tournament, but not without some difficult moments. Count one for the human race.

But while this time, the very human virtues of instinct, cunning, passion, experience and, yes, pure intellect triumphed over the awesome power of Big Blue, the event itself became a showcase of another technology far more profound in its effects on our world. I refer to the internet. Throughout this tournament, an estimated six million people around the globe followed every move on the worldwide web. With each move, the chess board on our screens was immediately updated. Given that chess isn't exactly action-packed, between moves, net surfers could click a button and play their own games against a computer with thanks to hot links to a number of challenging game sites.

Yes, the information age has ushered in changes so far-reaching, it's almost impossible to predict what's coming next! And with the rapid rise of emerging technologies comes emerging challenges for our government leaders as they wrestle with policy direction and struggle to keep up with this ever-changing part of our world.

With us today is the man who rides the pace car on the information highway, our Minister of Industry, The Hon. John Manley. Mr. Manley leads a critically important ministry, establishing an environment, through policy and legislation, in which Canadian industry can remain on the leading edge and compete in a global market that grows day by day.

First elected in 1988 and then re-elected in 1993 as Member of Parliament for Ottawa South, John Manley was appointed to his current post in November of 1993. His department combines the responsibilities previously held by the ministers of Communications, Consumer and Corporate Affairs, Tourism and Small Business, and Industry, Science and Technology. He is also responsible for a variety of government agencies including the Standards Council, the Canadian Space Agency, the National Research Council, Statistics Canada, the Federal Business Development Bank, the Natural Sciences and Engineering Research Council and the Social Sciences and Humanities Research Council. As you can well imagine, like Garry Kasporov's recent opponent, Mr. Manley must be capable of assessing over 200 million moves a second.

Needless to say our guest is a busy man who is always promoting Canada's place in the new economy. He has played a key role in developing a new long-term Space Plan with a commitment to improve our country's great strengths in high technology. He's working hard with other government departments and agencies to optimise science and technology policy as it applies to small and big business.

Prior to entering public life, Mr. Manley was a partner in an Ottawa-based law firm and lectured on taxation at the University of Ottawa. He and his wife, Judith, live in Ottawa South with their three children.

Unquestionably, the information age is here and the information superhighway is taking us where we've never been. Some of us are already in the passing lane, some of us are approaching the onramp, and some of us are terrified to turn on the key. It's an exciting yet confusing time but one of untold opportunity. In August of 1970, standing before this very podium, Captain James Lovell Jr., Apollo 13 astronaut, commented that "True wealth is harnessed energy placed in the service of mankind." Well "energy" is definitely not in short supply in our world today. And we need strong leadership to reach out and harness it for Canada's benefit. While our guest is a champion of tomorrow's technology, he is also an advocate of a strategic, informed approach rooted in thoughtful policy and industry involvement. We're honoured that he agreed to share his vision of the future with us today.

Ladies and gentlemen, would you please welcome our distinguished guest, The Hon. John Manley.

John Manley

Thank you. It is a delight to be here.

On Tuesday, our government set out in the Speech from the Throne what we believe are the major challenges facing Canada today.

Although my appearance before you is a year later than we had mutually anticipated, it is for me welcome, given the key leadership roles played by individuals and organisations represented here, that I can follow the Speech from the Throne and talk with you about the economic and social challenges we face as our economy moves into the next century, and how we believe Canadians, working together, should address them.

These changes are not only different, but in some ways more profound than any we have faced in the past. Within Canadian society at this time we find a pervasive sense of worry about the future. Despite many items of positive news, our people are uncertain about where their jobs will be found in years to come. This concern is evidenced in many ways, and it has wide-ranging impacts. Low levels of consumer confidence are one obvious symptom. And, I suspect that school drop-out rates, family violence and poverty-based crime are not unrelated. Many people have the feeling that our economy is drifting, that there is no real plan and that governments and businesses are pursuing goals that do not take into account the human beings who are often the casualties of downsizing and improved competitiveness.

We are experiencing enormous and rapid change. When I say the world is changing, I am referring to changes no less dramatic than the industrial revolution of the last century. Factories no longer manufacture an entire product, but use components from several locations; liberalised trade agreements mean that companies are engaged in international competition even in local markets; and it's becoming the norm for companies to have independent departments or branches spread over the entire globe.

Information technology is changing our world. We live in a digital world now, not an alphabetical one. Increasingly, as information technologies converge and information highway networks develop, distance and location are less and less relevant.

No one can estimate the effect this fact alone will have on society as a whole. It's not an exaggeration to suggest that the Internet may prove to be as significant a factor of change in communications as the Gutenberg invention of movable type several centuries ago. There is no doubt whatsoever that technology will continue to drive change in our economic and social conditions over the coming decades.

As technology radically changes the process by which we produce goods, the way we deliver services, and even the kinds of products and services we produce and consume, it presents us with enormous opportunities for growth and expansion--opportunities that the business people of this country are already pursuing successfully.

But there are also costs. People and industries who don't have the expertise and the skills can get left behind. And the resentment of workers, who for whatever reason find themselves left out of the new economy, will eventually erode the necessary political support for the very policies that are necessary for economic growth and prosperity.

This is already happening, and the evidence is seen in the Republican primary race, south of the border, where Pat Buchanon's siren call for a return to the old world of protectionism is appealing to voters who are afraid of what the future holds for them. This threat has not escaped the attention of the U.S. administration, as you would expect, in an election year. In fact, in a speech given quite recently by U.S. Labour Secretary Robert Reich, he said:

"If too many of our people feel excluded from the upside gains of a growing economy and are disproportionately burdened by its downside risks and costs, they will eventually support policies that sacrifice growth in favour of economic security--policies like trade protection, capital controls and inflexible rules of employment." In our political context, the most frequent call is to put less emphasis on bringing down the deficit in order to create more jobs. This is wrong. Bringing down the deficit is precisely what is required if we are ever going to create long-term jobs. For our government deficit reduction is not an end in itself, but is all about job creation and economic growth. Debt means higher interest rates; higher interest rates cap the ability of the private sector to start ventures, expand existing ones, and exploit opportunity when opportunity knocks. It is in the private sector that jobs and growth will occur, because, as the Prime Minister reiterated yesterday in the House of Commons, government does not create jobs; it creates the climate for the private sector to create jobs.

Since we came into office in 1993, our focus has been on getting government right. We have followed a jobs-and-growth agenda with two clear objectives in mind--getting our fiscal house in order and building an innovative economy that means jobs--good, full-time, long-term jobs for Canadians.

So, there has been and continues to be a plan. And that plan has met with some success. The overall unemployment rate has come down from 11.1 per cent to 9.4 per cent. In fiscal terms, we are on the right track and we are meeting and even exceeding our goals. Meeting the challenge of the fiscal deficit and debt is probably our biggest collective challenge since World War II. It has meant a radical downsizing of the government of Canada. Every department and agency was asked to look for economies in their operations. It has meant reductions in every aspect of the federal government from unemployment insurance to business subsidies to transfers to the provinces.

We said we would bring the deficit down to three per cent of GDP and we are doing that. We will have the deficit down to two per cent of GDP by 1997/98. That will put it in the range of $17 billion, down from the $42 billion it was at when we took over. That is a reduction of nearly 60 per cent in just four years. And if the deficit is calculated the way the U.S. and other countries calculate theirs, based on new borrowing requirements in world money markets, the figure drops to $7 billion, or less than one per cent of GDP.

That is the best economic news this country has had for a very, very long time! Now I know we have not yet reached the Promised Land. Of course there's more to be done. As Jeffery Simpson put it in this morning's Globe and Mail, "The deficit monster remains a sturdy spine..." But this government has shown the determination to meet and exceed its targets for deficit reduction, and in so doing has begun the process of restoring the confidence that Canada had lost over 20 years in the financial markets of the world. This is, in turn, key to lower interest rates--a prerequisite, with low inflation--for sustained economic growth. The result has been improved growth, and finally in the corporate sector, an improved profit picture, a fact which should be applauded as another prerequisite to economic growth and job creation.

But frequently lately, the question put to me by the media is: "What are you going to do about the fact that corporations are making record profits and laying people off in droves?" This has led to a debate over whether corporations owe a duty to anyone other than shareholders.

When I respond, the first point I have to make is that the media impression that corporate profits are at record levels is simply incorrect. Even if we include the profits of our major banks, corporate profits as a percentage of GDP are only slightly more than half what they were 20 years ago. In 1974, they were 13.4 per cent. In 1995, they were 8.5 per cent, still lower than in 1989 when they were at 10.7 per cent. While in today's economy some profitable corporations are still reducing employment levels, one thing is clear--it is unlikely that unprofitable corporations are going to help reduce the level of unemployment. We want to see those profit levels come back up. We need to make a better effort to have everybody understand the connection between growth and jobs and the requirement that our corporate sector be profitable.

I think people accept the need for profits. And they may even understand that it will take more than one year of profitability for companies to be in a position to invest in the expansion that will put Canadians back to work. At the same time we surely need to reply to people who are asking: "Is there not more to it than just paying dividends to shareholders?" Canadians want to know that business is part of the society and community in which it functions. They want to know that business is part of the team and that business is going to reinvest a good portion of its earnings into expansion, growth and the creation of jobs.

The government's challenge to business leaders is to work with us--to apply the Team Canada model to our approach to the domestic economy. The Team Canada approach to international trade promotion is an unqualified success, not just in the intangible benefit of seeing politicians of every political colour working together with business leaders to sign contracts that will mean jobs for Canadians, but to enable us to reduce our current account deficit from $28.8 billion in 1993 to $5.1 billion in 1995. This stunning export success however is less present to Canadians than is the continuing sluggish domestic growth--less than one per cent in the fourth quarter of 1995.

Governments and the business community must work together to build the domestic economy to make sure that the economic growth we are enjoying in turn creates the jobs Canadians need over the longer term. The jobless recovery must not become the jobless expansion. After all, unless the economy produces jobs, we all lose.

The great industrialist, Henry Ford, had a simple prescription. When the depression loomed and everybody else was slashing wages and firing workers, he maintained wages and protected his employees. His fellow industrialists thought he was crazy, but his response was only that if he did not do what he was doing, "Who will buy my cars?" This is not about short-term charity; it is about long-term self-interest.

The public understands that jobs don't appear overnight, but they need to see some progress. In some circles there is a sense that cutting employees and expenditures is all business has to do and further, that business is already doing all that it can. Just as government has to be about more than just deficit cutting, business has to be about more than just downsizing and cost reduction.

Clearly there is a need for a broader vision for both government and business. I welcome the efforts of the "First Jobs" private sector group who recently shared with myself and some of my cabinet colleagues, a potential plan to create first-time jobs for young people. There are people in the business community who understand that it is in all our best interests to worry about the future for our young people, who though equipped with an impressive, not to mention expensive education, are increasingly finding it nearly impossible to get their foot in the door of their first real employer.

Our objectives as set out in the Speech from the Throne transcend the goal of deficit reduction. We believe government must remove impediments to growth, certainly, but it can and must also be a positive force--in science and technology development, in trade expansion, in helping youth... That means working to remove inter-provincial trade barriers, reducing the regulatory burden, providing clear "rules of the road" for industry on things like the information highway, and in the development of new technologies.

That means helping business make better use of the new technologies as the Throne Speech indicated. We will be making specific proposals to support technology development in aerospace, in environmental and enabling technologies and in critical areas such as biotechnology. On March 11, I will be announcing the details of our technology strategy which is designed to ensure that Canada and Canadians ride the wave of technological progress rather than being drowned by it.

As the Speech from the Throne also said, we will expand the work we have been doing in selling Canadian products and expertise around the world. That requires a support system for our exporters in terms of financing and export development; a system we will continue to improve upon with an emphasis on developing new products and new exporters and attracting new foreign investment.

We will build on the success of the Prime Minister's "Trade Team Canada" which has already produced over $20 billion in new deals for Canadian business. We will continue to work to expand and improve NAFTA, continue our bilateral discussions with Chile and continue to do our part in the multilateral trade negotiations to create a more open world trading system.

But our focus is also going to be more on helping to encourage the best and brightest. We want to create a climate of opportunity for the young people of this country. They face enormous challenges, an unemployment rate double the national average and a world that seems to present fewer chances of success than a generation ago. We are committed to doubling the number of summer jobs for students this year, and we encourage provincial governments, and municipalities to do the same. We will focus these jobs on giving students experience in knowledge industries to give young people a chance to get the experience they need to become full and productive members of the work force.

For our government, the priority throughout our mandate has been to create the conditions that allow the economy to grow and the private sector to create jobs. But Canadians are seeking a vision for our future; a vision that comprehends the need for economic security; a vision that motivates our young people to pursue opportunities that the world presents and sometimes, to create opportunity for themselves; a vision in which governments play a positive role, where they share some of the risks, not shoulder all the burdens; a vision of all that we are as Canadians and where that can lead us; and a vision that is a motivating set of beliefs that is more than a targetted fall in the debt-to-GDP ratio.

As John Kennedy once said, "The task of government is to set before the people the great unfinished business of the nation." That is a task that Canadians expect their leaders to rise to. That is what the Speech from the Throne was about. It is a challenge for all of us to rise to. It is fundamentally a challenge of our will to succeed as Canadians. Working together we can pass on to our children a future as rich and precious as our parents bequeathed to us.

Thank you.

The appreciation of the meeting was expressed by Douglas Todgham, Vice-President, The Canadian Institute for Advanced Research and a Director, The Empire Club of Canada.