The Canadian Dream—We Must Wake Up to Enjoy It

BGEN. ANDRUNYK:

Distinguished guests, members and friends of The Empire Club of Canada: On November 1st, 1917 a remarkable and world-renowned Canadian spoke to an Empire Club audience. Here is part of what he had to say:

When I come to look back upon the history of the telephone, it seems almost like a dream that I was connected with it at all, so long is it since I have had anything to do with telephones--and I do not have a telephone in my own house within reach of my ears.

The last remark, it is reported, brought loud applause, for the speaker was none other than the inventor of the telephone, Dr. Alexander Graham Bell.

The benefits of the birth of one of the greatest inventions in history have put the modern world under lasting obligation to Alexander Graham Bell's inventive genius. Today our society has come to regard phoning as an act almost as natural as breathing and the telephone is perhaps the most pervasive business tool around. As computer technology and information processing ability combine with telecommunications innovations the life style of future generations will undoubtedly undergo tremendous change.

One of the world's leaders in these new developments is the Bell group of companies which includes Bell Canada, Bell Northern Research--its research facility--and Northern Telecom--its manufacturing subsidiary. This remarkably successful group of companies employs some 90,000 people in twenty countries around the world with 74,500 of them in Canada. Most important of all, this corporate giant is a genuine home-brew. Ninety-eight per cent of its 252,000 shareholders are Canadian and no Canadian company has as many registered individual shareholders.

Today The Empire Club of Canada is honoured to welcome as its guest speaker Mr. A. Jean de Grandpre, Bell Canada's Chairman and Chief Executive Officer, and Chairman of the Board of Northern Telecom. A native of Montreal, Mr. de Grandpre graduated from McGill University as gold medallist with the degree of Bachelor of Civil Law. After serving as counsel to Bell Canada, representing the company before the regulatory authorities in Ottawa, he joined the company as its general counsel in 1966. Since that time he has held various senior executive positions, becoming the Chairman in 1976.

Running a telecommunications empire with assets of more than ten billion dollars and a total annual -revenue of over six billion dollars provide Mr. de Grandpre with excellent and indisputable credentials with which to review the economic potential and constraints of the Canadian marketplace and the incentives needed to enable Canada to achieve its full potential.

Mr. de Grandpre holds directorships in a number of Canadian and international corporations, and his contribution to the business world and society as a whole has been recognized by several universities which have honoured him with doctorates. He is also active in a number of professional, educational and community organizations.

Ladies and gentlemen, please join me in extending a warm welcome to the Chairman of Bell Canada, Mr. A. Jean de Grandpre, whose topic of today's address is "The Canadian Dream--We must Wake Up to Enjoy It."

MR. DE GRANDPRE:

Mr. Chairman, ladies and gentlemen: I consider it a very great honour to have been invited to address your luncheon meeting.

If your chairman wanted to start the new season with out-of-town speakers, I am afraid that he is in for a disappointment. With two married daughters working and living in your very fine city, with an apartment here where I spend as much time as I do in Montreal, and with 28,000 employees in the Province of Ontario, in no way do I consider myself to be a stranger or visitor in your parts. In fact, the warmth and cordiality of your hospitality make me feel very much at home.

One is always tempted, when invited to make a speech at the very beginning of a new year, to develop some kind of a theme around the idea of "New Year's Resolutions." Recognizing, however, the truth of the old adage that the road to hell is paved with good intentions, and with two weeks of the year having slipped by us already, allowing many of those resolutions to have succumbed to that unfortunate category already, I thought it might be wiser to resist that temptation.

In recognition, however, of the fact that many of you have no doubt resolved to take shorter lunch hours and bend yourselves with increased vigour over the wheels of industry, I will endeavour to be reason-

ably brief in my observations about the state of our economy, and in tabling some of my thoughts on the priorities we should pursue in the year ahead.

To create a framework in which to develop these ideas, I thought it might be useful, since we are all business people, to take a very broad and perhaps superficial look at the kind of balance sheet with which we as a nation are entering 1982, so that we can apply some appropriate degree of perspective, both to the opportunities with which we are faced, and the constraints which we find imposed upon us. In so doing, I am reminded of an anecdote I read recently about a mountain climber who was enjoying a spectacular view from the edge of the cliff when he lost his footing and began tumbling towards a certain death. Clawing desperately at the mountainside, his hands found a root, and he managed to break his fall. He barely hung on, terrified, from his precarious position.

"Can somebody up there help me?" he cried out. Silence.

After a short time, his grip weakened and the root began to give way. Suddenly, he heard a powerful voice from above.

"Do you believe?" asked the voice. "Yes! Yes!" the climber responded.

"If you really believe," the voice continued, "then let go."

The desperate man pondered his fate for a little while. Finally, he asked in a timid voice.

"Is anybody else up there?"

Well, I am not quite sure that our pro forma balance sheet should engender quite such desperate thoughts in our minds, but I think that few people would question the observation that we are going through a somewhat difficult period in our economic history, and I suspect that many of us have been tempted from time to time to cast our thoughts upwards in the hope that relief of some kind may be forthcoming.

Difficult times call for stout hearts and resolute leadership, and I suspect that the coming year will demand both from all sectors of our economy.

It always does great things for the morale to consider the good news first, so let's take a look at the assets side of our national balance sheet and consider what we, as a country, have going for us. I must confess that I find it a little difficult to know where to start when counting the blessings we enjoy in this great land of ours. We have been endowed with so many riches, and with such great advantages compared with so many other parts of this world, to such an extent that the splendour of them tends to blind us sometimes, I fear.

Amongst these blessings our wealth of natural resources is perhaps the most obvious, though we should be equally thankful for the relative freedom from oppression with which our democratic institutions endow us, and for the rich cultural heritage we enjoy as a result of the heterogeneous nature of the population of Canada. It is good for us to remember from time to time that a substantial proportion of the inhabitants of this land freely chose to make it their home in the not incorrect belief that our society offered them and their children greater opportunities for development and expression than were available from whence they came.

They came, of course, in search of the "Canadian Dream" of freedom, prosperity and opportunity for their families.

Whatever their shortcomings may be, we must also count as valuable assets the parliamentary system of government, a respected and independent judicial system, and a well developed and highly competent educational establishment to provide us with our human asset needs of the future.

I would also classify as a singular advantage our proximity to one of the world's greatest nations, and certainly the finest consumer-trading partner with whom to do business.

And over the years there have developed in this country some incredibly successful industries and businesses in which all Canadians can take great pride. We have without question one of the finest banking systems in the world; our agricultural, forest product and fisheries industries are of a world class; our transportation expertise is sought by industrialized and less developed countries; our mining and resource extractive industries bring considerable wealth and economic activity to the country; we can meet a substantial proportion of our own energy needs, which sets us apart from many other countries from a security standpoint; and it would be uncharacteristically modest of me to omit mention of our telecommunications manufacturing and operating industries, whose products and services are considered second to none in the world.

Yes, by almost any measure you may wish to choose, we have a favoured position with regard to the basic assets with which to work.

Although we are young in the development of our national history, we have in that short time managed to use this array of assets to create one of the highest standards of living and among the highest per capita income levels of any country in the world.

So much for the good news. Now, without getting ourselves into an exaggerated state of depression, let's take a realistic look at a few of our liabilities, which impose some of the constraints under which we must necessarily operate.

Let's take the most obvious of these for a start, and not dwell on them at any great length.

The geography, climate and demographics of this land, magnificent though they may be in many respects, certainly present national builders with a unique set of challenges.

We have ever been sparsely populated, giving us rather meagre domestic markets, and widely separated ones at that. The domestic market base for our industries wanting to perform in export markets is therefore somewhat limited, and this is so for virtually every category of goods and services we produce. All of these factors tend, however, to be rather naturally imposed liabilities and constraints. Presumably we and our forebears took these matters into consideration when we settled here to make our lives and fortunes, and did not rank them as insurmountable barriers, in view of the very considerable plethora of advantages we found on the assets side of our ledger. And frankly, I doubt whether we can do very much to improve the geography, climate or demographics of the land in the short term anyway.

Some of our other liabilities, and I would suggest to you the more important ones, are more of our own making. We certainly haven't time here today to go in any depth into all of the shortcomings of the state of our economy--I understand my invitation was restricted to luncheon and this ballroom is required for other purposes at dinner. Other, probably more qualified speakers in your program, will doubtless be analyzing for you the effects of our seventy-odd billion dollar accumulated net debt, and the annual cost of carrying it at today's interest rates, but it would be a bit of an omission to make no reference to it at all as a national liability!

Similarly, I think we must take sober note of our unemployment statistics and the coincidental acute shortage of skilled manpower in many categories of jobs, and conclude that we aren't doing very well in matching our training to the national needs. This is a particular concern in the high technology field and we, and I suspect other companies, are actively engaged with university and college groups across the country in an effort to encourage the establishment of curriculums and enrolments to meet the needs of industry.

But there are other matters of a global nature which are very much in our own hands to correct and to modify to our own advantage, if we can muster the will and the wisdom to tackle them. I want to indulge in a few comments on just three aspects of what I consider to be major contributors to our set of liabilities.

Observers of our political scene from overseas (let alone those of us who are closer at hand) must sometimes be mystified by the way we go about the process of governing ourselves in this country. In fact, we must be the most overgoverned country in the world--eleven senior governments for a population of only twenty-four million! This may be an inevitable consequence of both history and geography, but whether we are well served in the twentieth century by such a complex array of administrations and legislations must be open to considerable question.

It is frankly disturbing to see the amount of time, energy and money which we expend in long drawn-out battles and negotiations over who is entitled to what, who will pay for which public services, who has authority over which resources, where regulatory responsibility should lie and how tax revenues should be shared. And while we have for several years been so frantically engaged and totally absorbed by these frustrations, the economy has been going straight to hell in a hand basket--and nobody seems to be very concerned about it, if indeed the phenomenon is noticed at all!

Constitutional reorganization is undoubtedly a required activity at this stage in our national development, and it is probably a necessary precursor to the subsequent rearrangement of jurisdictional powers and responsibilities, but I fear that our political leaders have spent an inordinate amount of time bringing these matters to their present stage, when we should have been putting at least an equal amount of our intellectual resources into planning and introducing measures which would be reflected in increased economic well-being for the years ahead.

A simplistic observation, perhaps, but one has to be grateful for the laws of momentum and inertia that seem to guarantee a continuum of some level of economic activity despite our gross neglect of the environment for its health and survival.

Another of our current liabilities must be our propensity for engaging in destructive attacks on anything which appears to be successful. The business community, unfortunately, makes an attractive target for attacks of this kind, and I have to think of the total collective expense that has been involved in massive assaults on some of our most successful institutions and enterprises. There simply has to be a better way to run our affairs than that which requires multi-year hearings by government commissions investigating the value, structure and procedures of industries such as telecommunications, petroleum, steel and banking. Though I suspect it might sound a bit heretic for a member of the legal profession to be reported in this vein, if just half of that money, talent and energy was diverted into productive investment the rewards could be quite revealing.

The third substantial liability to which I want to refer briefly is that of inflation. Not being an economist, I will approach it from what I believe to be a root cause rather than the effect, namely "inflated expectations." Perhaps it is a result of our wealth of assets; it may be the time in history, where increasing numbers of our population have no memories of the great depression or first-hand experience of the ravages of war. It is certainly a combination of factors, but for whatever reasons, our current society is caught in the grip of what I believe to be quite unrealistic expectations. During the period of economic boom of a decade or so ago, these already mushrooming ideas about the ability of our system to provide generously for all the needs of society and individuals, were further fueled by the relative plenty with which we were surrounded.

It was the euphoric period when it was popular to believe that all the needs, fancies or desires of the public could be met on what people were led to believe was a "no cost" basis. You remember the political slogans of the day: "Free Education For All," "Free Hospital Care," "Free Indexed Pensions," "Free Medical Services." Everything was free. We were like a bunch of drunken sailors on a buying spree. We were worse. The sailors were burning hard-earned money: we were buying on credit. Now the bills are coming in, and the pill is very bitter. The population (be they individuals or provincial governments) deluded for so long by the dream-merchants, now has difficulty accepting reductions in services which were perceived to be free.

The harsh realities of the new economic order brought about by oil and other energy pricing, the subsequent adjustments, inflation and rising interest rates changed everything, as we all know only too well. But the expectations of society didn't change. They remained at their already exaggerated level, and our collective refusal to acknowledge the inevitable requirement to draw back from the edge of that cliff is in large measure responsible for the continuing intolerable levels of inflation, which, if unchecked, will drag us into considerable grief and anguish. We simply mustn't allow it to happen.

What should we do about it? A review of some of the more compelling aspects of our national balance sheet should logically suggest at least some directions for our collective action.

The problems are complex and are the consequences of a number of factors, some of which were created on a world scale, others bear a made-in-Canada label with or without foreign contribution.

I regret to say--and it would be folly to think otherwise--that there are no ready-made solutions. We will not cure in one or two years problems which have grown over the last fifteen or twenty years. In this context I agree wholeheartedly with the Prime Minister's New Year's message, when he spoke of our forefathers as ". . . people just like you and me. They walked the same ground as we do, were warmed by the same sun, experienced the same climate and admired as we do the compelling beauty of this land. Yet they triumphed over adversity, not easily, but constantly. Shall we do less, we who have much more?"

Needless to say, therefore, that my next remarks should not be taken as solutions to the problems, but rather as resolutions which should help Canada in 1982.

First, there should be a true and meaningful resolve to concentrate our efforts on bread and butter issues. The bankrupts, the unemployed, the retired and the poor are not particularly interested in additional discussions on the Bill of Rights or the Amending Formula. The need for stimulation of the economy at the productive end of the cycle has seldom been more evident than it is today. I believe that the American and other world markets (including our own) will start to pull out of the current slump towards the end of 1982, and there are signs that the Reagan policies may create a rapid upsurge of savings and investment activity in the United States at that time. I consider it to be imperative that we get our economic house in the best possible shape by then, so that Canada and Canadians will be able to benefit to the maximum from the opportunities which will follow in the wake of these and the related world trade events.

Second, we should re-establish the basic principle that retroactive legislation should not be resorted to unless there are extraordinary circumstances. Fiscal and business decisions cannot be taken in uncertain environments. Legal or lawful decisions cannot be made illegal or unlawful by legislative action without damaging the public's confidence in the stability of the investment climate. Incentives, voluntarily created by one Minister of Finance to develop or support a particular sector of industry, should not be called loopholes by his successors. They can be removed, if no longer required, but perfectly legitimate past decisions should not be rendered ineffective under the cloak of equity, or any other guise.

Third, in a country like ours, with wide variations in the cost of housing, and experiencing difficulty in matching jobs and labour talent and resources, it appears basically sound that, for the good of the whole, people should be encouraged more to find a job. Equally important, in a complex society, the development of managerial talent very often requires that promising managers be transferred in order to expose them to new challenges or different environments. Providing housing assistance to these ends should not be called a loophole, but should be a cornerstone of a well thought-through industrial strategy. After all, didn't we spend eighteen months discussing a Bill of Rights that guarantees specifically the right of mobility of the Canadian labour force?

Fourth, we should have a positive attitude towards our Canadianization policies.

I am convinced that there is strong support at home and abroad for our desire to hold a greater share of our natural resources and of our productive facilities. But to achieve these goals, one does not need to be anti-American or anti-foreign investment. One has to be pro-Canadian investors.

Just to give you an example that is very close to home. In 1930, foreign investors held thirty-six per cent of Bell shares. By 1950, that percentage was down to twelve per cent. Today, ninety-eight per cent of our shareholders--common and preferred--are resident in Canada. We have simply not made rights available to U.S. residents whenever we had rights issues. And we maintained a high degree of credibility and goodwill on all international markets, notwithstanding the very aggressive but positive thrust to Canadianize Bell. There are obviously other methods. For instance, how about giving an annual ten or fifteen per cent capital gains tax credit on all Canadian investments? It would favour Canadianization and include long-term investments in Canadian projects. I must say that the non-deductibility of all or a portion of the interest charges on investments and the removal of the roll-over provision on share exchanges are running counter to the objective of Canadianizing our industries. Without the deductibility of interest charges, Dome Canada could not have been launched successfully and the Hudson's Bay deal could not have taken place without the roll-over provision, as evidenced by the actions taken by the officials of the Department of Finance and Revenue Canada in the days that followed the budget. Then, if it was a good measure for Canada on November 12th, why is it suddenly bad on November 13th?

Fifth, recently, our productivity improvements have left a lot to be desired. In order to make our manufacturing sector more productive, we should give more active tax support to research and development and we should not reduce capital cost allowances.

My colleagues and I have delivered so many speeches and given so many interviews and statements on this subject that it would be improper for me to burden you again about the issue. Let me simply reiterate that if we are not careful, we shall de-industrialize this country in the next decade.

Sixth, we should also address the need for Canadian, companies and their employees to be put in a fully competitive tax position when competing for work overseas. As some of you may know, my own companies are continually engaged nowadays in seeking and executing very major contracts in a large number of countries--contracts and opportunities worth billions of dollars to our balance of payments. But frankly, we are at a substantial disadvantage in the fierce international competition for this work under the present Canadian tax regime. This matter is under active consideration by the government now, and I Only hope it is resolved in an appropriate context and quickly.

Seventh, we should not forget, during the new debate on Canadian competition policy, that Canada by any standard is a small industrial nation. Such large industrial companies as we have are pygmies compared to the large international corporations. Abitibi-Price is one fifth the size of International Paper. Northern Telecom is one sixth as big as Western Electric. Stelco is only ten to twenty per cent of Nippon Steel or U.S. Steel. And the process of rationalization is accelerating around the world.

On November 2nd last, The Globe and Mail reported that two privately-held companies, Kruppstahl and Esteel-Hoesch, were discussing with the German stateowned Salzgitter Ag the merger of the three enterprises to create a steel giant which would be more competitive on world markets.

On December 7, 1981, Telecom Information International said that Kabelmetal had just signed a preliminary agreement that it will transfer its cabling production to the control of Cables de Lyon. This agreement which will come into effect this year will be one of the first operations geared towards industrial integration between Common Market countries. The result will be the creation, according to the news release, of a cable manufacturing group which will take second place in the world market, coming after the Italian Pirelli.

So we should beware, while our competition in world markets is moving in that direction, of a tendency we have displayed in this country to scorn or distrust (and thus discourage) the creation of worldscale business and industrial enterprises.

Finally, we businessmen must address ourselves to the means to encourage the younger generations of Canadians to understand and to participate in the wealth-producing investment activities of the country. The unrealistic expectation syndrome to which I referred earlier is partly based on pure ignorance of the modus operandi of the capitalist system of economics. If the younger generations of Canadians are effectively discouraged from playing a role as investors, or don't do so because they have not been taught how or why they should, the consequences could be very damaging and long-lasting. Our lack of attention to this kind of basic economic education could well lead us further and further down the road of increasing governmental intervention and state ownership of the productive machinery of the nation, with results which I fear we have seen only too vividly in other socialist economies. Far better that we should develop the means which already exist in many companies for easy access to share ownership by employees with their attendant interest in, and rewards flowing from the overall well-being of the enterprises in which they work.

You will, I suspect, have noticed that, in reviewing the few areas on which I have had time to touch today, I have tended to use the collective term "we" in the description of both problems and suggested remedies. We, meaning the whole business community, including industry, government, investors, academia--all of us. When Stan Roberts, of the Canadian Chamber of Commerce, addressed you last fall he emphasized the importance of the interrelationships between all of these sectors, and indeed their interdependence in today's complex world, and I fully endorse his observations in that regard. The problems this country faces are our joint responsibility, and successful solutions to them will come only from our collective best efforts. Anyone who thinks government is a simple task in the current environment should try it, and experience the conflicting pressures and demands on the political front line. And meeting payrolls and the legitimate expectations of shareholders is no picnic either! So, now more than ever, I believe there is a mutual responsibility for the sectors involved to consult and communicate effectively and constructively in the key areas of our mutual concern and expertise. My basic plea would be that the economic issues be given at least as much priority as the political ones in 1982.

These are, as I suggested at the outset, difficult and challenging times for government and industrial leaders alike, but I don't think we should be daunted by them.

I recall the account of Sir Winston Churchill's meeting with his Cabinet and Chiefs of Staff at a very low point in World War II. The blitz was on; cities and great industries lay in ruins; France had fallen; there was bad trouble in the Atlantic and Mediterranean theatres, and even worse in the desert in Africa. As the briefing concluded, the assembled ministers and generals were understandably glum, until Sir Winston stood up and, rubbing his hands together, said, "Frankly, gentlemen, I find it inspiring! "

The Canadian Dream, which enticed many of our people to this land, is as attainable now as it ever was, but I think it's the kind of dream we can only enjoy when we are wide awake, alert to the opportunities and working together at our problems. Since many of the liability aspects of our national balance sheet are largely of our own making, and certainly within our power to put right (over a period of time), I'd like to leave you with the thought that 1982 would be a good year for us all to feel inspired by the nature of the challenges facing us, and get all of our potential assets working together to the maximum long term benefit of all Canadians.

The thanks of the club were expressed to Mr. de Grandpre by Ian D. C. McPhail, a Director of The Empire Club of Canada.