Archive for September, 2012

Notes from the Margin – September 2012
September 25, 2012

This column was written for the Friday AM in Salmon Arm. It appeared in the September 2012 All Month edition. 

Is dead money killing the economy?

Last month, Bank of Canada Governor Mark Carney gave a speech to the Canadian Auto Workers. Breaking with convention, he argued that corporate Canada isn’t doing enough to drive economic growth. 

 According to Stats Can, Canadian non-financial corporations have cash holdings of $526-billion at the end of the first quarter of 2012, representing a 43 per cent increase since the 2009 recession. 

“We cannot grow indefinitely by relying on Canadian households increasing their borrowing relative to income,” said Carney adding that the level of caution could be viewed as excessive.  

Financial institutions are lending less to small business given the economic climate and tighter regulations.  Our Finance Minister may boast about Canada’s solid financial system to the world but he’s reluctant to acknowledge that there’s a healthy percentage of businesses – mostly the 75 per cent that make up small business – starving for cash. 

Henry Ford understood what economists have called the “virtuous circle of growth”. He wrote that not only was paying high wages a matter of social justice, it was a matter of smart business. He needed wage earners to be able to build Model-Ts and buy them too.

But for every virtuous circle, there’s a vicious one. The vicious circle we currently face is a crisis of confidence. And confidence can’t be borrowed or sold, legislated or regulated. It’s a feeling of optimism.  

To whom can we look to bolster our confidence? I think our best hope lies with young entrepreneurs who, unburdened by past scars are living through a renaissance of sorts. The internet and social media (like the advent of the printing press or Ford’s own assembly line) gives entrepreneurs unprecedented access to each other’s ideas and capital. And if you listen closely, you’ll hear their cries of excitement as their innovative thinking, peer-to-peer micro-lending, start-up accelerators and crowdsourcing smash barriers many of us are too patterned to break.  

So if you meet one in your travels – a young person full of dreams with smart phone or tablet in tow – don’t shake your head. Shake their hand. And you might even want to spare some coin – to help them make the change we need to see.

Notes from the Margin – August
September 25, 2012

This monthly column was written for the Friday AM in Salmon Arm  and appeared in the August 2012 All Month edition

Promote what you love instead of bashing what you hate is a quote I recently came across. If doing good and making a difference is what you’re into (and good for you), consider your own power as an economic advocate. Advocacy is not reserved for the mighty. The truth is, it rests with you and every single purchasing decision you make. The single consumer’s power to act on his/her decisions is what really runs our economy. But to quote the all powerful Spiderman, great power comes with great responsibility. 

Economic advocacy will entail a few assumptions. Economists are fond of assumptions such as perfect information, rational decision making, and the market’s natural cycle. My particular favourite is scarcity. As consumers, we have unlimited wants. As an economy, we have limited resources. Such is life.

The problem is that we don’t really have perfect information. Some of our purchasing decisions are hardly rational (pet rock anyone?). And you can only see a market cycle with certainty once it’s over (or we could have predicted 2008 and saved ourselves). Finally, in today’s society, there’s a tendency to act as if we’re entitled to everything we want whenever we want it. 

Trying to achieve the right balance and get as much as we can for as little as we have can be a challenge in ideal conditions. Trouble is, current conditions are far from ideal. Concentration of media ownership, powerful corporate agendas, and ideological government policy means we’re left in a state where money itself has a greater value than the actual value for which it’s a means of exchange. As such, the few who have the most (20%), often hoard (80%) and those who have the least (80%) often struggle to make what’s left (20%) work. 

So what’s a person to do if they want to flex greater economic muscle? Here’s what I’d suggest. Start by doing research and asking questions. Most of all, think before you spend. How you spend your money and what happens to it once it’s spent is what really makes you powerful. It’s straightforward. Shop as local as you can as often as you can. The money you spend at the farmer’s market, for example, packs way more punch than money spent elsewhere.

Same goes for local shops and services. Your customers are your neighbours. Invite them to tell you how they feel and what they think. Price too high? Not enough choice? Product not available? That’s the beauty of a local economy. If we pay good attention to one another, gaps in the marketplace are actual opportunities. Many have expressed concern that Zellers is closed and Smart Centres isn’t built. Fair enough. Seems to me there’s a great amount of opportunity there given pop-up retail, social media and young career-hungry people.

I choose to promote what I love. Salmon Arm is stuffed full of talented, creative, smart and resilient folk. We’ve found solutions to much more difficult problems (fires and floods, for example). With micro investment and mentorship, I feel sure we can find a solution to any gap in our economy. 

Or, on the other hand, you can bash what you hate, ridicule those you disagree with and complain on local Facebook groups, for example, about not getting what you want. Be mean and pointless or think about what good you could do. Believe it or not, the rest of us are depending on you, whether you like it (and us) or not.