In defense of capitalism

Based on a few columns and conversations over the past few days, I regret to inform you that anti-business sentiment is alive and well in New Brunswick.   Of course this is nothing new – I remember feeling this back in the early 1990s when I started in the economic development business when certain journalists and pundits heaped scorn on efforts to attract industry to the province as if there was some magical better way – a way they themselves never felt inclined to share with the rest of us unwashed masses.

There are clearly businesses that act in unethical ways.  There are businesses that act in criminal ways.  No one would ever deny that.  However, claiming that businesses – and capitalism itself – is inherently unethical and corrupt and needs to be tightly controlled is, in my opinion, fundamentally wrong.

We have rules and laws in society that apply to all people but are meant to deter a small minority who would act unethically or immorally if those laws were not in place.  If we took the no murder law off the books tomorrow, the vast majority of people would still eschew murder – because it is morally wrong.    The same applies to business.  We need rules and laws to protect the majority of fair minded and honest business people from the fringe who would act unethically or immorally given the chance (and who do).   We should not assume all businesses and business people are inherently corrupt and immoral and need tight laws and control anymore than we would say that about the general public at large.  We do not assume all New Brunswickers are inherently unethical and immoral and we need tight laws to rein in their evil designs.  However, that is exactly how many people feel about businesses – and the New Brunswickers who lead them.

In fact, the seeds of fascism lay in that very belief that people need to be tightly controlled.  Tightly controlled by whom?  Same with business.

I believe in the invisible hand – in most cases, where there are relatively open and competitive markets – works fine.  There are hundreds of industries from pizza to plumbing that operate essentially on the supply/demand principle.  There are a few industries where more regulation is required – those where there is a greater public interest or where there is greater potential for externalities – but that doesn’t invalidate the capitalist, free market system.

Those who wage this guerrilla war on business with their misleading and inflammatory diatribes – I think – do so from a belief system that capitalism is inherently evil and needs to be tightly controlled.  They believe there is a defined economic ‘pie’ that is somehow carved up and too much of that pie goes to too few people.    The whole Shumpeterian idea of innovation, creativity and creating new value/wealth is completely lost to them.

My liberal view of the world is that we need to be an open, free economy where businesses can thrive and prosper and those who commit illegal acts are brought to justice – just like those individuals who also flout the law.    Society as a whole should take a portion of the economic activity generated and apply it to public goods that are desired by the population as a whole.

While I fully agree with the right of any person to have a viewpoint and, further, I even agree there is some value to keeping a skeptical eye on some industries and business practices, I wholly disavow the full bore war on business.  It is cowardly to try and bring something down without providing a viable alternative.   All that does is make the current system unstable and distrusted by the populace without providing any other options.

New Brunswick needs more business investment, not less.  At its core, the problem with our society over 100 years has been the lack of a vibrant and growing business community.  We have replaced this lack of business activity with $2 billion in transfers from stronger economies elsewhere in Canada to pay for public services and created an unstable political economy where there has been virtually no immigration, limited business investment, a lack of entrepreneurship and out-migration of many of our most talented people.

I am going to keep defending capitalism in New Brunswick.  I am going to celebrate those entrepreneurs who develop interesting new ideas into products and services and take those ideas to market.  I am going to applaud those large businesses who make the decision to invest their capital here rather than elsewhere creating jobs and opportunity for New Brunswickers.   I am going to continue to call for more immigration – and the attraction of people and ideas – the ideas that transform dormant capital into economic development and stronger societies.

And where businesses and business groups take steps or do things I think are counter to interests of New Brunswick society as a whole, I will continue to say so – just as I have by criticizing business groups for demanding ever lower taxes even as KPMG reports we have the lowest total tax burden for businesses in North America.  We can, and should, have these debates – but I will not broadly criticize the economic system at the heart of our democracy.  I will promote it.

Let the criticism begin.

13 thoughts on “In defense of capitalism

  1. ” but I will not broadly criticize the economic system at the heart of our democracy”

    Ah, well, who is criticizing it? Nearly all the moaning I hear about business is aimed at certain large corporate empires, not at business per se, nor at capitalism. I hardly think NB is a hotbed of anti-business sentiment.

    Are you setting up a strawman?

  2. Good post David. It would be an interesting study to investigate the perceptions New Brunswick’ers have of business, and entrepreneurship.

    If we have a tendency to be on the ready to “throw rocks” at business, or are quick to elevate individual failures as evidence to say “I told you so”; then we aren’t thinking about how we as individuals can start and create our own businesses – and even more importantly, we would contribute to a cultural web of influence that inhibits others from creating businesses.

    Personally, I have a huge amount or respect for any individual who shows the strength to become an entrepreneur. There’s nothing nobler in my view. These people live their passion, and often sacrifice wages and time for the sake of BUILDING something. Even those that have tried and failed – deserve huge respect.

  3. I’ve got ten minutes so I’ll expand on Richards point (which sums it up pretty well:) There are VERY few people I’ve heard go on and on about the evils of Pizza Delight and how they are corrupt and a drain on society and ‘shouldn’t exist’. Who says that?

    Who in New Brunswick, I mean come on, thinks the ENTIRE economy should be run by the government? Most people in NB, maybe even Canada, don’t think the government can run what its SUPPOSED to run. I don’t think I read a SINGLE comment that praised the government when it started selling its own beer.

    And again, it comes down to this ‘invisible hand’. That phrase was coined in the late 1700’s by a scotsman. Now, if we were sitting around talking to scientists about the ‘ether’ or ‘phlogistem’, we’d be laughed out of the park, yet people still bring up this ‘invisible hand’ as if it were a fact to them.

    It’s good when you try to come down in the middle of topics, we know you don’t agree with Scott very often either, but in this case its all semantics. The ‘invisible hand’ as a matter of ‘fact’ (at least by its first proponent) had the component of intense public regulation-namely regulation to prohibit monopolies or oligopolies. Now, does THAT sound like modern ‘capitalism’? Canada DOES have anti monopoly laws, but has virtually never used them. So you get, well, New Brunswick. Where McCains and a co op determine agricultural policies, where Irving determines energy policies (by and large), where five companies, each with a monopoly in a certain area of public land control forestry policies.

    How many people did you hear complain when RIM purchased that company in Fredericton? If they added more jobs tomorrow, imagine the headline “RIM creates 200 jobs in Fredericton” – do you expect pickets? Riots? Even a SINGLE letter to the editor from a crazy person saying “we want to keep that Ontario money OUT”.

    We don’t live in ‘capitalism’, we live in ‘corporatism’, which is something that any original capitalist would shudder to think of. Private concentrations of power were even more anathema than governments. This is where Scott always misses the boat, a corporation is FAR more dictatorial than government, and an unfettered market simply means that ultimately ONE corporation would exist. I run my own business, so I certainly am no marxist, I’m believe in free markets the same way Ralph Nader does. But you need a strong government to control corporations, who now have more wealth than most countries. Its true that TODAY governments in canada essentially work in partnership with these corporations, but ‘today’ doesn’t mean ‘forever’.

    The next time you are talking to somebody who is so ‘anti business’, just ask them how they felt about the RIM deal or whether they’d rather that the government owned all the businesses. I think you’ll find that, as Richard says, there’s just one or two businesses they have in mind.

  4. It is true that the attacks are centered mostly on big business. I have talked about the romanticism associated with the mom n pops in this province (of which I am a proud member). But microbusinesses (less than 20 employees) only employ 20% of the workforce and if you take out the one and two person shops it drops to 15%. You guys can pretend its about ‘one or two’ firms if it makes you feel better but I talk to a lot of people and read virtually all of the print media in this province and it’s more than just ‘one or two’ firms. When people talk about the ‘corrupting corporate influence’ and the ‘governments cowering to big business’ how do they think that is viewed by the general public? We can, and do, have a serious conversations about issues on this blog but I happen to thing this attitude has broader impacts on society. And it is interesting to hear about this from someone in Waterloo who is living in a region that has benefited from more global business investment than just about any secondary market in North America. Let’s trade places. We’ll take RIM and the dozens of global tech firms and the billions in investment and you can have the folks complaining about the corruption.

  5. ” the attacks are centered mostly on big business”

    Perhaps, but the point is there are relatively few such attacks – and nearly all of them are aimed at the Irvings and the McCains. I think you are making a mountain out of a molehill.

    It’s certainly true that people have different perceptions of SMBs than large corporations, and many of those perceptions are false. But to conflate that with the idea that our current ‘capitalist’ economic system is evil – well, I think you are exaggerating things just a tad. Those perceptions are not that much different here than anywhere else; its just that, because of a less dynamic economy, we have fewer examples of positive development and more examples of ‘told you so’.

    And, yes, I would be happy to have RIM and its billions of investment capital here – even if a few wagging chins moan and, heck, even if RIM greases a few palms to get it done.

  6. I guess one of the problems is that you folks don’t see the impact of the attitude. I talk to politicians, community leaders and even business leaders on a weekly basis who tell me “we don’t need those big firms coming here” and “we can solve our own problems”. I hear this after mill closures as if pouring a few million in taxpayer dollars into a few small businesses is going to replace the mill. This is not a theoretical discussion. In the 1950s and 1960s, if you read about economic development, you see a focus on attracting investment here. Now you hear the opposite – we have hundreds of government workers whose entire job is taking taxpayer dollars and determining which small to medium sized NB businesses are going to get it. I estimate there are some 500 people between ACOA, BNB, the Enterprise Agencies and the CBDCs whose primary function is related to matching government funding programs to SMEs and around two dozen people whose primary function is to promote New Brunswick outside the province. This stuff does matter.

  7. You want RIM? Nothing personal against RIM, but six years ago RIM was laying off people-NOT hiring them. Our unemployment rate here in KW is virtually identical to NB-10%. Most of the head owners of RIM have been CAUGHT doing illegal insider trading that SHOULD have landed them in jail with Conrad Black. And that doesn’t even get into the murky area of where exactly their original patents came from in the first place-its quite possible the owners aren’t so brilliant, but are just good thieves.

    While its great that the owners like research and give lots of money to think tanks, the fact is that virtually EVERY natural space in the city has now been co-opted by RIM buildings-even though there are tons of empty warehouse spaces sitting vacant.

    And keep in mind that that is TODAY, if you don’t think that in the future when times aren’t so good that RIM beneficience won’t be quite so laudable,think again, they are a PUBLIC corporation. People said wonderful things about Nortel 30 years ago-and RIM doesn’t pay like Nortel, in fact their manufacturing pays less than what an NB call centre employee would make.

    So lets not pretend RIM is not a corporation, they are just in a different field than the Irvings, and one which has what we’d call ‘better quality’ jobs and is growing fast. But thats it. As for ‘international money’, I’m not sure what you’re thinking of, as I’ve pointed out before, even the companies that have set up in the “Accelerator Centre” have gotten money from the government, even despite an ‘angel investor’ campaign.

    THAT is why people have problems with big companies, what I just wrote is about what is considered a golden company, yet there are big problems associated with it. If the owners of RIM, on a whim, decided to pack up and move to India-which they could-this city would be screwed beyond your wildest dreams.

    The other thing that saves the area is of course the fact that you good hearted people of the maritimes continue to send your monthly insurance cheques here.

    Thats WHY people have a visceral dislike of ‘big’ companies. Its for the same reason they distrust ‘big government’, or big ANYTHING. The repercussions are so clear in a place like NB that personally, I think you’d have to be crazy NOT to think that.

    Keep in mind its not just one or two companies except within industries. In aquaculture its Cooke, in insurance you have five main players, but 15 companies, all from outside NB. In banking you have four or five. And within towns there’s always one or two families that own all kinds of things. When I worked in NB, I had customers with money, but boy you get a different story of these guys when you meet somebody who had worked for them or been a supplier.

    This is NOT to say that investment is bad, foreign investment is bad, or even LARGE investment by a single party is bad. I’m explaining WHY people think the way they do. You overcome that with the proper political tools and doing due diligence. Is a chicken processing plant that will dump all its effluent in the St. John River a good idea? I don’t know, it all depends on the details.

    I appreciate that you talk to lots of people, but anecdotal comments can be tricky. If its small business people, then why would they want more businesses?

    One other point. ‘Community leaders’ are often the same as political leaders, and business leaders. Thats a VERY small segment of the population. And frankly, if they are all getting by, whether by a monopoly market or government largesse, then why would they think anything else? Try talking to the other folks, and yes, the other folks DO matter.

  8. ” I talk to politicians, community leaders and even business leaders on a weekly basis who tell me “we don’t need those big firms coming here” and “we can solve our own problems”. ”

    Yes, that attitude is found often enough. But that is not a rejection of the capitalist system is it? It’s more like a rejection of reality.

    “criticizing business groups for demanding ever lower taxes even as KPMG reports we have the lowest total tax burden for businesses in North America”

    I will bet you that I see the “we are taxed to death” statment more often than you see the ““we don’t need those big firms coming here” statement. Again, a rejection of reality.

    Of course, we can’t blame people for rejecting reality. After all, major news media throughout North America work very hard to create an alternate reality.

  9. > Based on a few columns and conversations over the past few days…

    > Those who wage this guerrilla war on business with their misleading and inflammatory diatribes…

    I wish you would be more specific instead of responding to ghosts. Who are these critics (do you mean me?) and what are they actually saying?

    It’s easy to be against unnamed “inflammatory diatribes” – harder to be against the actual arguments people are making.

  10. Sorry about that, but its a visceral reaction to the ‘..coming from waterloo’ remark. I’d move home to NB in a minute if there were any viable opportunities-well, maybe. For this region, I’d far rather see growth WITHOUT RIM, because there are numerous mid sized companies doing research. But just like a pulp mill leaving, if RIM packs it in it creates HUGE hardships. But Open Text is here, Google has a small presence, all these are good small and mid sized companies, and there is no reason that HUNDREDS more couldn’t set up. That makes for more ‘natural’ growth. So much tied to one company is like growth in Fort MacMurray-its not a great way to grow.

    IF there were ANY private sector unions left in the province, then you might have some ‘leaders’ who would present other views. The workers in NB are largely disenfranchised, they have no ‘leaders’ who speak for them and would no doubt LOVE virtually ANY company. If you read the remarks about the chicken processing plant, apart from a few crazy irrelevant comments, virtually all of them were extremely happy, even though it is a Quebec company, and even though it may create considerable environmental problems. But the people in that region are ecstatic, as was most of the comments.

    Keep in mind also that it is largely hypothetical, if you had a large investor backing you up, then people may have a different view. I remember reading a book about life in Yorkshire called “The Horse of Pride”, it pointed out that the less a person has, the more likely they are to have extreme pride in what little they have. Nobody likes ‘charity’, so just talking about an investor ‘coming to help’ sounds very much like “hey, your a basket case, wouldn’t you like somebody from ontario to come and bail you out?” People will quite naturally resent that. But again, apart from the subsidy talk, I don’t remember much complaint that Molson was coming to Moncton, and though they are gone now, I don’t think many in the acadian peninsula were griping about ontario money in Atlantic Yarns.

    I should finally state that I DO understand the concern-that that kind of talk could permeate all the way up the chain of command to decision makers who are working at the ED organizations. If THEY are picking up on that or using that as a focus, then there is a problem. That’s where the measuring statistics would come in handy.

    I think it would be beyond ironic that businesspeople would be ‘attacking capitalism’, I mean, thats exactly what they are doing.

  11. Perhaps this ship has sailed, but I wanted to take a minute to back up David’s observations. In my role, I’ve seen numerous examples of anti-business sentiment from union groups, civil servants, non-profit organizations and even small businesses. The sense that profit is bad and success is a dirty word can definitely be seen in the coffee shops around Fredericton. Someone driving a nice car that their entrepreneurial risk earned them is viewed as stepping on the little guy, even in that entrepreneur IS the little guy.

    I’m similarly worried about those who see new foreign investment as a bad thing that will increase competition for talent, drive wages up, and crowd out local company head offices and operations. To me, more companies hiring, paying better wages and bringing greater competition to our economic landscape will stimulate the population growth we need and the tax base development critical to a stronger fiscal future for all NBers.

  12. ” In my role, I’ve seen numerous examples of anti-business sentiment”

    No doubt, but is the level of ‘anti-business’ any higher here than elsewhere? If true, then perhaps there is a problem, although I’d like to see some evidence that it has adversely affected public policy before I got too excited. If some of our poor public policies (which often benefit ‘big business’ outfits already here) are looked at, I think you could argue that the public is bending over backwards to help large companies.

    ” more companies hiring, paying better wages ”

    And what percent of your members would like to see the next increase in the minimum wage spiked? Perhaps that might explain some of the ‘anti-business’ attitude you encounter.

  13. “Is the level of ‘anti-business’ any higher here than elsehwere?”

    I would honestly say yes. When I lived in Sydney (AU), Delhi, Toronto and even Ottawa, I saw a celebration of business growth and success that I have not seen here. Perhaps that’s because of our proportion of public sector employees in the provincial workforce…

    “What % of your members would like to see the next increase in the minimum wage spiked?”

    If by spiked you mean killed, about 20%.

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