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History Table of Contents
1992 Summer Conference
Summer Conference 1992
Competitiveness and Social Justice: How Can Canada Have Both?

Panel: Considering the Competition

DAVID CRANE, Economics Editor, Toronto Star
KNUT HAMMARSKJÖLD, Chair & CEO, Atwater Institute
GEORGINA WYMAN, Senior V.P., International Management, Data Limited

The moderator was John Kirton, chair of the program committee for the conference. He introduced the panel: David Crane, well-known author and economics editor for the Toronto Star; Knut Hammarskjöld, chairman and CEO, the Atwater Institute; and Georgina Wyman, a senior vice-president of Bata Limited and former high-flyer in the federal public service.

David Crane began by agreeing with Peter Nicholson’s remark that we must either have both competitiveness and social justice or we could have neither. He also agreed with Donald Coxe’s quotation from the Clinton-Gore ticket on the need for wealth-creation and competitiveness.

We were facing a very serious challenge in this decade. Yesterday Statistics Canada had reported the loss of 129,000 jobs in July, the largest number of jobs ever lost in a single month. Crane noted that on the drive up Highway 400, one could see the idle factories, the police signs and that kind of thing, which were outward signs of the seriousness of the problems. We really had to find new ways of creating wealth, in order to afford our quality of life and social systems. Without new wealth we could not afford what we’d like to do with the environment, or the new kinds of social services we wanted.

Referring to Caplan’s praise of our welfare achievements, Crane said those things had been created when we had much higher rates of economic growth and much higher productivity. We now faced a situation where we were much less certain that we could afford those things.

Crane did not believe that debates of the kind we had heard last night gave a true picture of Canada. Here there was not a clash of ideologies so much as a quest for balance between wealth-creation and wealth-distribution. In Canada the pendulum swung between these two. In the past ten years it had swung to the right, probably a useful correction to the welfare years. It could be time now to find the middle way, a balance.

Examples from other countries might well be helpful, always remembering that one could not simply transfer programs from one culture to another. What one could do was choose useful ideas from other countries and adapt them to our own conditions.

Crane sketched an overview of what was being achieved in countries that were our partners or competitors. Distinguishing three styles of capitalism, he saw the systems of Europe and Japan as communitarian, of the Anglo-Saxon countries as individualistic. He thought Canadians were closer to the European than the American style, viewing the community as responsible for everyone in it. Better education of workers, both white-collar and blue-collar, and better health and other social services meant a higher commitment by workers to the company effort. The Japanese way put the corporation above individual workers or even shareholders.

While we had been obsessed with the constitutional crisis, other countries had been moving to make their economies more competitive.

We would be strongly affected by what was happening in the U.S., which for the past year had been developing an industrial strategy, though without calling it that. This was not a Clinton-Gore initiative but an enterprise of the Bush administration, spearheaded by U.S. high-tech industries which were terrified of Japanese success in technology. In the current fiscal year the Bush administration was proposing to spend almost $77 billion on R&D, 40.5 per cent for the Pentagon, the rest for civilian enterprise, a huge budget. Even in the Pentagon sector, more and more was being spent on dual-use technologies. A 21st-century electronic highway, the world’s first, was being planned with a $5 billion grant. Similar initiatives were underway in advanced materials, bio-technology, and new manufacturing systems. The commerce department had a new division to help adapt new technologies for commercial use by medium and small business. Investment in basic research by the universities was being doubled over five years by the National Science Foundation.

All this – essentially bipartisan – posed a special problem for Canada, with our poor showing on R&D. More and more of our bright people and bright companies would want to do their research in the U.S.

Japan saw its future as a science power and invested in brain capital. Japanese strengths were long-term vision and consensus, and a system of interlocking corporations that made for swift exchange of technology and internal sources of investment.

The Europeans were dealing much more effectively than we with the schools’ dropout problem and the need for retraining workers. In Ontario we should look at the emphasis on middle-size business as it works in Germany.

We were terribly behind the rest of the developed world in the drive for competitiveness.

In social services we needed to concentrate on getting people back to work. Other countries could show ways to achieve this. Crane reviewed some of the British and Scandinavian strings attached to unemployment relief.

The turn of Knut Hammarskjöld came next.

There was a fascination in Canada with the Swedish model. The speaker was not an expert on the topic, since he had lived outside his country for some 50 years, 25 of them in Canada. But with borrowed knowledge he would try to trace the origins of the myth.

We had today in some ways a repetition of what had happened in the early 1930’s. Following the crisis of that time, the Swedes had developed their labour policy. It started with unions and management collaborating to avoid disputes and state intervention. They tried to solve the problems between themselves. Industrialists and labour had a common interest in ensuring that the politicians had no influence on their decisions.

These events attracted international attention. The improving economic situation alone could not explain the spirit of compromise by which industrial peace had been achieved. It must have been part of Swedish culture. Later on, this trend was reflected in the social welfare system and foreign policy.

It was a fact that today the Swedish model was being questioned as never before. For a very long time the country had been ruled by social democrats. During the war there had been a coalition; between ‘76 and ‘87 an interregnum, with right-of-centre coalitions. Since September 1991 a young, non-socialist coalition had been in power. One of their stated aims was to reduce the public sector, or restructure it for greater efficiency.

Social democrats had pursued a pro-business policy. They claimed to have had a levelling effect on society. And it was true that the spread between high and low incomes was narrow. There was little difference between the earning levels of men and women. Women were strongly represented in positions of responsibility and power, as ministers, politicians and ambassadors, though they were also over-represented in part-time and low-skilled jobs. There were no problems in access to education.

Criticisms of the welfare state had been expressed. The cost of services was increasing and their quality sometimes questionable. It was said that the society had been levelled down, instead of raising the level for all. It was important that the general level of education should be high.

In structure the system had strong unions facing strong employer organizations; the power for negotiation in the market was not lacking. But unions were entitled to representation on company boards, and there were other forms of co-determination.

In the 1970’s a long-lasting strike in Lapland in a government owned iron ore mine had changed the working atmosphere for the worse. It was followed by an increasing number of other strikes, both wildcat and union-led. Yet in spite of all this, the Swedish readiness for compromise had averted worse excesses.

Sweden’s great ship-building industry had been virtually closed down in recent years, yet with retraining and other measures the damage had been contained.

In the end it had to be said that the middle way was best. Not the middle between black and white, which was a dull grey; but between red and blue, perhaps, even if it came out pink. Compromise might not be glamorous, but it did hold out hopes for peace and effectiveness.

Georgina Wyman spoke last. Scorning the podium, she faced the auditorium with a shoe in her hand. With the help of another shoe lent by her son, she was to deduce an extraordinary amount of information, nothing less than an object lesson on the meaning of "value-added".

In the shoe business, Wyman said, which was global, it was hard to give precise measurements of competitiveness, especially in the value-added component, the brain component. She did not have much sympathy with the self-flagellation of Canadians on the issue of competitiveness.

She also had been in Czechoslovakia recently and thought it unhelpful to talk in terms of the failure of socialism and the triumph of capitalism, instead of looking at what was really happening.

The son’s shoe was a Reebok pump, and her sample a Bata Power Shoe. Reebok pumps were for the most part conceived and designed in the U.S. To make the shoe fit you better, you had to press on a (literal) pump in the shoe. It was manufactured in Korea or, increasingly, in China. From a material perspective the shoes were almost identical. For manufacturing both shoes, our agents and their agents were in the same building and part of the same company. There was no difference between where these shoes were manufactured. Most were made in the Far East because of low wage cost. One shoe sold for about $150 and the other for $70. Both cost between US$15 to US$20 to manufacture. What was going on here?

The footwear industry had seen the movement of manufacturing to the low-wage economies. When we flagellated ourselves over not being competitive, we were looking merely at the manufacturing component, or rather the assembly component. Components in both shoes were highly sophisticated materials, many derived from the American space program, conceived and put together in the developed economies and marketed from the developed economies.

The second point was the value-added or brain power that went into the design of these shoes and into the whole strategy for marketing them around the world. The assembly component had gone from Canada and probably would never comeback. We should learn to look at these issues in a different way. We should realize that much of the value-added was in the heads of people. To be able to conceive the inconceivable, to think ahead, to understand what customers wanted. Wyman believed that in these areas Canada could be strong and should understand where our strengths lay.

There was also a significant shift back to the developed economies of manufacturing in certain kinds of textiles and footwear. In France, for example, there were advances in making shoes very rapidly for short runs in response to the urgent but volatile demands of high fashion. Here the value-added was intangible. Timeliness was becoming extremely important. The French factory could reproduce a shoe on reorder within three days. The manager was improving on this to the point where you could order a particular shoe in the morning and drive away in the evening with 400 pairs.

You needed new forms of work organization and multi-skilled workers. The organization process, and the ability to respond to demand were the elements in this new thinking. It was in keeping people flexible and in educating them that the value-added was developed. We had not given enough thought to this aspect of competitiveness.

Bata operated about 40 factories around the world. They were being re-organized for maximum value-added, and increased involvement of workers.

Wyman followed with a brief account of her experience in Czechoslovakia. It was too simplistic to speak in terms of the triumph of capitalism. The subtleties were greater. Tyranny had frozen the shoe business in its habits of 1945. The banking system also was frozen in time.

Changes that we had gone through in 40 years were taking place in Czechoslovakia in about two. And while they were restructuring they were also privatizing. They too were debating compassion and competitiveness.

But tyranny had made people irresponsible, they had forgotten how to be moral agents. How could people learn responsibility? The people over 40 were probably a lost generation.

The government was withdrawing even from education and health care. Teachers and doctors were urged to find market solutions for their problems.

There was also a vacuum in law. Our freedom in Canada, including our commercial freedom, depended on a legal structure, a system of rules, and this was missing in the former socialist economies. In trying to transfer real-estate we found there were no rules, so that we more or less had to invent them. It was clear that we really did need a competent public sector in order for the private sector to work.

Concluding, Wyman paid her own modest tribute to the middle way, the way of compromise and balance.

In the question period that followed familiar anxieties were aired.

One man confided that he owned over 20 pairs of shoes and his wife more than 40. Did this not reflect over-production? Did we need so many shoes? Again, advertising created a demand among teenagers for such things, and peer pressure made it hard to resist. So teenagers spent too much time working in service jobs so they could afford the latest fads, neglecting their studies.

Georgina Wyman pointed out that the man and his wife were the ones responsible for buying their own shoes. No one had compelled them. And as for restrictions on advertising and promotion, she had a problem with that. It amounted to excessive control.

In this answer the speaker was not making a debating point so much as connecting her insights about command economies with her knowledge of the shoe market.

A union leader wanted to know to what extent the ethnic homogeneity of Sweden was responsible for industrial peace. Knut Hammarskjöld replied that Sweden had had two waves of immigrants, the first because Sweden needed them, the second because they needed Sweden, but that the Swedish habit of seeking compromise had continued.

Another question related to fears about the dominance of Canadian business by multinational corporations.

In a lengthy, well-argued answer, David Crane showed that there were several kinds of multinationals, not all harmful. The one that was least help to Canada was the multinational operating in Canada but with its head office elsewhere. Such an arrangement deprived Canadians of the important value-added or brain jobs described by Georgina Wyman.