The Thursday Question 2:46: All creatures great and small

The Carney economic agenda, so far

Cecil Frances Alexander’s hymn, All Things Bright and Beautiful, is a famous ode to the beauty of the divine creation and a favourite for children’s services. These days we usually skip the third verse - not many congregations want to celebrate the supposedly divine ordering of the estates. But the hymn’s enduring popularity still inspires with its verses on tiny flowers and bird, purple-headed mountains and rivers running by. Check the stained glass at your local church. It probably reflects the themes.

Lots of conservatives embrace Tolkien’s fantasies as lessons on how we should revere and protect the world as we have inherited it, and far be it from this newsletter to rubbish The Hobbit. But James Herriott’s memoirs of his time as a young veterinarian in post-war Yorkshire, published with titles inspired by Alexander’s hymn, are both more accessible and more germane. Herriott was raised in Glasgow and studied at its Veterinary College. He then moved to Yorkshire to join a small practice and worked with the county’s farmers and merchants as modernity pressed into that corner of the world. Opportunity and tragedy followed. New markets and technologies brought wealth, and also devastating new livestock diseases. The monsters and heroes of All Creatures Great and Small aren’t the imaginative beings of Middle Earth. They’re recognizably human figures. Where Tolkien asks his reader to imagine themselves as hobbits or elves facing the facing ugly horrors of Sauron and the orcs, the struggles of Herriott’s mid-century shire are more proximate, precious, fragile, and humanely beautiful.

With modernity comes the drive for scale. As we follow Harriott’s career, the small, prosperous farms of Yorkshire slowly give way to large-scale farming. Traditional methods give way to specialization and technology. An acre of land must feed more mouths with less labour. Yorkshire is remade into a less diverse but more efficient agricultural centre.

As any entrepreneur knows, scale creates inefficiencies along with efficiencies. Scale means bureaucracy and the pathologies of rational organization. A successful society eventually finds a way to ensure that large and small can co-exist. In this way, the decentralized, embedded knowledge of a spontaneous order creates more value, humanity, and freedom than a rationally planned order. All creatures, great and small, can thrive in a properly tended garden. (1) Freedom brings real diversity, and real diversity builds strength through resilience.

Alas, politics rarely attracts gardeners, and when it does the gardeners have trouble winning. Political ambition comes mated to the human appetite for greatness, and citizens admire and even worship that appetite. Who praises Harper for having tended the garden well? Our lists of “greatest prime ministers” highlight those who strove for greatness and persuaded us that they achieved it, not those who weeded well and left good compost (2).A political leader can campaign on the importance of liberty, but usually loses to the one that promises some supposedly bigger and more inspiring goal.

*

Canada’s private sector has a rich diversity of firms, but our market is weighted to small- and medium-sized businesses. Canada’s economy has only ever generated a handful of big multinationals, and they have not lasted. The Hudson Bay Company was once a global giant, had not been one for decades when it disappeared. Nortel, JDS Uniphase, and RIM all shone, then shrank or folded. Brookfield, Thomson Reuters and Couche-Tard are doing well today and with global reach. So are Bombardier, Lululemon, Shopify, Atco and a few mining firm. But our largest firm, Brookfield, doesn’t make the Fortune 100. We don’t have a Walmart, Amazon or Apple, nor does our health sector support a firm at the scale of UnitedHealth or CVS. The US, China, Japan, France, Germany, and South Korea all have huge global firms. We don’t.

Many of our economic problems get attributed to the rarity of giant firms in Canada. This why Canadian firms do not trade much beyond the US, or do enough research and development. It is supposed to be why we don’t “innovate”, whatever that means. Small firms are said to be starved for capital, to hold us back from national workforce planning, and to make our productivity problems worse. It is hard to get business, labour, and government aligned when businesses are mostly small.

In its early days, the Trudeau government often acted like small business wasn’t just an economic problem but a scam. Bill Morneau’s tax proposals targeted small businesses that were “just” fronts for doctors or lawyers. After Morneau left, the economic wreckage of Mr. Trudeau’s Covid response hit the smallest Canadian businesses the hardest. Then, last year’s capital gains tax seemed designed to penalize those who survived. But it’s hard to say that small business was especially hard done by. Canada’s big companies were also more than ready for a change in approach. When Conservatives shut the door to their lobbyists and CEOs, and savaged their corporate leaders in private and public remarks, well, something had to give.

It’s early days for the Carney government. So far, all we know is that the triumvirate - Messrs Carney, Blanchard, and Sabia - are creatures of the biggest firms, not the small ones. They know the halls of Brookfield, the Caisse, and CN, not the strip malls and industrial parks where our small companies are located. They have lived their lives in global capital markets. And they have earned more than their share of success.

So far, their world view shows in their signature economic effort.