BLOG #2: Is Canadian Manufacturing Facing a Problem?

This is a draft excerpt from Chapter 1 of "The Boiling Frog Dilemma" which I've been working on over the past couple of days. The point of this chapter is to set up the problem that traditional manufacturing in Canada is in for trouble (i.e., a frog in a pot of water) unless we take some intentional steps. Below I intentify three kinds of attitudes that deny Canadian manufacturing is facing a problem. I'd be very happy to hear any comments!

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Is There Really a Problem?

There are those who would challenge the whole idea that Canadian manufacturers are in trouble, or if they are, that there are very easy fixes to the problem. To these people, talk of the sun setting on our domestic manufacturers is all much to do about nothing. These voices can be loosely groups into three schools of thought:

The Deniers: Some will flat-out deny that Canadian manufacturing is facing any challenges whatsoever, and that in fact things are on the upswing, so we needn’t fuss or worry.

Lots of statistics could probably be dredged up to show that manufacturers are doing just fine. This is a well-known problem with numbers and data—selective use of it can be used to make almost any point. (It’s also one of the reasons why this book intentionally avoids the heavy use of statistics.) Just because some select data could show some upward trends in manufacturing (which doubtless they could if you dig hard enough) is not evidence enough to stand against the common sense knowledge that Canadian manufacturing is experiencing the ground shifting beneath its feet.

Even more anecdotal evidence could be presented of the “success stories” in contemporary manufacturing. A big part of this would no doubt be the Canadian auto manufacturing industry, which as posted an impressive come back after its near-death experience in 2008 and 2009. But the very fact that they had such a dramatic near-death experience—and required massive bailouts from the federal and Ontario provincial governments—is more to the point that all is not well for manufacturers.

The deniers are similar to the frog in the pot who has somehow managed to trick itself into believing that the water is not actually heating up but is actually quite comfortable.

The Blamers: Others will admit that there are worrying challenges facing Canadian manufacturers, but they blame these on external, especially global businesses and global trade liberalization.

The key arguments here include accusations that other countries unfairly subsidize manufacturing, allow sweatshops that abuse and underpay their labour, or employ other untoward tactics to lure manufacturing away from North America. These are also generally the anti-trade activists who believe far more damage has been inflicted on the world from trade liberalization than benefit. While there are certainly concerns around fair trade practices and labour standards, the overwhelming consensus of economists has concluded long ago that trade liberalization has done far more to raise living standards for millions around the world than has any other type of policy, including foreign aid. The Blamers, however, will reject those statements outright.

The Blamers are similar to the frog in the water who externalizes the problem, doing nothing but croaking loudly and angrily, hoping someone on the outside of the pot will take pity and turn down the heat.

The IF ONLY-ers: Finally, a third camp would also agree that Canadian manufacturers have some issues, but insist these could all be easily solved through more favourable policy measures.

Of the three types of people who would challenge the idea that manufacturing must change, these are probably the most common. They see the solution lying in lobbying governments for tax concessions, more generous subsidies, loan guarantees, and other internal policy changes. Oddly, both union activists and management fall into this camp. Unions blame management for the problems, and push for higher wages and better pensions (as if that’s going to solve the problems). Management blames unions for raising labour costs and imposing rigid, inflexible contracts. Both push the governments to do something, as witnessed in the 2008 auto bailout.

The solutions for those in this category all start the same way: “IF ONLY ____________ would do ____________, then the problems for manufacturing would be solved.”

The IF ONLYers are like the frog in the pot, anxiously swimming around saying “if only the water was cooler…”

Of course, all three are wrong. And like the frog that doesn’t take action, their self-preservation strategies are going to end badly.

All is Not Lost!

So, is there a problem for Canadian manufacturing? Without question the answer is yes.

But there are reasons for hope, too...

(more coming in Chapter 1 of the book "The Boiling Frog Dilemma")