Pivot or perish: Canada’s economic dilemma in 2017

Special to The Globe and Mail | Sunday, January 15, 2017

More than 90 years ago, an enterprising businessman in Cincinnati named Noah McVicker came up with a clever solution to a vexing problem. Wallpaper was popular in homes in the 1920s and 1930s – but because of coal heating and oil lamps, it got filthy. Mr. McVicker developed a putty-like substance that could be pressed onto the walls, cleaning them without damaging the wallpaper.

His family-run soap company enjoyed great success with the product, but he was sideswiped with a most unwelcome development. By the 1940s most homes had converted to natural gas and electricity, and wallpaper was not getting as dirty. This gutted the demand for his cleaning product and threw the company into trouble.

Fortunately, his nephew Joseph was able to see a bigger picture. He recognized that Mr. McVicker’s product was so much more than just wallpaper cleaner. It was also popular with art students as modelling clay, and children enjoyed playing with it. With this greater perspective, Mr. McVicker pivoted and changed the market for the product. It gave birth to one of the most successful and beloved toys of all time: Play-Doh.

What lessons can Mr. McVicker’s story offer to Canadian industries in 2017? We aren’t facing falling demand for wallpaper cleaner, but our economy is in a precarious situation. The United States is shifting toward less, not more, global trade. And like Mr. McVicker who faced an unexpected and unwelcome drop in demand for his product, we need to pivot. Quickly.

But how? It requires us to look at our economy, our resources and our products in a new way.

Bitumen would make a terrible children’s toy. Softwood lumber has few other purposes if not sold to U.S. buyers. Our auto parts sector will be decimated if Trump puts Canada in his anti-trade crosshairs. Adapting to unwanted and unexpected change is not easy, and no one suggests it is. Mr. McVicker, too, may have thought he was doomed. What saved him was his nephew’s ability to see the wallpaper-cleaning putty in a new way.

So what’s Canada’s bigger picture? If the world’s largest economy is turning inward on us, can we pivot to Japan, the world’s third largest economy? They need lumber and oil too, as well as high value-added parts and components in manufacturing. Maybe 2017 is the year we get serious about a bilateral free-trade deal with Japan.

And while bitumen has few other purposes other than to be pumped into a pipeline and sent to refineries in Chicago, can we find other ways to economically use the product here at home? Refineries are costly, though, and Canada is an expensive place to build them. What other creative ideas can we come up with to use our hydrocarbons in a different way, rather than simply burning them as fuel?

Our manufacturing sector, too, holds enormous untapped potential. Rather than remaining a branch plant economy that feeds into the U.S. behemoth (the model that worked so well for decades following the Second World War), what can we learn about design mentality from places like Denmark? How can we position our economy at the top end of the value-added chain, which is product design?

Thousands of Canadian companies are already doing this. We are creative, innovative and great designers. But so far, it hasn’t been enough. If Mr. Trump carries out his (naive) plans to repatriate U.S. jobs by restricting trade, Canada’s economy is in serious trouble. We don’t have the luxury of a five-year Royal Commission to explore the problem, and two decades after that to execute a plan (which was the model used to introduce the free-trade agreement in the late 1980s).

We need to act quickly. The solutions may not seem obvious to us at the moment. Then again, I doubt Noah McVicker would have imagined being the inventor of Play-Doh.