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Timing is critical to comedy.
So it was perfect that in response to a freedom of info request, the office of Industry Minister Maxime Bernier confirmed last month that the feds would now welcome more foreign investment in Canada.
This follows a year when a raft of new companies, some considered Canada’s economic crown jewels, were up for sale to foreign corporations, hedge and vulture funds: Hudson’s Bay, Dofasco, Stelco, Domtar, Inco, Falconbridge.
Bernier, a founder of the far-right Montreal Economic Institute, may think it’s natural that Canada is about the only country that would ever let foreigners own its entire car industry, control its oil, gas, mining and forestry resources, command its processed and prepared food companies and retail outlets.
It was last February, a few weeks after taking office, that Bernier commissioned a report from as yet unnamed economists on whether regulation of foreign takeovers was really necessary.
The second element of comedy being surprise, Bernier’s economic consultants surprisingly found that the “overall evidence provides compelling economic reasons” for the benefits of foreign direct investment. During the last week in August, Bernier’s staff let it be know that the consultants’ advice would be heeded.
More head-office jobs, innovations and exports follow in the wake of foreign takeovers, said the economists paid by Bernier, so there is no public-interest reason to get uptight about takeovers. Trust the market.
Joining the comedy troupe, the Globe, never to be taken seriously when it spouts conventional 18th-century economics, printed an editorial welcoming the economists’ report and affirming the message that “foreign investors with big pockets and bigger dreams are welcome arrivals.”
It sure is a bit of a laugh to think that Canada needs foreign investment because Canucks don’t have investment money of their own. In fact, Canucks invested $465 billion overseas last year, much more than foreign investors brought in.
To add humour to that, the government gave major tax deductions to those who exported their investment money through registered retirement plans and government co-financed pension plans. Investing savings offshore isn’t exactly the smartest way for soon-to-be-pensioners to ensure that the next generation of workers will be able to pay taxes to cover public expenses for seniors, but exports are supposed to be good for an economy, so why not export money, too?
What about the gag line about foreign investment bringing in innovation? In fact, over 97 per cent of the foreign investments that came before Investment Canada since 1985 were takeovers of already existing companies, with little left over for innovation startups. It would have been better to kiss off Investment Canada and rename it Mergers and Acquisitions Canada.
The idea that Canadian companies can be more innovative when owned by Americans is a less than subtle stab at hilarity. The U.S. balance-of-payments deficit running into the billions each month, mostly due to excessive imports of resources, electronics and manufactured goods, shows what whizzes its multinationals are at exports.
And the top 10 places where the U.S. has a trade surplus wouldn’t exactly turn a company with a lust to export green with envy – the list includes two Caribbean islands, two city states, Belgium, Panama and the United Arab Emirates. Therein could lie Canada’s economic future, too, the humorists tell us, if we hitch our economic wagon to a winner.
The bald statement that countries benefit when companies export more is a crude form of humour known as a hoax.
Companies that export end up costing their host country a lot of money. It’s nice to know that when you hire economists to estimate costs and benefits, they never calculate “externalities” – economics lingo for costs paid by taxpayers.
It’s a little-known fact that exports have huge externalities, while servicing the local economy doesn’t. For starters, check out the infrastructure costs for ports, railways, canals, seaways, cross-border highways and bridges.
Provincial and federal governments are paying out $600 million to widen border highways in the Niagara-London-Sarnia-Windsor noose, on top of $1.4 billion slated for other Ontario highway improvements, an August 23 provincial media release brags.
That’s a lot of money sunk into boosting imports and exports instead of supporting more local trading in the domestic economy. If Bernier’s funny economists were more up-to-date with the facts, they’d know that exports no longer do what they used to do in 300-year-old theories or even in the branch-plant reality of 40 years ago.
At least since the 1980s, modern multinationals rarely make products from scratch, then sell them as exports, bringing in revenues, all of which create jobs back home.
A typical Canadian or U.S. export packages imported components made by cheap labour elsewhere rather than factory labour in the host country, as California business economist Robert Feenstra has shown, in a process he calls “the disintegration of production” or “delocalization.”
This is what exporting is increasingly about, as is foreign ownership that boosts export capability: unskilled workers lose production jobs and are forced to find low-paying McJobs in the foreign-controlled service and retail sectors.
This explains the trend over the last 30 years of increasing wealth coexisting with increasing wretchedness, and the reappearance of food banks and homeless shelters after an absence of almost 50 years.
Withholding that kind of info just proves that economic conservatives are masters of the ultimate trick of showmanship: hold the punchline till the end.
news@nowtoronto.com
