The Domino Effect: Manufacturing In Canada

"...The Problem… Under the TPP (Trans-Pacific Partnership) countries across the Pacific, who do our Manufacturing for us and take away jobs while killing the need for innovation, manufacturing and distribution, will now able to do it even more but the deal is there is no over head or much less for shipping it across which means it’s cheaper. All that sounds good until your unemployed and don’t have a job to afford the now cheaper items...."

The Domino Effect: Manufacturing in Canada

(This article was first published on Pulse@LinkedIn on August 19, 2014)

In 2012 the GDP for the manufacturing sector in Canada (, 2013, Government of Canada ) reported Compounding Annual Growth Rate (CAGR) as a negative number. Here in Canada, partly due to trade agreements like NAFTA we have yet to make use of a manufacturing sector properly. In the last 40 years we have left the most important economic policy decisions to politicians. When economies reach maximized output levels it is because linear and vertical businesses and dependent sectors do well enough that they lessen the overhead cost by way of competitive advantage with each other. This causing the consumer cost to decrease with the retail price while reducing overhead operating costs and increasing employment. This also leads to greater consumer buying power with an increase in sectors which need employment and a propagating growth in economies ("The Wealth of Nations", Adam Smith, 1879). The point to keep in mind is that the GDP of one sector directly effects all other sectors. Michael Porter drew a conceptual layout of competitive sectors in the "Competitive Strategy Cycle" where we see how important it is to have flourishing sectors work side by side. If somebody said to me, "What does Randeep Dosanjh and Clickstream Consulting Inc do?" - I'd say "Outsourcing" but we're not destroying sectors - A) the sector is called "outsourcing", B) The "Outsourcing Sector" is there who assist in times when the work flow needs specialized hands C) "Outsourcing" strengths the overall strength of other sectors. When Canada outsourced "53%" of it's total Manufactured Goods to Foreign Ownership, you sold off the entire sector!

The first point this paper will attempt to make is that there is grave danger in outsourcing nearly an entire sector - especially manufacturing. The point where you're only relying on your nations financial position to be well established through the export of raw natural resources while you're increasing the cost of the general overhead needed to make up for the loss of funds you hope to make at the retail level through tax dollars is while consumer buying power is less because wages needed to sustain living is so little that very few citizens can afford to live well.

(Above Charts, www, , 2013, Government of Canada )

Let's look at Canada compared to the United States of America. Even with NAFTA, we see more "Made in the USA" labels than we do "Made in Canada" labels. The United States of America has hard rules which state if you're an American company your firm needs to have a certain percentage of total goods manufactured by a firm that year, in whole or near where all must be made in the USA. In Canada, we don't even care if the tag says "Made in Canada" to a point where we've killed our buying power while killing jobs and destroying an entire sector. To give you an idea of how passive Canadians are as business minds can be, I was sitting with a couple having dinner at the Fairmount Pacific in Vancouver while striking a conversation with the couple next to me. It just happens that the man worked for Oxford (a Blue-Chip Commercial Real Estate Developer) and his wife was a housewife who had worked in business previously. We were talking about how much oil Alberta is producing and I said something like, "It's sad we don't have more Canadian Oil Companies for the retail shelf. We're shipping it out to buy it back refined, to be sold at the retail level in packages with labels that say it was made somewhere else - not to mention the retail markup on the price". So his wife looks at me without thinking a note and says "Well that would never work because we only have 36 million people in Canada". This narrow minded woman doesn't even sit to think about how many countries and people in the world buy oil at the retail level.

This couple was from Alberta. For some reason Albertan's come across as self proclaimed geniuses about business but don't be fooled. That last statement is a serious problem if someone from there who worked in business couldn't even take a minute out of her narrow capability with that brain of hers to think maybe they sell oil in other places. I wasn't offended but I got up and left because we left a nation to be run and supported by people who think like this.

Which brings me to my next point about how killing manufacturing killed sectors which we need to bring up the unemployment rate with capable workers in that sector. Even with the numbers in manufacturing steadily increasing, we still have the vast majority who can't understand or do understand but either don't care or don't know how to change. Canadians need to understand top economies like that of the US to see why in the United States does better. Let's understand why the retail price of goods is cheaper as a beginning. I don't want to give it all away from my experiences of studying top economies so here is why things are cheaper to buy in the United States of America:

Top 3:

A) They have more consumers - so if you have more people buying something, the price of it will be less because the business selling the item knows it can sustain a profit without loss at a cheaper price. With 36 million people and some percentage of people who work and buy things, you've left your economy to be run by foreigners and their money OR Canadians who by and large don't have the buying power left because the overhead that business need to run their businesses is added to the retail price because a lot of what's needed to get items to the retail level is outsourced.

B) They have internal economies of businesses which produce jobs in more than one sector thus leading to a great economies of scale rule which, for short can be stated as, "exponential growth". As a business grows so do the linear and vertical channels eventually leaving a sustained internal economy to fund franchising to other nations while not leaving US citizens without jobs if they can. Ford and General Motors still manufacture cars in the United States of America. In Canada we fear the firms leaving Canada so much we manufacture raw goods and consumer goods in other nations making it near impossible for a single salary be able to buy a house in some places.

C) Because they have more consumers with enough buying power for their currency to pass through every sector needed for Competitive Strategy to be exercising Competitive Advantage the value of their currency holds greater investor confidence as well as consumer confidence. So much so that threw the last recession world currencies still valued their own worth in comparison to the US Dollar.

In conclusion, the Canadian Economic model needs to change to be a leading economy with more manufactured goods in Canada while understanding top democratic economies like the USA, Germany, Japan, Brazil and India. Canadians, like the current United Kingdom party in power, were able to convince media and themselves that Mark Carney, who is now Governor of The Bank of England, saved the Canadian economy during a recession when really there is a recession every 7-8 years since 1981 - anyone in his position would have looked just as good at the time. Not to mention those short term strategies Carney and the Canadian Tory government put in place let the Canadian economy go back to where it was prior to oil in Alberta or the recession. With of the natural evolution of economies needing reviewed policy changes with the evolution of linear and vertical advancements in all areas and the need for nations to change how they work together (usually leading to a war from a negative response to some nations advancing further than others) every 7-8 years this evolution of economies needs more understanding from policy makers. The Canadian population who thought Carney, Harper or the Tories were going to save the economy now see why that entire group, not to mention the self proclaimed brain behind this, Preston Manning, even back tracked since his hay day of preaching how to save the economy was a bunch on baloney. Even the United States won't let them build on oil pipeline because the Canadian government in power comes across "short term and ignorant". The economy in Canada is so reliant on the US that even in the past, at the lack of the US dollar to stay above the Canadian dollar, Canada is back where it was prior to the recession. Oh well, it's a hard way to end a paper if your a redneck reading this but I hope you'll wake one day from the delusional thinking that put Canada back where it was before the US economy went into a heavy recession. The next time someone tells you that entire sectors of business are better off outsourced ask them to include the other variables.

Author: Randeep Dosanjh

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