A PANEL DISCUSSION ON THE INTERACTION BETWEEN NATIONAL POLICIES AND BUSINESS DEVELOPMENT
THIRD INTERNATIONAL CONFERENCE ON COMPUTER COMMUNICATION. TORONTO. AUGUST, 1976
The interaction between Government and the Free Market System is at a critical stage in Canada. Government involvement in the economies of major countries in the Western World has been growing for over a century, but has shown a marked acceleration during recent decades.
The imposition of comprehensive controls on prices, wages, profits and dividends, here and elsewhere, has caused concern and even alarm. The frightening spectre is that the involvement of government at the detailed level of product development and marketing may become permanent.
This is clearly a time for reason not rhetoric. Entrepreneurs and businessmen in Canada must not panic, but rather respond to the Prime Minister’s challenge to open the topic for national debate.
THE NATIONAL CHALLENGE
The challenge we face as businessmen and citizens is to ensure that the subject is discussed and the result is a clear definition of the role that government should be permitted to play in the Free Market System for the benefit of the country.
The Free Market System has provided the Western World with the highest standard of living ever known. The system should not be lightly discarded.
It has not been proved in any country that extensive government control or direct operation of a large portion of a nation’s economic enterprises does act in the best interests of the majority.
However, it is equally true that the ‘invisible hand’ of Adam Smith is not sufficient guidance for all aspects of a complex modern economy. The question that must be addressed is not IF government involvement is required but WHERE and TO WHAT DEGREE.
Let me suggest some guidelines:
THE ROLE OF GOVERNMENT
I believe that the first obligation of a national government is to establish a clearly stated set of objectives for the country. These objectives should be stated as rigorously as possible. The plan must be long range, e.g. to the Year 2000.
By being rigorous, I mean that the government should define the national objectives in numeric terms, wherever possible. I suggest they could include:
• a gradually increasing GNP per capita with specific checkpoints every five years
• a defined acceptable level of inflation
• a policy of substantial resource independence through development of substitutes, recycling, etc., as only this way can a National Plan be reasonably independent of external factors
• a definition of acceptable environmental levels of pollution
• an objective in terms of desired population size which must be linked to the desired GNP, resources, and similar factors
Such a model would have to be dynamic but would at least provide objectives against which Canadians could judge the results of strategies developed by governments or private enterprise.
This clearly recognizes that there must be constraints but these will be largely acceptable to both parties when viewed in the light of the national objectives to which the majority of Canadians would then have committed themselves, I believe that the greatest shortcoming of our current national government is the failure to create such a Plan.
I do not underestimate the size of the task. We must not under estimate the cost in wasted effort if we do not try.
The establishment of a national set of objectives is particularly difficult in a mixed economy. The implem entation will be more difficult than a series of Five Year Plans in a more authoritarian state but, if we fail to define where we are going, there will be no way of judging how well we are succeeding.
Many States in the United States have established Project 2000 operations with this in mind. I believe the government in Canada owes the people no less.
Without such a long range plan, Democracy as we know it and the Free Enterprise System we purport to cherish will almost certainly decline. The difficulty is that, without national objectives, the majority in a Democracy can and will vote themselves as much of the resources of the country as each generation desires. This situation is compounded by the generally short range outlook of governments elected for periods of five years or less.
With clearly stated goals, the role of government can then be defined in terms of the amount of involvement in the economy necessary to reach these goals.
THE INTERACTION OF GOVERNMENT AND THE FREE MARKET ECONOMY
If the first objective of government is to define national goals, the next task must be the definition of minimum levels of service in Health, Transportation, Education, etc., that will have to be provided directly by the government if such services are going to be uniformly available to all Canadians.
Examples might be:
• a national rail network, such as the CN
• a national airlines system, such as AIR CANADA
• a national broadcasting system, such as the CBC
Public support of such basic operations will be necessary if service is to provided to all Canadians even in marginal areas. Canada has shown great ingenuity in using Crown Corporations, or other devices, in developing our present mixed economy.
However, unless it can be clearly demonstrated that further regulation, control, or operation by government of organiz ations in such industries is absolutely necessary, I believe that the Free Market System should be allowed to operate with as little interference as possible.
For example, restricting Canadian Pacific Airlines to a percentage of Air Canada flights in designated areas is a restriction totally unwarranted. Having established a national broadcasting network, with its implications for national unity, it then becomes redundant to artificially restrict what can be done by private networks.
It is in areas such as the latter that government is creeping into the Free Market System in a way that will ultimately lead to the destruction of the system.
Where there are peripheral services that are desirable but not within the defined minimum level of necessary services, these should be left strictly to the private entrepreneurs. Those operating in the free market sector will, of course, have to live with constraints in the areas of public safety, environment or, on occasion, resource usage. But beyond this, the default option should be that the private sector is left unregulated.
The role of the private sector must be to provide the choice and diversity of products and services desired by the citizens of the country. They can only do this when the Free Market System is available to allow opportunity for entrepreneurs with suitable rewards for success and the risk of failure when the entrepreneur has not properly judged the desires of the public.
GOVERNMENT AS AN ENTREPRENEUR
Where the national government has attempted to take over the role of the entrepreneur, the results have been almost uniformly unsatisfactory.
The well-intentioned efforts to establish a computer manufacturing industry in Canada has only led to financial disasters, such as Consolidated Computer, Inc., or the provision of government funding to multinationals who could well afford to finance programs on their own.
The attempts to establish a components industry with government urging and backing has been even less successful. Microsystems International is a project that I doubt would have been undertaken had it not been for the prompting and financing of the Federal Government.
These and many other examples arise because of the confusion in the policy of our government between the risks that an entrepreneur can and should properly undertake in response to real and not imagined demand, and the proper role of government in providing the basic minimum levels of service designed with national objectives in mind.
The government is a poor entrepreneur. It should stay out of this area. It should leave to industry the initiative in response to market demand. Government should let industry take the risks.
There is more than enough to do with public money than to bear risks that should be undertaken by the private sector.
THE COMPUTER COMMUNICATIONS INDUSTRY
Our industry faces a major challenge in this redefinition of the role of Government and the Free Market System.
First, in Canada at least, our industry is going to have to be more independent and stop requesting assistance from government. The more we request, the more difficult it will be to draw a reasonable line between government and our industry. If we do not like the results, we will then have only ourselves to blame.
Secondly, as we are the entrepreneurs in the information processing field, we will have to direct our efforts towards assisting our national government in doing the computer modeling and other tasks that will be necessary in the Project 2000 I am proposing today.
I am sure our industry will rise to this challenge.
A BILL OF RIGHTS FOR THE FREE MARKET SYSTEM
As students of Roman History will know, it became necessary for the Citizens of Rome to establish a position called The Tribuni Plebis. This Tribune of the People was responsible for protecting the rights of the citizens against the Senate. Today, the position of Ombudsman has a similar function wherever this concept is in use.
I suggest that the time has come for those of us who believe in the Free Market System to establish an Ombudsman to protect the system from encroaching government interference.
Such a position would have to have constitutional powers to monitor government’s action and take corrective steps, where necessary.
I believe that nothing less than this approach will be truly effective. The alternative will be a steady erosion of the system that has done so much for us.
The default option must be the private sector. The onus must be on the government to convince the Ombudsman that it is absolutely necessary for the government to take over or closely regulate a new sector of the economy. This case can only be made by relating the need to the previously proposed national objectives.
If we believe the Free Market System is worth protecting, we must act now.