BUSINESS WATCH

Santa Claus and a free economy

Peter C. Newman January 2 1984
BUSINESS WATCH

Santa Claus and a free economy

Peter C. Newman January 2 1984

Santa Claus and a free economy

BUSINESS WATCH

Peter C. Newman

The affairs of the nation this past year seemed more and more at odds with the partisan hollerings of Ottawa. Much of the action that mattered—most of the year’s heroes and villains—were businessmen, subarctic versions of J.R. Ewing, or John Forsythe manipulating Dynasty’s cast of sinewy characters.

This process of chief executive officers becoming the new fantasy icons has a lot to do with the retroactive realization, forced on public consciousness by 1982’s recession and this year’s recovery, that on a day-to-day basis our lives are governed not by politicos but by our jobs—or the lack of them. Very different from such business types as Ebenezer Scrooge, the 19th-century robber-barons or Sloan Wilson’s The Man in the Gray Flannel Suit, there is evolving in this country and the United States a new breed of entrepreneurs. Its members are nimble, witty, understand Laffer curves and have dropped their predecessors’ Gothic preoccupation with fancy titles and “statement” offices.

They are the dedicated computer softwear jockeys, working away in basements and attics on their IBM-PCs, Apple Lisas and Kaypro-10s. These cottage industries are beginning to change the economy’s dominant ethic, so that instead of a price, innovations now have a value. The year signalled the ascendancy of these and other middlemen ( middleper sons ? )—thought-brokers, legal intermediaries and concept auctioneers—all using other people’s money to trade ideas for cash.

What was probably 1983’s most impressive business coup fitted this category, even if the players were hardly new arrivals. A syndicate (comprising Toronto’s Ted Rogers, Montreal’s Philippe de Gaspé Beaubien and Vancouver’s Sam Belzberg) was awarded the licence to launch a cellular telephone network—the electronic equivalent of the federal giveaway that accompanied the building of the CPR. The granting of this valuable licence will eventually create a second national telephone net of portable hand-held instruments. This new technology (which requires an initial investment of only $100 million to set up all the basic hardware) has the potential of putting a fairly inexpensive telephone into every Canadian car, boat and summer cottage.

Most of the general economic news in 1983 was good, following 18 months of the worst recession since the 1930s. Plummeting interest rates and relatively mild inflation helped re-establish consumer confidence and renew retail spending. Despite the strength of the recovery, its base remained narrow, with most businesses using up their inventories rather than financing great new capital projects. Not until industrial investment takes a major leap will there be a real dent in unemployment levels.

In the rarefied sphere of public finance, nothing that happened in 1983 resolved the basic conflict between ballooning deficits and slow money growth. The other prevailing dilemma, according to Mitchell Rothman, chief economist for Ontario Hydro, is that “the Bank of Canada wants to keep interest rates low enough to ensure and sustain an economic recovery—but at the same time keep the spread between Canadian and U.S. interest rates high enough to encourage capital inflows to keep our dollar stable.”

The favorable domestic economic news was offset by dispatches from Rio de Janeiro, where dispossessed members of the middle class (who have seen their per capita incomes plunge) were looting supermarkets and blaming U.S. banks for their plight. At about the same time, Julio Gonzalez del Solar, head of Argentina’s central bank, took his country’s $40-billion debt seriously by trying to restructure part of its repayment—and was arrested for his troubles. The possibility of default in Argentina, or in Brazil (where 1,400 banks are owed $90 billion), continues to haunt us. By year end, external debt of the developing economies had reached $650 billion, with at least 30 countries in serious arrears. The potential danger was chillingly summed up by Eliot Janeway, the American economic commentator. “First,” Janeway quipped, “the banks break their customers—then their customers return the compliment.” This is in fact already happening. In early December the Federal Deposit Insurance Corporation in Washington reported that nearly 600 U.S. banks (out of 15,000) were in serious trouble—the highest level of “problem” banks recorded by the FDIC since it was founded in 1933.

Internationally, the political quote of the year was Japanese Justice Minister Akira Hatano’s complaint that everyone was making too much fuss about Kakuei Tanaka’s conviction for taking a $2-million bribe because “to look for integrity in a politician is like trying to buy fish at a grocery store.” In this country an equally puzzling, if less incriminating, statement was Richard Hatfield’s claim that free enterprise had become a myth. “If I had a choice between believing in free enterprise and Santa Claus,” he expounded, “I would believe in Santa Claus.” The New Brunswick premier was presumably lamenting businessmen’s inclination to soothe their every hiccup by running to governments for help. This mixture of private initiative and public money may once have been a grand idea, but with governments barely managing to pay their bills, it is business that will have to lead this country out of its economic malaise.

That new mood of feisty independence will be 1983’s most impressive legacy: an economy set loose from its political footings, dependent for its future direction and success on the new superstars of business.