Column

Martin rethinks the mergers

Peter C. Newman April 3 2000
Column

Martin rethinks the mergers

Peter C. Newman April 3 2000

Martin rethinks the mergers

Column

Peter C. Newman

It’s the ultimate irony of Canadian politics that the duo of scorpions now facing off for leadership of the Liberal party need each other almost as much as they despise each other.

Jean Chrétien, 66, has little chance of being returned to power for a third term unless he can campaign in 2001 with Paul Martin, his most capable minister, at his side. At the same time, the 61-year-old finance minister can’t appear to be rudely rushing the reigning prime minister out to pasture without alienating Chrétiens still-powerful allies within the Liberal party.

Martin’s impatience has deep personal roots. He is haunted by his father’s record of running for the Liberal party’s top job three times—in 1948, 1958 and 1968—and missing the crown each time. His son’s current frustration is fuelled not only by his ambition but by his confidence that he understands the challenges facing this country far better than the incumbent prime minister. And that he thus stands a far better chance of extending the Liberal mandate.

Just before the recent Liberal convention, Martin talked to me at length about how today’s new economy requires a new politics. Canada, he believes, has entered a kind of altered state. Instead of being haunted by the past, dreading the present and squinting nervously at the future, Canadians are more at ease with their status and their prospects. Instead of being afraid of globalization, they are embracing its technology. “What I’m finding,” he said, “is that even the new economy’s smallest start-up companies have to go from concept, to financing, to market and to global distribution very quickly. You can’t move forward incrementally anymore. We must have the infrastructure in this country that enables this to happen efficiently, and that’s the direction governments have to move.”

The finance minister surprised me by citing as a prime example of the required shift, the desirability of merging Canada’s banks. “The turndown of the bank mergers,” he told me, “was in no way a rejection of the concept that Canadian banks must become major North American, indeed world, players. That has to be the ultimate goal. The issue was that the mergers couldn’t take place at the expense of decimating domestic competition, because the only alternative to competition is excessive regulation—and I certainly don’t believe in that. We wanted to make sure that banking services will be provided in rural parts of this country and that small and medium-size business have access to as much competition for their services as possible. We want the banks to be as big and as international as they can be, but we have to find a way this can be done without destroying domestic competition.” Martin believes this can be done and

will be announcing new regulations to that effect in April.

He describes his recent budget’s aim as modernizing government by enhancing opportunities for the high-tech revolution’s leading-edge entrepreneurs. “What Scott Paterson has done at Yorkton Securities is the classic example of what I’m driving at,” he told me. “There is no doubt in my mind that Canada is incredibly well positioned when you see what a young fellow like Paterson has done—or Izzy Asper in another area, or John Roth at Nortel, one of the hottest companies going. We must duplicate those three people, time and time and time again, because they understand where the world is going and have a sustaining interest in public policy by setting out a realistic agenda for the future.”

“This year’s budget,” he continued, “the first of the 21st century, said OK, if we’re going to make it, this is what we have to do. Of course we must focus on education and health care, but as part of my post-budget tour, I visited a highly successful company called Research In Motion, in Kitchener. What struck me was that the owners argued very forcibly that they’re going to stay in Kitchener, expand the size of their plant, and that the single most important factor in that company’s development was the proximity of the University of Waterloo. That’s the kind of situation we started to focus on in this budget. What’s important for us is that the head office be here, that the driving force of the New Economy remain in Canada.”

It’s a difficult assignment because, at some point, politicians are tempted to create incentives for the people making extraordinary efforts by placing them in a more favourable tax situation than others. “Sure we have to recognize competitive pressures,” Martin believes, “but if you don’t retain fairness as your main ingredient, you won’t have the public’s support.”

Martin’s most impressive take is on the future of the new economy. “There is a tendency to think that the only thing that we have to do now is pay down the debt and cut taxes,” he says. “But that’s only part of it. What’s really required is a fundamental attitudinal shift. I’m talking about a cultural transformation that has a lot to do with changing concepts of risk, and understanding how you finance and develop the new paradigms. That’s essentially a private-sector issue but government is an important part of that component. Governments must drastically alter their architecture, because we’re the last institution that hasn’t gone international. Yet we must also figure out how the world can go global so that markets work for people and not only a small, privileged few.”

Though they are separated by only five years in age, Paul Martin is tomorrow’s man, just as surely as Jean Chrétien is yesterday’s.