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Strategies for the Canadian Economy
26/04/2003

On Monday, the Globe and Mail had an article about a decline in the number of corporate head offices in Vancouver. It seems that through mergers and relocations, "nearly one-third of [British Columbia]'s largest 100 public and private companies disappeared between 1997 and 2001".

In the globalizing, free-trading, world, this seems like an inevitable phenomenon. If two companies merge, there is one fewer head office. Most of the time, the larger company in the larger market or in the more significant city will stay where it is, and the smaller one will relocate. Or, if there is no relocation, the smaller operation can evolve into a "branch-plant" role for the head office. So, the fact that Vancouver is losing major corporate head offices to Toronto or to the United States should not be terribly surprising, just as Toronto also sees a transfer of responsibility from here to New York, London or elsewhere.

In a way, this is one of the explanatory factors of the "brain drain" that was such a big story a few years ago. I never believed it was the calculus of marginal tax rates that was really driving away some of our best and brightest. It was the fact that there are proportionally many more challenging, top-level jobs in the United States. For example, my colleagues in the engineering school at the University of Windsor who dreamt of someday designing automobiles eventually discovered that very few of those jobs are to be found in Canada. GM, Ford, and Chrysler may employ many engineers in Canada, but most of them are designing and managing manufacturing systems, rather than the cars themselves. Large corporate power, and the high-level strategic jobs that are associated, tend to gravitate to the United States if only because of size and momentum.

So, what sort of future is in store for Canada, then? Are we destined to have our large companies bought up, with leadership roles exported? I say that the answer might be "yes", but that in the long-run this doesn't matter nearly as much as it seems. In fact, if we adopt the right strategy, we may be able to come out on top.

The reason I feel that the gradual take-over of big Canadian corporations (with, perhaps, some special cases like banking) doesn't matter so much is that these companies aren't as important in the long run as they may seem. Yes, big companies dominate the economy. But the biggies that dominate today are not necessarily the ones that will dominate in a decade or two. I don't state this as a particular fact about 2003 compared to 2023, but rather as a more general insight. This is an ongoing process.

What happens is continuous innovation. New types of work are created, new products are created, new ways to produce old products or services are developed, and new businesses rise to power and dominate a greater part of the economy. This is happening all the time, and we can see a landscape with many different types of companies, of varying sizes, doing work of varying degrees of newness.

Claiming ownership of large, old, stable industries is not necessarily the best that we can hope for. Letting these businesses go can be accepted if we make sure we have a society where people are supported in developing the new work that will dominate the economies of the future. We can let Nortel get bought up, and eventually moved to the United States -- in essence, if not officially -- so long as throughout Canada new businesses are growing up that might be the Nortels of the future. If we do this, we'll retain a healthy economy despite take-overs.

To some readers this may sound very "neo-conservative", but that's not the angle I'm taking at all. First, much of my thinking on this subject has grown out of insights found in Jane Jacob's The Economy of Cities. This is not her most famous book, but I highly recommend it. However, when one reads Jane Jacobs, one becomes exposed to thousands of ways in which the conservative leaders of this country -- and the United States, for that matter -- are behaving in a manner that runs counter to the sound principles of innovation and development that she writes about. In fact, the livable, walkable, sociable, liberal, equitable, diverse city that I sometimes advocate on this website is, in Jacobs' writing, the strongest force behind innovation and the development of the new work that will ultimately maintain and grow our economic strength.


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