Does the Twentieth Century Belong to Canada?

BRIG. GEN. LEWIS:

Members and friends of The Empire Club of Canada: Nothing perhaps has captured the imagination so much as the tremendous strides and advances which have been made with regard to air and space travel and communications, much of it in our own lifetime.

In the year this club was formed, the first controlled, sustained flight in a powered aeroplane was made. If one dates the beginning of power-driven air flight by the Wright Brothers at Kitty Hawk, we have only been in the business for something like seventy-six years.

In that relatively short time, we have gone from the fabric and wire of those pioneer air machines to sophisticated space craft, exploring the universe almost beyond the limits of our imagination. Similar technological developments have given us communication satellites which put us in touch, live and instantaneously, with every quarter of the globe.

Canadian expertise and leadership has given us a respected position in the aerospace industry, and we are delighted to have as our speaker today one of the leaders in this field, Mr. Larry Denman Clarke, Chairman and Chief Executive Officer of Spar Aerospace Limited.

Following service in the Royal Canadian Navy in World War II, Mr. Clarke graduated in Law and was called to the bar in the Province of Ontario. He served for two years as a special adviser to the Department of Defence Production during the Korean War and in 1953 joined de Havilland as contracts administrator.

From 1960 to 1965, Mr. Clarke was president of DCF Systems, a joint venture of de Havilland, Ferranti Canada, and Canadian Aviation Electronics. In 1967, our speaker founded Spar Aerospace Products Limited, serving as President and Chief Executive Officer until 1974 when he became Chairman and maintained the role of Chief Executive Officer.

Those who follow the fortunes of business will no doubt have read the recent press report that Mr. Clarke's company has won a seventeen million dollar contract to build a satellite communications antenna in the West African country of Ghana. It is said that this project will provide three hundred man-years of employment for the company and the ten Canadian sub-suppliers involved.

Ladies and gentlemen of the Empire Club, it is my pleasant duty at this time to introduce to you the Chairman of Spar Aerospace Limited, Mr. Larry Clarke, who will address us on the subject "Does the Twentieth Century Belong to Canada?"

MR.CLARKE:

When I was approached last fall to speak to you I accepted with trepidation. I have never before been asked to address a business luncheon meeting.

Research into the art of public speaking now became my first priority. I learned that you must first gain the interest of your listeners by telling a light, topical and, if possible, witty short story.

I know I am no good at telling witty stories, so I am left with telling a topical one. I have, as a matter of fact, long wished for an opportunity to tell this particular topical story. Its title, "Does the Twentieth Century Belong to Canada?" poses a question; its subtitle, "The Need for a National Industrial

Strategy," could provide the answer. The telling of it will, I'm afraid, take up the whole of my allotted time.

Although Sir Wilfrid Laurier at the turn of the century had more than once proclaimed his belief that the twentieth century was to be Canada's, an economic study released shortly after World War II disclosed that Canada was the least industrialized of the modern industrial nations. A recent revision of this study shows that in the intervening thirty years a number '. of countries have overtaken us in industrial capacity and that ` today Canada could be rated amongst the most highly industrialized of the less developed countries. These statistics provide a damning indictment of Canadian industrial strategy or, rather, the lack of it since 1945.

To describe Canada's industrial situation in less abstract terms and through foreign eyes, a 1976 report looking at Canada as an industrial nation from a Japanese viewpoint had these comments to make: Canada is seen as a country sliding backwards--not unlike Australia or New Zealand. We are seen as having entered a phase in which the majority of really important economic decisions are dictated by external forces (multinational corporations and international unions) rather than by our own government. The Japanese study notes that the existence of eleven regional governments largely preoccupied with defending and enhancing their parochial influence has contributed greatly to the emasculation of the central government.

The country has no visible national goals, no apparent national strategy, and no known industrial or trade strategy. Public policies are confusing, poorly co-ordinated, often contradictory. The so-called "establishment" thinks more in nineteenth century terms than in those of the impending twenty-first.

The economy is ailing. The weak manufacturing sector appears to be largely unaware of the existence of microelectronics; and so has almost completely missed what promises to become the second industrial revolution.

The labour scene is chaotic. Management--at best--is second class. Productivity is poor.

Inflation is rampant and once again will reach double digit figures.

Such, then, is an assessment of our economy by observers from a more successful economy, to wit: Japan. Although some of these comments are arguable, the fact of our relative economic decline over the past thirty years certainly is not. Obviously we have been doing many things wrong. Therefore, we must think afresh and give serious consideration, for one, to the formulation of an industrial strategy.

The argument that Canada does not need a vibrant manufacturing industry is, I believe, false. It argues that all we need are resources and service industries. Canada, it says, has passed into the so-called post-industrial era.

Even the most ardent supporters of this philosophy must surely appreciate that there is a limit to the extent to which we can take in one another's washing. For a country to provide the ever improving standard of living desired by its citizens, there must be continuing growth in real wealth which can only come from growth in both the resource-based and the manufacturing sectors. The service field, except with respect to its activities in support of industry, does not create real wealth.

Events over the past quarter century have demonstrated that resource-based countries (other than OPEC) are becoming poorer while industrialized nations are becoming wealthier. At the beginning of this century, Canada had a resource-based economy deriving its wealth from agriculture, fishing and from the products of its forests and mines. Such manufacturing industry as there was existed behind high tariff barriers and made little, if any, effort to export its products. While the output of our resource industries has increased greatly in value in the intervening years, the percentage of the labour force employed in the resource-based industries has decreased substantially.

Over the past twenty-five years, it has been the service sector which has been absorbing most of the increase in the labour force. Although there has been a small increase in the manufacturing sector labour force, the proportion of the total labour force within this sector has actually decreased by more than twenty per cent since 1966. We are now experiencing a reduction in the rate of growth in the service sector and even the modest rate of increase of employment within the manufacturing sector is constantly threatened by foreign competition employing lower paid labour.

These trends clearly indicate why Canada is now placed within the group of less developed countries.

We must face the challenge of finding gainful employment for our growing, well-educated labour force. With little prospect for significant increases in demand from the resource sector, we must look to the manufacturing sector and its related service activities to absorb these people. This is a task of monumental proportions--how do we reverse the direction of our economic thrust in the face of ever more severe international competition?

It is unrealistic to meet such a challenge without an industrial strategy.

However, before discussing such a strategy I would like to touch briefly on the subject of inflation. If we cannot conquer inflation, we cannot possibly implement an industrial strategy of any kind.

We have been obsessed with inflation, and rightly so, because it robs people of the will to work. Inflation destroys the confidence of those who have to invest in the future. Little new or modernized plant is being purchased: fewer jobs are created.

It seems to me that the approach we should take with our legislators on the subject of inflation should be that of the preacher who, because many of his parishioners had little, if any, formal education, was asked how he put across his messages.

"Well, sir," he said, "I adopt a very simple approach. First of all I tells 'em what I am going to tell 'em, and then I tells 'em, and then I tells 'em what I told 'em."

With your indulgence, I will now join that ever-expanding chorus of unofficial economic advisers.

I believe that first of all government at all levels must establish a far more realistic relationship between current accounts and capital accounts. It is only through capital expenditures that we can increase our real wealth.

Secondly, the federal government should stop printing money faster than is warranted by the real growth of the economy. Unless confidence in the value of our currency is regained, investment decisions will continue to be based on the assumption that tomorrow's dollar will be worth less than today's. This assumption will ensure the continued deterioration of our capital plant.

Canadians shy away from autocratic strategies, whether economic, industrial, or whatever. Historically, we have been much influenced by economic doctrines popular in the United States where central planning is anathema. We also are sceptical about the efficacy of central planning because we have seen a number of failures in other countries. However, the success of the Japanese and German economies should modify our scepticism.

In Canada we have taken the view that, if there is to be industrial planning, it can be applied only to individual industries or markets because industry-wide planning is thought to be so general as to be impracticable.

I do not believe that this bias against broadly-based industrial planning makes sense.

Some fifty years ago there was a group in the United States who called themselves "America Firsters." I believe that we must become dedicated Canada Firsters, and choose Canadian solutions to Canadian problems. We must have the courage and the imagination to design a Canadian industrial strategy that answers our national needs.

What should be the form of this strategy?

It must be broadly based. It must be based on the realities of both the Canadian environment and the world marketplace. It must draw on past domestic practices and on the experience of other countries only where such experience is clearly relevant.

This strategy must be adopted by all levels of government, by industry and by labour. It must be followed consistently over a period of time sufficient to produce the desired results. In so doing, governments, industry and labour must be prepared to adopt and maintain a mature, disciplined--yet sympathetic--approach to the regional and individual economic hardships that will arise. The ultimate benefits will justify short-term adjustments.

The first step leading to the establishment of an industrial strategy is to take stock of our industrial assets and liabilities, and draw up a balance sheet. A beginning has already been made: twenty-two industrial task forces were set up last year to advise federal and provincial ministers of industry on the status of the country's principal industrial sectors. This process should continue, its results distilled and refined, until there is a consensus among government, industry and labour as to the optimum strategy. There is no doubt in my mind that the chosen strategy must be based on the achievement of productivity levels that are competitive within the international marketplace.

When this point is reached, it will be necessary to step back, take a hard look, and establish priorities. This will require a great deal of give and take, much soul searching, and some very difficult decisions for all concerned. Then, with the industrial priorities established, it will be necessary to allocate resources. It is at this point that we shall face a political "crunch."

Inevitably, a higher percentage of discretionary funds--that is to say our taxes--will have to be invested in the capital account supporting industry. This will, at least for a period, significantly reduce the rate of growth in the funds available for socially oriented programs. I foresee a tough political struggle but, unless we have the courage to change the pattern of national investment, then, as surely as night follows day, Canada will follow the United Kingdom down the road to economic disarray.

Before closing, may I put forward a bare outline of the policies which, I believe, Canada's proposed industrial strategy should follow.

First, we should decide to build on the strengths inherent in our resource-based industries by taking processing into our own hands as far as possible.

Second, we should encourage the growth of manufacturing activities in such advanced technology areas as transportation and communications. These are industries which have substantial domestic and export markets.

Third, we should organize training programs within our educational institutions, industrial and labour organizations, to produce a work force that is able to respond competitively to the demands of today's global industrial marketplace.

Fourth, government procurement at all levels, including crown corporations and regulated industries, should adopt a "Buy Canadian" policy--but only where and when such a policy makes sense in respect of the conflicting yet interrelated interests of both consumers and suppliers.

The recent reduction in the value of our dollar has given our manufacturing sector a temporary advantage. We must use the respite from this period of advantage to put in place our new industrial strategy. If we lose this opportunity, the tide of competition sweeping throughout the world will engulf us. Then, in truth, Canadians could regress to the modern equivalent of the proverbial hewers of wood and drawers of water.

One hundred and twelve years ago, the Fathers of Confederation, as the British North America Act shows, had a clear perception of Canada's economic needs. I believe that the economic realities of today demand that we reassess, restate and, once again, reach a consensus on what our industrial priorities should be.

If our vision today is as clear, and our dedication as steadfast, as was that of the founding fathers in 1867, then and only then can we look forward to the twenty-first century, if not "belonging to Canada," then at least being a century of prosperity.

The appreciation of the audience was expressed by Mr. John D. Herrick, a Director of The Empire Club of Canada.