Bank of Canada governor blasts ‘dead money,’ Deloitte report calls for a reset of productivity trajectory – but culture of risk aversion has served Canada well
By Todd Humber
Stability, it seems, is passé.
Some economists, frustrated by the turtle pace of the economic recovery, have lashed out at Canadian organizations for being too conservative. They want to see less tortoise and more hare.
And when I say “some economists,” I mean Bank of Canada governor Mark Carney. Last month, he decried the fact too many Canadian corporations are sitting on “dead money” that should either be put to work or paid out to shareholders.
A report by the National Bank of Canada that looked at 327 publicly traded companies may have debunked Carney’s claim, finding no widespread evidence of dead money, but he stuck by his guns.
“I stand by every single word that I said,” Carney said at a speech in Calgary, according to the Canadian Press. “Look, the facts are the facts. There’s a lot of cash, and there’s a lot of work to be done.”
Now, Deloitte has picked up Carney’s torch. In The Future of Productivity: Clear Choices for a Competitive Canada, a report released Oct. 1, it said the country’s culture of risk aversion, low export activity and weak spending on research and development are stifling growth. The 60-page report should be on the reading list for organizations, including HR professionals.
The executive summary put it thusly: “Over the past several decades, a major gap has emerged between Canada and the United States in the most important driver of prosperity — productivity, defined as the average value produced per hour worked. The only way to safeguard our standard of living for future generations is to reset Canada’s productivity trajectory.”
The status quo, Deloitte argues, is not an option. But the alternative — an aggressive push for growth, and a drive to improve productivity, doesn’t seem all that alluring either.
The U.S. is more productive than Canada. Well, congratulations to them.
That may look good on paper to economists, but Canadians are hardly salivating when they look at the economy south of the border. The unemployment rate in America stood at 8.1 per cent in August. In Canada, it was 7.3 per cent.
Average weekly earnings of American employees in August? US$809.09.
In Canada? $906.68.
The grass really doesn’t look much greener on the more productive side of the fence to the average Canadian. And that doesn’t even take into account things like the sub-prime mortgage crisis that brought down the U.S. economy and got us into this mess in the first place.
Let’s not forget the experience of American banks — sure, they made a killing and grew fast. But when that house of cards began to fall, it took the housing market with it and required serious government intervention to prevent the banking system from complete collapse.
The picture was far different on this side of the border, where banks did not require a serious bailout and the housing market remained strong. Ottawa has since taken steps to ensure the housing market doesn’t overheat.
That doesn’t speak to worker productivity, but it does speak to the advantages of the Canadian culture of risk aversion. It may not lead to double digit growth across the board, but it also eliminates the extreme lows.
The Deloitte report contains some excellent recommendations, compiled by people a lot smarter than me when it comes to the economy. It calls for employers to build their business both across Canada and around the globe and to invest in meeting talent needs. It calls on government to improve the immigration system and to encourage foreign investment. And it calls on academia to work with business and align curriculum.
There’s no doubt organizations can’t rest on their laurels in a global economy. And Canadians — including employers, government and the academic realm — have a lot of work to do to protect our standard of living.
But let’s also not forget the lesson that has worked so well for Canada in the past — in the long run, it’s always better to be the tortoise than the hare.
Todd Humber is the managing editor of Canadian HR Reporter, the national journal of human resource management. He can be reached at todd.humber@thomsonreuters.com.