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Canadian Economy is Strategically Threatened !

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This entry was posted on November 3, 2006 and is filed under Economy.

The Canadian Economy is Strategically Threatened !

Canadian-US Competitiveness in Manufacturing, Business, Technology and Productivity

Canadian Manufacturing Productivity in Crisis

The October World Economic Forum Global Competitiveness Report found that Canada's 2004 competitiveness ranking fell to #15 from # 12 in the previous year. [Postscript 2006 below]*. There has been a lot of talk since about Canada's position in the world but in reality it is the comparison with the US that should most trouble Canadians. The United States ranked #1on the Business Competitiveness Index [BCI] as shown in the table:  

Canada seriously underperforms the USA in the main index and the strategy-ranking-component.  The bottom line analysis is that Canada cannot compete in its overwhelmingly main market and manufacturing in particular is far behind the United States in productivity [chart middle]4. Strategically Canada faces a calamitous long term future if changes are not made.

This situation is seemingly unnoticed by mainstream Canadian economists who repeatedly claim that the economy is healthy and strong. In fact, much of Canada’s growth in the last decade was on the back of a severely depressed Canadian currency [see bottom chart - imagine the impact of an extended 15-25% off sale] and falling living standards2,6 masking Canada’s precipitous fall in competitiveness with the US.
  

The Chief Economist of World Economic Forum Mr. Lopez-Claros says, “The United States is technologically pre-eminent among nations in the world, both in terms of research prowess and its ability to commercialize innovations”.
 

Technological capability is a fundamental building block for any modern economy, yet it may be that technology innovation management and entrepreneurship is the weakest link in Canadian overall competitiveness with the United States. Differences between Canada and the US in this area are stark. For example, is it that Canadian innovators look first to the Government for assistance while Americans do so as a last resort? Sadly the Canadian Government, at times directly competing against their own private sector, spends millions to induce companies to partner with them thereby embedding a potentially ruinous mindset among innovators. Government venture capital is damaging to start-ups yet the Canadian Government recently increased venture capital funding "to harvest and commercialize" technology.7 

We soundly disagree with other analysts who say "Governments have an Important Leadership Role" 8 or that "Government at all levels has a critical role to play"9 in competitive strategy, for what Canada needs is much less Government not more. Governments absolutely make highly burdensome partners virtually always but especially in the commercialization of technology. Indeed, Governments should not try to give business advice to the private sector and entrepreneurs would best avoid taking such advice.

The Canadian economy should have performed much better than it did in the past and it could perform better in future were Canada more competitive. "Canadian-US competitiveness" is not a usual parameter of the econometric models used by mainstream Canadian economists. It should be. The strategic signs that the Canadian economy is threatened and in trouble are already apparent - manufacturing productivity is at a crisis level. Canadian entrepreneurs and innovators would best recognize this and make the urgent strategic changes that are essential to their and Canada's future.

TRU Group Inc, Tucson AZ Toronto ON

Activating Your StrategicMindset

Related Links:

  1. World Economic Forum

  2. Centre for the Study of Living Standards

  3. Institute for Competitiveness and Prosperity

  4. Measuring Canada-US Productivity Gap Rao, Tao and Tang. Industry Canada

  5. Harvard University - Institute for Strategy and Competitiveness

  6. TD Bank "Are Canadians Slipping Down  the Economic ladder"

  7. The Honourable David L. Emerson Minister of Industry September 20, 2004 on Canadian Competitiveness 

  8. Task force on Competitiveness Productivity  and economic Progress

  9. Roger L. Martin [Rotman] and Michael E. Porter [Harvard] Canadian Competitiveness: Nine Years after the Crossroads  

 

Postscript 2006 }

 

Canada's competitive position deteriorated

in the September 2006 Ranking for

National Business Environment and Strategy.

 

 

World Economic Forum 2006 report -

http://www.weforum.org/pdf/Global_Competitiveness_

Reports/Reports/gcr_2006/gcr2006_summary.pdf

Business Competitiveness Index 2007-2008


Postscript 2007}

Canada's competitive position improved one level to 14 overall the September 2007 BCI Ranking.

 

World Economic Forum 2007 report -

http://www.gcr.weforum.org/




 

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    • February 8, 2007 Malcolm Bartels wrote:
      Well where does one start ? I do not believe the government assistance to run companies does any good for the people of Canada , this country has many natural resources and we as Canadians would rather give them away and more so, pay to give them away, at some point in the future we will again pay dearly for this idea.
      We as Canadians lack the ability to have confidence in our self's and invest in our self's , we look at some form of assistance to move forward.
      The idea of free trade may have been a great idea for the US, but for Canada it was a direct sell out in my opinion . The Americans have a population ten fold of ours and a currency that will bleed our economy for all it's worth , we as Canadians lack the, and confidence in our own ability to develops our own natural resources so we rely on the Americans to do this for us . Years ago as I watched the debate on an American TV channel about free trade , I saw how the idea of the Americans was to use their money to develops our resources ,(10 to 1 population,and at a discounted rate of 15 % on the dollar, further to approx 50% ) the idea they had was that they would finance the development and stimulate our economy , this has happened , but at what cost? Our national debit is by comparison greater than the Americans our taxation is higher, our health care system is being challenged our cost of living is increasing and our living standards are decreasing. I am old enough to remember when our dollar was in fact worth more than the American dollar and at that time there was very little work to be had,we would send raw timber to Japan and have it sent back as plywood , as the dollar went down in value the work began to improve , at what cost ? We now have 35 year mortgages and people retiring with payments being made from pension cheques . We as Canadians are slowly becoming renters in our own country. Enough said , I may be wrong on all counts and do not hold all the information that one could on this subject but I do feel we will pay for the future and so will our children . We now live in a false economy and will have to pay for this at sometime in the near future . A country cannot operate on borrowed money forever !
      Reply to this
    • April 18, 2008 Rodney wrote:
      Canadian Government proves itself a Threat to Canadian Innovation - AGAIN !!!!

      How sad now that Canadian technology capability has fallen to the point that the Industy Minister of the Canadian Government in April 2008 thinks that he is protecting Canadian Security by preventing the sale of a Canadian aerospace company to an American parent. How ignorant can an Industry Minister be - Is he trying to finally put nails in the coffin of all Canadian innovation. For Canadian innovators who want to make money (yes, making money is the underpinning of entrepreneurship) I say beware the Canadian Government, it is a threat to YOUR business. Take your ideas to the United States and get rich!

      ++++++++ Some BACKGROUND >

      The Canadian government said Thursday it had rejected the sale of satellite and robotics technology to a U.S. firm, noting it would be against national interest. Industry Minister Jim Prentice said in a statement that Ottawa cannot agree with selling the space technology division of Vancouver-based MacDonald, Dettwiler and Associates (MDA) to U.S. rocket-maker Alliant Techsystems Inc. The proposed deal involves 1.325 billion U.S. dollars.
      Reply to this
    • May 16, 2008 دردشة wrote:
      The idea of free trade may have been a great idea for the US, but for Canada it was a direct sell out in my opinion . The Americans have
      Reply to this
    • August 18, 2008 John wrote:

      BDC BUSINESS DEVELOPMENT BANK OF CANADA – MOST DESTRUCTIVE OF CANADIAN GOVERNMENT CROWN CORPORATIONS

       

      The above article should have mentioned the competition with the private sector by the Business Development Bank of Canada . This Canadian Government body is the largest management consulting group in Canada and is also one of the largest lenders to and investor in start-up companies. It has destroyed the private sector basic services start-up infrastructure in Canada and has created a mindset among entrepreneurs that the government is all you need to succeed. Also, that the Canadian Government should even think they have the capability to advise start-up companies is arrogant and that entrepreneurs should actually take the Government's advice totally mind-boggling . No wonder Canadian innovation and competitiveness is so poor. The BDC should be broken-up and disbanded. The damage it has caused will take many years to repair, but it must go and go now!


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