Economics 101

In the last week or so I have read or watched two radically different individuals discuss the current state of affairs of Canadian businesses. It is hard to believe that two people with I assume similar education or at least using the same type of information would present such different understandings of how the Canadian economic world works.

Gwyn Morgan in a piece from the Globe and Mail entitled “Corporation’ is not a bad word: How to fight against pervasive anti-business rhetoric” published in their online edition of September 7, 2014, argues that there is a concerted effort being made by the liberal establishment – specifically the various institutions of post-secondary education (but also Hollywood) to maliciously malign capitalism. Morgan further maintains that such active misinterpretation of the facts will lead us all to revert to communism. He suggests that this sort of almost brain washing of the young will make it impossible for corporations in the future to exist or at least to be effective. Of course Morgan’s concern is not only that some people are opposed to capitalism, but rather that this misguided approach on the part of the public will lead to a change in public policy. And of course if that happens - corporations will make less money (and the world will dissolve into chaos)

The above is not a new argument and quite frankly not that persuasive. It would perhaps be more interesting if I had any sense that big business as an entity was at risk. However it seems to me that capitalism, globalization and corporations, in spite of the economic crash that happened less than a decade before – a crash that clearly demonstrated the ineffectiveness of capitalism to either monitor or to fix itself – is alive and well. Furthermore there is every indication that the Canadian government is clearly wedded to the concepts espoused by capitalization. It strikes me as absurd that someone would publish a piece arguing that we need to be more active in preventing a return to the “Marxism-socialism” world of Soviet Russia.

      On the other hand, TVO gave author and economist Mariana Mazzucato a platform to discuss her latest book The Entrepreneurial State - Debunking Public vs. Private Sector Myths. Her primary argument is that the private sector are not the innovators that drive the economy but rather that it is the public sector (governments) that funds and drives research. And there are lots of examples for her to chose from that prove her case: the internet was initially funded by the American Government; the research on how to develop the Alberta Tar Sands was at least in part paid for by tax payers; research into GPS, touch screens, the green revolution, biotech and pharmaceuticals were all supported in their early days of development by the public purse. The private innovation funds only start to invest when much of the risk has been alleviated.  Mazzucato went on to say that corporation have millions and millions of dollars sitting in their bank accounts, money that they could invest into their industry but they don't. Why would they when the government will?

Of special interest to me were three issues that were raised during Mazzucato's discussion with Steve Paikin. One is that we, the public, are not informed as to our government's investments in certain high risk ventures - unless of course it turns out to be a poor investment. Then the opposition has new a new two by four to beat up the government of the day, but there is no public debate as to whether we want that kind of investment. I spend some energy being careful that my limited retirement funds are not invested in corporations with poor environmental records. Clearly I am wasting my time if my government is investing in the very corporations that I am opposed to.

Secondly if we the public are investing in these high risk ventures - how come we don't make money on that investment when things work out well? Why do private (wealthy) investors make money when the risk has been assumed by the public purse? And finally if investing in high risk ventures that could benefit the country as a whole is going to happen - could we please have someone making those investments not because of ideological positions but rather because Canadians will benefit not only financially but socially as well.

In thinking about the two positions taken by Mazzucato and Morgan - it would seem to me that it is well past time that capitalist and their shills stop whining about how hard life is (and therefore how they should pay less and less tax on their corporate income). They should stop telling us how invaluable they are to the Canadian economy and for heaven's sake the need to stop pretending that they alone are the final bastions of democracy. Instead  they should stand up and give thanks for the millions and millions of dollars that they directly or indirectly receive from the Canadian tax payer and perhaps just a small thanks for the fact that they live and work in a country that is so gullible.