Notes from the Margin – September 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.