On reading "New Report" by Grace Macaluso on April 10, 2014, in the Windsor Star, it revealed that Canada was excluded from the $17.6 billion in the global automotive assembly investments made last year.
This fact comes as no surprise to me. I have been working with a Canadian consulting company that offers business transformation consulting services to automotive manufacturers in North and South America, and I have been aware of the gradual movement of automotive manufacturing operations from Ontario and the rest of Canada to more investment-friendly jurisdictions.
Yesterday, I spent a very enjoyable three hours riding bicycles with a longtime friend who happens to live in the High Park region of Toronto which has a population that is responds well to the labor policies of left-wing parties such as the Ontario Liberals and NDP. The NDP, in particular, believes that every citizen is entitled to a "living wage".
My friend claims to have completed a university level course in Economics in the 1970s. However, in espousing and supporting the "living wage" doctrine, he reveals how little he understands about Economics in the current business climate that has embraced international trade on a scale never seen before in world history. Investment capital is highly mobile and seeks the best opportunities for its owners, and rightly so. Where capital goes, so do jobs.
While having lunch, I asked my friend to tell me why he thinks we are losing manufacturing jobs in Ontario. He told me that he thought it was political. I then asked him to consider what criteria he may consider if he were an executive of an Ontario-based automobile manufacturing operation that was struggling to control costs so as to maintain profitability in a highly competitive market. My friend did not understand my question. I then asked him to name some of the top costs associated with manufacturing operations and asked him what he may do to reduce these costs.
When organized labor costs were aired, he did not consider it advisable, or even feasible, too reduce these costs on the basis that it would be unfair to the workers who need to maintain a living wage. When energy costs were considered, he was aware that these had been climbing steadily, but were under political control and, consequently, were unlikely to be reduced. Finally, my friend had not considered the cost to comply with government regulations which often incurs large costs that are difficult to quantify.
I explained to my friend that the one thing that all three of these cost areas had in common was that the government had a high degree of influence on them, and without government involvement, these costs may not represent the competitive threats that they do today. Ironically, in the attempt of politicians to protect our interests, they unwittingly have destroyed the interests of many workers who once were employed in a once thriving and profitable Ontario manufacturing sector.
The "living wage" argument is an interesting one because few people analyze the unintended consequences of this policy. My friend argues the NDP claim that it was the labor union movement in Canada that was responsible for the creation of Canada's middle-class in the 1950s through 1970s. There may be some shred of truth in this claim, but it is not the entire story. However, it sells well to those who are currently in the middle class and who aspire to achieving middle-class economic status in the future.
My friend also claims that, by eroding the "living wage", citizens will not earn enough to drive the economy through consumer purchases; there will be more economic unrest amongst the population which will lead to increases in civil unrest and criminal behavior ; and there will be increased demand on our government welfare expenditures resulting from higher levels of unemployment and/or underemployment. There may also be some truth to these claims, but these scenarios are not the only possible outcomes.
Going back to our earlier hypothetical scenario of placing my friend in the role of manufacturing executive, we revisited the discussion of what he might do to fine tune the business model of his manufacturing operation in order to remain competitively viable. We both agreed that a profitable business was better then no business at all for all parties - the government will continue to collect taxes from the workers and from the business; the workers can collect wages instead of collecting unemployment insurance payments from government welfare rolls; local business enterprises which serve the company and which provide food, clothing, transportation, entertainment and other services to the workers would also benefit; and the customers of the business would continue to receive the products and services they have come to know and appreciate.
However, global trading is the reality today in every country of the world. Each country has inherent trading advantages and disadvantages. Consequently, countries that possess the climate and soil to grow bananas will do so to their competitive advantage in the world market; however, they will not mine oil if it is not one of its inherent advantages. This capitalization on natural advantages is how competitive world trade works - it is the process by which business winners take hold and thrive and where business losers shed their less productive use of capital and labour resources in every country. Ultimately, unfettered markets will allocate resources in ways that best serve the citizens through the competitive forces within every society.
In such an economic climate, it is difficult to maintain a strict "living wage" policy because factors of production must be dynamic and adjustable to meet ever-changing market realities. To make firm policies that restrict or prevent the needed adjustments that shape viable business models is to use government regulations to inevitably condemn private business enterprises to the dustbins of history.
Government mandarins do not experientially appreciate and understand the forces of competition in free markets because their livelihoods are not dependent on profit or loss. For this reason, they are the least qualified members of society to issue policies that handcuff businesses. The best role for politicians and governments in the economy is to get out of the way of businesses, with the sole exception of protecting the property rights, including personal safety, of every citizen without bias.
As I tried to explain this to my friend, he was unable to "hear it" because he has been so deeply influenced by the NDP rhetoric that is ubiquitous within his community. This fact saddens me because, while a highly intelligent person in other areas of his life, he has swallowed the NDP message hook, line and sinker without applying any critical economic thinking. It is the same story with the majority of our citizens who have been employed in the public sector and sheltered from any firsthand experience of working in a business that must be profitable in order to survive. The same can be said of regular readers of the Toronto Star, Huffington Post, Wall Street Journal, and other socialist leaning media purveyors who have also dispensed a form of thinking that completely ignores the immutable laws of pricing theory, supply and demand economics, and property rights.
I have been asked many times why I continue to run as a Libertarian candidate in the Ontario provincial elections. The answer is simple. I have spent over seven years reading and studying economics, and had seen through the lies and abuses of our political leaders and are government operations.
Knowledge is a powerful thing, but it is also a two edge sword. One edge cuts cleanly through the dense undergrowth of government policy and taxation objectives, and leads one with a clear understanding of the immorality of government at its core. The other edge creates pain and frustration in possessing this knowledge and it is this pain and frustration that motivates me to do whatever I can to protect my family and my love ones from these abuses. For this reason, I see my political role as one of educator and messenger. I seek any citizen who is receptive to protecting their families and loved ones as I do. My friend is not receptive to this message, at least not at this stage in his life, but others are, and it is my task to find them and to help them understand.
I pledge to carry on this thankless mission for long as I can.
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