BUSINESS/ECONOMY

The Tory-Business honeymoon

Ian Austen November 12 1984
BUSINESS/ECONOMY

The Tory-Business honeymoon

Ian Austen November 12 1984

The Tory-Business honeymoon

BUSINESS/ECONOMY

Ian Austen

When Pierre Trudeau became Prime Minister in 1968, he spent the first Wednesday night of every month consulting with some of the nation’s top business executives. But within two years, Trudeau had become disenchanted with the industry leaders because, he said, they were poorly prepared for the meetings. Recalled one close Trudeau aide who attended: “He was appalled by their lack of expertise and breadth.” The businessmen in turn became angry with what they regarded as Trudeau’s arrogance. Said the aide: “You do not tell Earle Maclaughlin [former chairman of the Royal Bank of Canada] to suck eggs in public without getting him upset.”

But that mood of confrontation changed dramatically with the landslide victory of Brian Mulroney’s probusiness, anti-interventionist Tories on Sept. 4. As Tory Finance Minister Michael Wilson prepared to announce his first economic statement this week, the country’s boardrooms were already expressing pleasure with the government’s first major moves: plans for massive cuts to the Canadian Broadcasting Corp.’s budget; the swift, unapologetic sell-off of all of the money-losing Crown corporations owned by the Canadian Development Investment Corp.(CDlC) (page 50); and the launching of an inquiry into the controversial 1981 PetroCanada purchase of Petrofina Canada Inc. (page 52). The Tories were also reaching out and inviting high-level private sector experts to Ottawa as advisers. William Mackness, vice-president and chief economist of the Bank of Nova Scotia, for one, is expected to become a government special adviser on fiscal matters for a one-year term.

At the same time, business executives say that they find the Prime Minister accessible again. Said John Bulloch, president of the Canadian Federation of Independent Business, whose group is to meet with Mulroney this week: “They are more of a pragmatic, consensus-type government and they seem anxious to consult. We have found every door open.”

The most striking of the government’s early actions was the shakeup and dissolution of the troubled CDIC, announced by Industry Minister Sinclair Stevens last week. Said Richard Sharpe, the

chairman of Toronto-based retailer Sears Canada Inc.: “The stand they took on the CDIC came pretty darned fast and was pretty courageous.” But the key issue facing the nation, according to business groups, is the $32.3-billion fed-

eral deficit. A paper released this fall by the Business Council on National Issues (bcni)—a lobby group that draws its membership from corporate executives—reflected the private sector’s concerns over the government’s

A BCNI task force headed by Darcy McKeough—the former Ontario treasurer who now runs Chatham, Ont.based Union Gas Ltd.—said that cutting government spending to reduce the defi-

cit “is the first priority.” As well, it rejected the notion of Ottawa increasing taxes to cut the deficit, arguing that new taxes would only slow down the economy. Instead, the group proposed that, among other measures, Ottawa end universality for social benefits such as pensions and baby bonuses, freeze foreign aid programs and wind down various energy programs, including grants for improving home insulation. The council also contended that the government should suspend incentives for petroleum exploration, and reduce government expenditures in all other areas, except the military, by two per cent.

The report said that failure to take those steps would be a costly mistake. If the existing programs were allowed to continue, it added, they would lead to higher interest rates and inflation. As well, Ottawa might be forced into increased foreign borrowing to meet its debt bill.

For his part, Pearce Bunting, the Toronto Stock Exchange president, also argues that cutting the deficit is an essential priority. Reducing debt, he said, would be a certain

means of attracting more foreign investment in Canadian industry. Added Bunting: “A lot of people want to invest in North America, but they have frankly perceived Canada as a less beneficial place to invest in the past few years. But

cutting the deficit is probably the one action that most foreign investors would regard as the clearest signal of change.”

Other business groups have proposed even more severe cutbacks to ease the deficit. The most controversial one came from the 8,000-member Canadian Manufacturers Association (CMA). In a submission to the new cabinet Oct. 17, the group urged Ottawa to consider relaxing some of the nation’s most sacrosanct laws, including child labor regulations, minimum wage laws and statutory holidays, as well as health and safety standards in the workplace. Even the CMA’s chairman, James Black, acknowledged that the government’s reaction to the plan was likely to be “just a little bit incredulous, a little bit disbelieving.” The New Democratic Party’s federal secretary, Gerald Caplan, charged that the CMA’s program represented “nothing less than a declaration of class warfare, an attempt to turn the clock back to the last century.”

Business groups have also welcomed Mulroney’s more conciliatory approach to trade and economic co-operation with the United States. To that end, the Prime Minister may discard many of the measures currently imposed by the National Energy Program—a favorite corporate target—as well as the stiff limits that the Foreign Investment Review Agency can apply to incoming capital. Said Alton Cartwright, the chairman of Canadian General Electric Co. Ltd., the Toronto-based arm of the U.S. electronics, machinery and appliance giant:

“The facts of life are that we are entering into a very open trading system in which the Canadian market will be open to all comers. To survive we will need a bigger market than the 25 million people we have now. The only one that is available is the United States, so we have to lean in that direction.”

But there have also been objections to the Tories’ early actions. Senator Keith Davey, a key Liberal strategist known for his pro-nationalist stance, declared, “I think the frightening thing is that the American business community will have an inordinate amount to say in

Canadian affairs.” Criticism of privatization plans has come from at least one unlikely source as well: Thomas Kierans, the president of the Toronto investment firm McLeod Young Weir Ltd., and a blue-chip member of Ontario’s Tory elite. Although Kierans is aiding Britain’s Conservative government in a sell-off of 51 per cent of its holding in British Telecom PLC, he declared in a recent study for the Institute for Public Policy Research that “privatization may prove counterproductive to Canada’s true policy priorities.” Kierans said he is concerned that after privatization, companies such as Canadair and de Havilland will be added to the holdings of corporations that are already much too large and too powerful. At the same time, he noted, there is little evidence to suggest that privatization will ultimately lead to the creation of any new jobs for Canadians.

Outside the realm of business, attitudes toward the deficit vary considerably. Douglas Hartle, an economist at the University of Toronto’s Institute for Policy Analysis, said last week that “most businessmen frankly do not know what they are talking about.” Acknowledging that the large deficit is “a terribly serious matter,” Hartle said it is more important to have a clearer sense of how long Canada will have to face such a large debt and what effect it has. He said that cuts are needed in the United States, where the deficit is more a product of the nation’s economic structure and where it has international implications. But Hartle added that cuts may not provide the solution to many of Canada’s economic difficulties. The Canadian deficit, he contended, could be largely dried up through five years of sustained growth. Declared Hartle: “We have had large deficits before and we have recovered from all of them.”

Still, businessmen clearly have high expectations for the new government. But many observers contend that the corporate world will eventually sour even on a pro-business Tory government. Said Jack Granatstein, a York University historian: “Although the reality is that business is the most listened-to group in society, businessmen always seem to feel they are not consulted. It is a historical whine and we will be hearing it even if the government does everything it said it would during the election.”

Mary Janigan

Carol Goar