Corporate Power and Public Purpose

MR. STALDER:

Distinguished members and guests, ladies and gentlemen: Thomas Aquinas the Saint was born in the year 1224 and specialized in theology. At that time this was most important, for he guided people in what to believe. He was a professor at Lyon and Toulouse. The church called him Doctor Angelicus and canonized him in 1323.

Our guest of honour today studied political science, international relations, and company and international economic law in Paris. This should enable him to teach the path of righteousness until the year 2000. Since he was not born until 1940 we should not expect any canonization before the year 2039.

Thomas d'Aquino is President of the Business Council on National Issues, an organization composed of some one hundred and fifty chief executive officers of major enterprises in Canada. Formed in 1976, the Business Council is the means chosen by senior business leaders to contribute personally to the development of public policy and to the shaping of national priorities. Member corporations are drawn from the full range of industry, trade, commerce, and finance in Canada. These companies administer in excess of $450 billion in assets which produce annually more than $170 billion in revenues. The member companies employ almost two million Canadians. Mr. d'Aquino, a lawyer, is President of Intercounsel, an Ottawa-based consulting group which offers advice on federal government policy, legislation, and regulation, and on matters related to international business and trade. In addition, he is Professor Adjunct of the Faculty of Law of the University of Ottawa, where he teaches, at the graduate level, a course on the law of international business transactions and the regulation of multinational enterprise.

Mr. d'Aquino is a native of British Columbia and was educated at the University of British Columbia, Queen's, London University and in Paris. He holds B.A., LL.B., and LL.M. degrees, having specialized in political science, economics, and international economic law. Mr. d'Aquino is a member of the Canadian and International Bar Associations and of the Law Society of British Columbia. His professional experience has included: legal counsel to a national Canadian organization in the transportation field; five years in the federal government--one year as Executive Assistant to a federal minister and four years as a Special Assistant to the prime minister. For the past ten years he has acted as both legal counsel and an adviser to a number of major enterprises in Canada and abroad on regulatory problems. He is the author of a number of publications and has lectured and travelled widely.

Please welcome our guest of honour, Thomas d'Aquino.

MR. D'AQUINO:

Mr. Chairman, ladies and gentlemen. What a pleasure to be invited to speak from this well-known and widely respected platform.

I would like to share with you today some thoughts about our economy and about our country at a time when we face crisis and uncertainty.

When I was invited to speak, it was suggested that I might talk about the role and responsibilities of business in our national life and, more specifically, what business leaders of Canada are doing to help us recover from the deep wounds of recession.

My task became more challenging in the face of the recent report of the Social Affairs Commission of the Canadian Conference of Catholic Bishops entitled "Ethical Reflections on the Economic Crisis." The Commission addressed the most tragic consequences of recession--the growing legions of disillusioned Canadians out of work and unable to find employment.

The report of the bishops is written in appropriately compassionate language and its theme has immediately captured nationwide attention. They speak of witnessing first-hand the results of a troubled economy: personal tragedies, emotional strain, loss of human dignity, family breakup, and even suicide. In speaking out, and they certainly have every right to do so, they remind those of us who are fortunate to have jobs and financial security of the urgency of helping those less fortunate. They name the unemployed, the welfare poor, the working poor--pensioners, native peoples, women, young people--and small farmers, fishermen, some factory workers, and some small business people.

I know I speak for many business leaders in Canada in saying that the plight of the hardest hit of the recession's victims is very much on our minds. In the past year, I have spoken with many chief executives who have shared with me their anguish in having to close a plant, or shut down a production line. And that anguish had little to do with loss of profits. It has a great deal to do, however, with the impact they knew their decisions would have on families, local businesses, and sometimes entire towns.

We recognize therefore, as the bishops do, the tragic human consequences of the recession. We also agree with the need to address job creation as the number-one priority. But it is at this point that we part company, for we differ fundamentally with the bishops on how Canadians can achieve that end. Let me emphasize this point--we agree about ends; we do not agree about means.

First, the bishops argue that we should recognize unemployment rather than inflation as our top priority. We believe that the fight against unemployment and inflation are inseparable, that inflation is the greatest underlying threat to jobs and to income security. We believe that inflation has contributed significantly to the current economic crisis of Canada and the world. I find the connection between unemployment and inflation an easy one to trace, and really do not understand why the bishops fail to acknowledge it. For jobs to be created, economic production must increase; for production to increase and growth to resume, interest rates must come down--then people will spend and businesses will invest; for interest rates to come down, inflation must fall. To wage war against unemployment with little regard for inflation is to strike at one link in an interconnected chain, to treat an effect rather than the cause. Victory in such a situation is impossible. I would suggest the bishops' argument of "employment first, inflation somewhere else on the list of priorities" is flawed in another way. Inflation, not unemployment, is certainly the number-one enemy of those on fixed incomes outside the work force--especially the aged. To downplay the fight against inflation is to turn attention away from people who most need it.

Having demoted the fight against inflation in their list of priorities, the bishops then argue that a more equitable and balanced program should be developed for stemming the rate of inflation. They recommend that the burden of wage restraint be shifted to upper-income earners, that controls should apply to prices, and that new taxes should be imposed on investment income such as dividends and interest. Again we wish to differ. The Conference Board of Canada in a recent survey of three hundred and twenty organizations, mostly with large work forces, found that executives, management, and professional people are leading all other working Canadians in accepting pay restraint, and that often means pay freezes or even pay cuts. Unionized, working Canadians in the private sector have been least affected by the federal government's six-and-five program with many settlements already in place, or still coming in, above these guidelines. Insofar as prices are concerned, one has only to observe what is happening to price levels to recognize what a powerful discipline the market is exerting. The consumer price index is moderating, and many companies are struggling to survive in the face of falling prices for their products. The recommendation by the bishops that new taxes be applied to investment is most disconcerting and, in my view, seriously prejudicial to the goal of job creation. Without investment, companies--large and small--wither and vanish. We are seeing this all around us. With them go jobs. If rewards for investment in Canada are not attractive, investors will go elsewhere. Permanent jobs, and with them job security, can best be guaranteed by wise and active investment. The bishops, governments, all of us must get behind this investment drive if we expect to return to positive economic growth.

Third, the bishops argue for an industrial strategy aimed at developing permanent and meaningful jobs in local communities, increasing production, and creating new labour-intensive industries. A worthy goal--but no longer realistic unless those jobs, that production, and those industries produce goods and services that are competitive in the Canadian and international marketplace. Canada is not a remote island in a great economic sea. We are an integral part of a continent and a planet, more closely bound together by politics and economics than most of us realize. And, I would argue that the interdependence I speak of is a powerful force for progress and for peace, and should be encouraged. I would even go further and say that the developed countries of the world have a moral obligation to fight protectionism because at the root of protectionism lies a philosophy of beggar-thy-neighbour based on fear and some of the more perverse aspects of self-interest. To protect indigenous industries from healthy competition, would we not be compelled to raise barriers against imports of products and

services developed by workers in other lands, especially those in the Third World? Would we not be tempted to add to the already lamentably high numbers of non-tariff barriers that exist between regions and provinces in our own country? And what about Canadian consumers? Should we compel them to purchase products and services at costs that in most instances would be higher in a protected market? Will not some of those consumers be those disadvantaged among us whom the bishops would most wish to help?

Fourth, the bishops argue that greater emphasis should be given to the goal of social responsibility in the current recession. They say that every effort must be made to curtail cutbacks in social services and maintain adequate health care and social security benefits. They want guaranteed special assistance for the unemployed, welfare recipients, the working poor, and one-industry towns suffering from plant shut-downs. I am sympathetic to these appeals. Indeed, the evidence suggests they are being heard. The bishops should have noted that public spending in support of the victims of the recession has dramatically increased. The unemployment insurance fund will pay out this year the staggering amount of some $8.4 billion, an increase in one year of 75 per cent. Welfare payments are expected to exceed $6 billion. To be expected, the impact on the deficit has been enormous. Most of the business leaders I know do not begrudge this source of increase in the deficit. To be fair, the bishops might also have noted measures taken to help people who have exhausted unemployment insurance benefits; interest rate assistance programs for farmers, small business people and home owners; various direct job-creation programs; and housing related initiatives. I do not see evidence of abandonment of those suffering from the recession.

Fifth, the bishops argue that labour unions should be asked to play a more decisive and responsible role in developing strategies for economic recovery and employment. Hear, hear! But surely this means that organized labour must not only work more closely with the unemployed and unorganized workers as the bishops suggest. Shouldn't the unions also be working much more closely and co-operatively with employers and with governments? Isn't it time that nineteenth century European concepts of class conspiracy and class warfare couched in the rhetoric of "we and they," and so obviously inappropriate to Canada, be banished from our lexicon once and for all? And wouldn't the bishops be more comfortable with a broader definition of the word "worker?" To me all those who in one way or another apply their energies towards creation, production, and service are workers. To regard some as workers and others as something else--presumably the oppressors of the workers--is to foster division and conflict, and to violate what I understand by the principle of dignity of human labour. Following an outline of their five-point strategy, which I have attempted to comment on ever so briefly, the bishops then address what they call the crisis facing capitalism, and the impact of technology and change on the industrial order. What is disturbing about their analysis is the imputation that democratic capitalism is somehow the cause of the current recession, and that as the dominant organizing principle of economic life it is causing to be unleashed upon us a new and terrifying industrial order. With respect, I believe the bishops are wrong about this. The cause of the current recession cannot be attributed to a single source in Canada or abroad. In many respects we are all to blame: governments, employers, employees, consumers. Our expectations and demands have been too high in relation to our effort. We have not worked together as closely as we should. We have been fearful of adjusting to change. And change will come, ladies and gentlemen. As Heraclitus stated five centuries before Christ, "There is nothing permanent except change." I am convinced that the only way to deal with change is head-on and with a positive spirit. I will outline some of the Business Council's ideas on this in a few moments.

But first, let's talk frankly about democratic capitalism. It is not only an economic system as the bishops would seem to imply, but a political and cultural system as well. Democratic capitalism involves a commitment to cultural ideals which include an open society, respect for the rights and dignity of individuals, and the vision of justice and equity that has been part of Western civilization since earliest times.

And has the system served us well? History and fact tell the story. Democratic capitalism has conferred enormous wealth upon the world, a wealth never before envisaged except in a few places, for the very few. It has also proven to be the most efficient system ever devised by human beings. Whatever its faults, no other system even comes close to it in inventiveness, productiveness, and in the achievement of widespread distribution. In Canada, a democratic capitalist spirit transformed a great wilderness into one of the richest and most modern countries in the world. It has provided opportunity and benefits to individuals beyond a level ever imagined by our forefathers. In their statement, the bishops quote statistics about income distribution that, I submit, are without meaning. A complete breakdown of the latest Statistics Canada information indicates clearly that Canadians enjoy one of the most equitable distributions of wealth of any country in the world. [Statistics Canada 1980: 12.2 per cent of families and unattached individuals have incomes of more than $40,000; 14.7 per cent have incomes of $30,000 to $39,000; 10.9 per cent have incomes of $25,000 to $30,000; 11.9 per cent have incomes of $20,000 to $25,000; 10.1 per cent incomes of $16,000 to $20,000; 12.2 per cent incomes of $10,000 to $16,000; 15.6 per cent incomes of $5,000 to $10,000; 9.9 per cent incomes of less than $5,000.]

Capitalism certainly has its warts. Its deficiencies are well known to us. But to suggest that the current recession proves that the system is deeply flawed is like saying that heart disease in humans is the result of a badly designed circulatory system.

With what system would the bishops replace ours? One which guarantees work to individuals through centralized planning? We know the performance of such systems and they are poor indeed--poor in terms of productivity, and in many cases even in the provision of elementary staples. And they often leave a good deal less room for individual choice and for personal freedoms.

Even if the bishops are not calling for the virtual dismantling of our system, they are at least inviting government to play an even bigger role in our lives at a time when democratic institutions are already suffering from the weight of massive and growing bureaucracies and the erosion of fundamental principles of accountability. I do not think we appreciate fully enough the link between capitalism and democracy. There is between them an underlying system of mutual reinforcement, an internal harmony. A distinguished American professor of religion, Michael Novak, puts it this way: "Traditions of private property and individual rights grew up in the capitalist orbit. An economic order built upon respect for the decisions of the individual in the marketplace; upon rights to property which the state may not abridge; and upon limiting the activities of the central state, are at the very least harmonious with the habits of mind required for a functioning democratic political order."

And what about profits? The bishops more than once in their analysis identify profits in less than generous terms. Yet this recession makes it dramatically clear that as companies' profits plunge, layoffs intensify, bankruptcies multiply, and tax revenues decline. Profits are not stuffed in the pockets of greedy capitalist oppressors to spend on the luxury goods which the bishops mention. Profits are, for the most part, put to work to keep the engines of industry running and thereby to employ and to pay people, and to pay taxes. On the level of the individual, profits are the rewards to that relatively small number among us who are prepared to assume risk in order to create, to build, to multiply. Life in the past couple of years has not been easy for the risk-takers. The soaring number of bankruptcies testifies to that.

I have disputed many of the views of the bishops. However, I would not want my difference with them to overshadow the fact that we are agreed about the need to address on a priority basis the problem of unemployment. Nor would I want to leave the impression that I have anything but admiration for the courageous step they have taken in advancing their views. We need a catalyst, and here we have one. I say to them, let's put aside the ideological rhetoric that needlessly pits Canadians against one another. Only then, I believe, will we be able to work together towards our shared goals for Canada. What proposals has the Business Council? We have put our views forward in many forums. They are based on what we believe is a realistic appraisal of the economic world we live in, a world that is tied closely together by commerce and trade, a world that is fiercely competitive. Although it is a world that is rapidly changing, I do not foresee its transformation into a simpler, more idyllic place--a modern-day version of St. Augustine's City of God. Man individually and man in national groups has been blessed--or cursed--(as you like) with an instinct for self-preservation. This instinct leaves some room for altruism, but not enough, I believe, to base a view of society upon. That having been said, I find it interesting that some commentators are of the opinion that the recession itself is a powerful catalyst for change, and much of it good. They argue that it will produce a stronger, more resilient postrecession society in which we will work harder, demand less of others and more of ourselves, and link our personal ambitions more closely to the needs of the country as a whole. If these commentators are right, then the bishops and all of us should take heart, because out of calamity might emerge a reaffirmation of some old-fashioned values--those of self-discipline, a willingness to share, and respect for one's fellow man. These values dominate the ancient scriptures--in my view, they also have a place in a modern technological society.

What then of our program? In early 1982 the members of the Business Council on National Issues developed a ten-point strategy for recovery. Much of that program in our view remains relevant today. It calls for concrete steps to fight unemployment and inflation; to achieve voluntary restraint; to tilt the tax system towards investment; to create a climate of confidence in support of economic growth; to resolve outstanding federal-provincial disputes; to reduce barriers to trade within Canada; to ease the burden of regulation; to reassess the principle of universality in certain social programs; and to reform some of the institutions of government. Since then, Business Council members have gone further, recognizing that if the recovery when it comes is to be sustained, Canadians must engage in a program of reconstruction. And by reconstruction we mean fundamental change in some of the attitudes, some of the structures, and some of the laws that shape our lives. Task forces made up of chief executives are now at work in three priority areas dealing with problems of the economy, social policy, and governance. We have engaged some of the best minds in the country to help us. It is too soon to offer you any conclusions, but I am certain you would identify with our concerns. We are seeking to develop models that would best guarantee sustained and inflationresistant post-recession growth. Ways of improving productivity performance are of prime concern as are fresh departures in the critical relationship between labour, business, and government. We are also reassessing our industrial and trade strategies so that we can better seize opportunities in a world being transformed by stunning change.

On the social policy front, we are continuing our efforts to help develop an affordable, effective, and equitable pension system and other social programs.

In the critical area of governance, we will continue to advance our ideas for the reform of Parliament, the Senate, and other institutions of government.

In the meantime, we face the immediate task of igniting the engines of economic growth. We may at long last have some help: interest rates have fallen dramatically; inflation is declining; wage settlements have begun to fall in line with the lower underlying inflation rate; inventories have been liquidated; and monetary policies have been eased and are expected to continue to ease.

Given the possibility of an early recovery, we would suggest that the following proposals be at the heart of economic-led initiatives in the coming weeks.

First, that the federal government consecrate its efforts in the forthcoming Speech from the Throne and Budget almost entirely to economic recovery. This would mean putting aside for the time being a number of doubtless worthy initiatives at present being considered, such as Combines Act amendments, affirmative action programs and pension policy changes. The crusade for job creation will require unprecedented singlemindedness.

Second, the federal government should face the issue of fiscal stimulus with great caution. With prospects for recovery improving, excessive stimulus at this time might neutralize the gains achieved at such a painful cost in past months. The prescription should be mild stimulus at best with contingency plans in readiness should the anticipated recovery be no more than a false alarm. Moreover, the authorities should ensure that the impact of the stimulative measures be immediate, and that the measures be adjustable and reversible. We will be more specific in our recommendations when we meet the Minister of Finance on February second.

Third, we urge that together with governments we continue efforts begun successfully in 1982 to help reverse our stilldeteriorating competitive position in relation to that of our major trading partners. Six-and-five has given us a precise target. Every step along the way to that target saves jobs.

Fourth, we ask our friends in the labour movement to join with us and with government to agree on a workable basis of consultation in preparation for the post-recession world. We cannot emphasize enough the importance and urgency of this priority.

Fifth, we expect closer co-operation between the two levels of government in developing and co-ordinating policies to fight the recession and to prepare for recovery.

Mr. Chairman, ladies and gentlemen, the coming months are going to be critical ones for the world as we balance precariously on the thin ledge between financial stability and chaos, between economic co-operation and vicious trade war. Canadians will not decide the outcome. Let's pray that common sense and reason will prevail. In the meantime, there is a great deal we can and must do in our own land. The bishops have sounded a bell for change. Let's embrace the spirit of the bishops and work together to build a stronger and more prosperous community.

The appreciation of the audience was expressed by Catherine Charlton, Second Vice-President of The Empire Club of Canada.