Some myths about foreign business investment in Canada

Some myths about foreign business investment in Canada A. E. SAFARIAN Harold Innis once said that the risk of being an economist in Canada was that you might die of laughter. That risk seems to me to apply today to non-economists as well, when one considers the haste with which many persons are leaping on the bandwagon of economic nationalism and the arguments which are being used to convince us of the evils of foreign business investment. Canadians were recently asked by a parliamenta_ry committee to consider a proposal that at least 51 percent of the voting shares of all Canadian companies be eventually owned by Canadians. We were also told, by the same committee, that this might involve "a massive misallocation of scarce Canadian capital resources." And everyone knows that the 49 per cent single foreign owner would continue to control the company if the remainder were widely held. Not too long ago a strongly nationalist editor was reported in his newspaper to have told a group of high school students in Toronto that it was impossible to be a Canadian patriot without being anti-American. More recently, his paper quotes him as emphasizing that he is not anti-American. If one were to use his earlier standard, this would put his patriotism into question. Then we have the increasingly insistent and widely-reported views of some well-organized groups who would have us believe that not only the survival of Canada but poverty, regional inequalities, nationar unity, unemployment and pollution are closely related to the question of foreign (particularly American) ownership of industry . One is reminded of that line in the movie Z: "Always blame the Americans even when you are wrong you are right." * An earlier version of this paper was given to the McMaster Economic Society, March 1971. Journal of Canadian Studies I suggest that we are being misled in a very dangerous way by much of the current debate on foreign investment. I say dangerous because such false premises can only stampede us into thoughtless actions with very little regard for whether they will achieve the desired ends, whether they are the best means for so doing, what will be the net costs and who will bear them. There are policies we need on foreign investment, and far more on the corporate sector, wherever owned. But any such policies need to be subjected to close scrutiny in their own right, not adopted as desperation measures to save us from what is often self-induced paranoia , without regard to the consequences. The public debate on this issue, however, reflects a polarization which is notable more for its opportunism than its serious consideration of policies. Those who believe in nationalization of industry as such find the multinational corporation a handy scapegoat (especially since it is at present mainly American) but their real quarrel is with the mixed private enterprise and regulatory system we now have. A simple test is to ask whether those who believe in massive nationalization of industry would nationalize the 15 per cent or so of the capital in the iron and steel mills which is foreign-con~ trolled but not the approximately 85 per cent which is controlled in Canada. Of course not. What should be a debate on the merits or demerits of massive nationalization (regardless of who now owns the assets) has been submerged in some quarters under a wave of national feeling, calculated to turn even the heads of some strongly nationalist conservatives - until they consider the far left's position on Quebec. Meanwhile, other groups present us with far too much special pleading masquerading as the public interest. I am not innocent of the idea that everyone is a special interest at some point. But I suggest that there is a public interest which is not going to be secured by protecting everyone who sets up a hue and cry when 3 he is hit by foreign competition. In those few areas where questions of identity are paramount, we must try to find less stifling ways than this to encourage Canadian initiatives . Another Look at the Data One of the more important myths on this question is the...