According to the Globe and Mail, Chrysler has resorted to extortion in order to extract tax payer money to prop up their failing company. According to the article:
At a parliamentary committee hearing last night, Chrysler president Thomas LaSorda said the company would commit to maintaining roughly a quarter of its North American production in Canada if its “needs” are met.
Chrysler then went on to list three demands/conditions of Chrysler continuing operations in Canada: union concessions, tax payer money, and an agreement that Canada will back off on its tax collection efforts to recover $1B in taxes it currently owes the Canadian people.
(Chrysler officials) “can say whatever they want. … Taxpayers expect us to apply the same rules to everybody in Canada and we’re not going to change the rules for Chrysler”
U.S. troops returning from duty in Iraq will be carrying out homeland patrols in America from October 1st in complete violation of Posse Comitatus for the purposes of helping with “civil unrest and crowd control” – which could include dealing with unruly Americans after a complete economic collapse.
Other news reports have highlighted past “behind the scenes” preparation by the US government relative to even a modest level of anticipated civil unrest, such as the advance preparation of massive prisoner holding pens which were put in place for expected mass arrests during the Denver Democratic National Convention in 2008.
Denver
Recently, a bill entitled the National Emergency Centers Establishment Act (HR 645) was introduced in the US Congress in January. It calls for the establishment of six national emergency centers in major regions in the US to be located on existing military installations. The stated purpose of the “national emergency centers” is to provide “temporary housing, medical, and humanitarian assistance to individuals and families dislocated due to an emergency or major disaster.” Some pundits say that this bill is in reality establishing domestic internment camps since HR 645 explicitly states that the camps can be used to “meet other appropriate needs, as determined by the Secretary of Homeland Security.”
Europe’s top politicians are so rattled by the prospect of growing protests that they have arranged an emergency leaders’ summit in March to deal with growing tensions.
There are numerous tent cities starting to appear in the United States as the financial crisis continues to hit hard.
Growing Tent City Outside of Sacramento California
The Daily Mail in the UK reports on the growing number of unemployed in the US moving into tent cities. The article talks to the growing tent city outside of Sacramento California. Surprisingly, Sacramento’s mayor, Kevin Johnson views this as a viable solution to handling the increasing number of unemployed. The Mayor is quoted as saying:
‘I can’t say tent cities are the answer to the homeless population in Sacramento, but I think it’s one of the many things that should be considered and looked at.’
There are an increasing number of videos that document this disturbing trend -
… 31,000 jobs added to the health care and social services sectors in February alone.
Recession-proof jobs are identified as including: education, health care, the public service. Civil engineering and construction jobs are also considered safe due to government stimulus spending on physical infrastructure such as roads and bridges.
Nortel currently accounts for 32% of the R&D spend in the top 10 spenders in Canada, and Magna (automotive parts) currently accounts for 13%. Over 45% of the R&D spend of the top 10 spenders in Canada is in decline and at risk of evaporating to nothing.
Unfortunately – RIM which is always held up as the shining tech light for Canada – isn’t even in the same league as Nortel and never will be. It could be argued that RIM is likely to rapidly diminish in size/scope over the coming years as technologies such as the iPhone and Android continue to see rapid adoption.
Jeff predicts thatthe US auto industry will undergo a massive correction that will eliminate 200,000 more jobs as half the US’s 51 auto plants are permanently shut down.
The Canadian economy contracted at an annualized rate of 3.4 per cent in the fourth quarter, compared with a 6.2 per cent decline in the U.S. economy, a 5.9 per cent drop in the European Union and a 12.7 per cent plunge in Japan. Canadian GDP dropped 1% in December.
A friend in California sent me an article today that was very disconcerting. The article was reflecting on a recent report published in Europe relative to the impacts and consequences of the economic situation:
According to the European think tank, LEAP/Europe 2020, two factors make the US a likely candidate for civil violence: the absence of a strong social safety net and the presence of hundreds of millions of firearms.
Former National Security Adviser Zbigniew Brzezinski has publicly expressed his fears about impending civil unrest with MSNBC’s Joe Scarborough:
JOE SCARBOROUGH: You also talked about the possibility of class conflict.
ZBIGNIEW BRZEZINSKI: I was worrying about it because we’re going to have millions and millions of unemployed, people really facing dire straits. And we’re going to be having that for some period of time before things hopefully improve. And at the same time there is public awareness of this extraordinary wealth that was transferred to a few individuals at levels without historical precedent in America….
And you sort of say to yourself: what’s going to happen in this society when these people are without jobs, when their families hurt, when they lose their homes, and so forth?
We have the government trying to repair: repair the banking system, to bail the housing out. But what about the rich guys?… Where is the monied class today? Why aren’t they doing something: the people who made billions, millions…. there’s going to be growing conflict between the classes and if people are unemployed and really hurting, hell, there could be even riots!
And the unrest is not expected to be restricted to the US. On Feb 23rd, London Police expressed public concern over the possibility of a “summer of rage” in the UK -
Police said on Monday they feared a “summer of rage” with mass protests over the economic crisis…
A reduction in the number of service companies related to knowledge-based companies (and Nortel), e.g. legal, accounting, recruiting, manufacturing, technical contracting, retail
Ottawa economic growth prospects will decline as the city becomes increasingly less attractive for knowledge-based multi-nationals to locate/expand in Ottawa due to declining size and skills of the local workforce brought about by:
Continued emigration of knowledge-workers out of Ottawa (Stats Canada reports have highlighted the lost high tech capabilities and workforce emigration away from Ottawa - 2 in 5 laid off tech workers left Ottawa)
Continued reduction in base of knowledge-workers with current experience (Stats Canada reports have highlighted that 4 of 5 laid off tech workers did not find work in tech)
Ottawa may soon be the “Flint Michigan of Canada” when it comes to high tech.
After this blog entry I was immediately asked about the challenges those ex-techies who joined the Federal government have found. Here is a quick summary of what I’ve been told:
Being under-employed/under-challenged (compared to their personal perceived capability)
Being discouraged from working excessive hours (one individual told me about a situation where a co-worker took them aside and asked them to stop working long hours because it was making the rest of them look bad – however all other individuals I know said they had never experienced this type of behavior and in fact noted that people in their departments tended to work more then the regular work hours as a matter of course)
Really, really bad employees who are passed from department to department like a hot potato (these employees typically know how to exploit the various government union and HR policies to effectively do nothing and avoid being fired and consume vast amounts of their managers time and reputation in the process)
Political wars and games where each department was working to position themselves for projects they expect to see funded
In Nortel, I personally experienced:
Being under-employed/under-challenged (only when working on a product transitioning to legacy support – when this happened I usually changed jobs)
Being given really, really bad employees as part of a new project team (who I first mentored/worked with to help them develop missing skills or cultural awareness, and if that failed (only on one occasion) I put them into the HR process leading to termination/transfer to a job with a better fit)
Political wars and games where each department was working to position themselves for projects they expect to see funded
Anyone else from High Tech who ended up in the Federal government have observations to contribute?
The stereotypical government employee is usually characterized as “lazy”, “inefficient”, “in by 9 out by 4″.
With the tech downturn, a lot of people I know ended up in the government. The general consensus among the ex-tech people who ended up in the government is that yes, there are pockets of poor performers and demoralized individuals – but by and large – the majority of government employees are motivated and engaged in doing the best job they can. The other observation of the ex-tech people inside the government is that the internal politics are very similar (although more pronounced in some departments more then others!) to the politics that they encountered inside Nortel.
On a personal level, my observations and experiences with Federal government employees include:
I have made submissions and worked with the NRC-IRAP team over the years. I have found the NRC-IRAP team in general to be top-notch from the executives down to the ITA’s – they recognize the importance of their role in the future of Canada tech development and they work as an engaged and committed partner.
Stats Canada produces high quality research reports that I have found to be very insightful and valuable in supporting my various market analysis activities over the years.
The Passport office is a model of efficiency and customer orientation. When I look back to the first passport I got compared to the last one a few years ago – they have made massive improvements. In general I have found they are increasingly efficient and customer service oriented. The last time I went in to get my renewed passport – in-spite of a full waiting room of people – I was in and out in less then 30 minutes. I personally like the way they introduced an option for a taxpayer to pay extra for expedited services.
On the e-Government side, e.g. making it easy to find information and access services online, the government continues to make improvements year over year. I have always been able to find the information I need online. As an aside – I believe our government’s expertise in e-Government is a area we should be looking to export/develop into commercial businesses.
Politicians aside, in general it is my opinion that we have a pretty good group of people working for us in the Federal government.
One in five persons living in Canada is foreign born
In Toronto, almost half of the population is foreign born
Census statistics from 2001 provides a broader overview of immigrant origin in Canada:
I personally believe this is a great advantage for Canada. The more ties we have with other countries, the more likely that business relationships will be developed.
As of Sept 30 2008, the US national debt was estimated to be$10 Trillion. This is roughly $35,469 per US taxpayer. The debt is continuing to grow in the wake of the increasing size of the stimulus budget items.
Canadian Federal Debt as % of GDP
As of February 2009, the federal debt stands at roughly $458-billion. This is roughly $13,685 per Canadian taxpayer. This is an upward trend with the recent federal budget, which reduces the debt reduction activities of past government budgets.
Who Owns the US National Debt?
The view from an independent analysis based on January 2007 data:
The view from the US Federal government for Sept 2008:World National Debt by % of GDP (2007 from CIA estimates)
With all the talk of government stimulus and spending it is disappointing to see the government not using programs that have already been approved and rolled-out.
“We’re stepping up because Ontario is not going to let others steal our future out from under us - we will produce the next wave of clean technologies that create jobs and clean up the environment,” said Premier McGuinty.
“We’re sending the message to companies around the world that if you’ve got a project that will grow your business and create jobs, we’ll make it happen in Ontario,” said Minister of Economic Development and Trade Sandra Pupatello.
“This fund is about building on our strengths to ensure Ontario can compete and win in the global economy - and create a better standard of living for Ontario families,” said Minister of Research and Innovation John Wilkinson.
There was also much noise made about how:
Companies are guaranteed a decision within 45 days of submitting a complete proposal.
So, since being announced a year ago…. nothing has happened.
Furthermore, last summer – Nortel, IBM and Carleton University submitted a proposal to establish and collaborate on a project called “Coral CEA”. The group’s proposal was to setup an organization to focus on development of communications enabled applications with the objective of spinning-off companies and jobs. In-spite of being under bankruptcy protection Nortel remained committed to the proposal because of it’s strategic value.
This was a proposal from two of Canada’s top innovators and Ottawa’s leading University… and nothing has happened.
In fact, worse then nothing has happened – good ideas have been submitted and no action has been taken.
It appears that the only jobs that the NGoJF is creating are jobs for government organ grinders whose purpose is to turn our “Creative Class” into dancing monkeys for the bureaucracy -
If McGuinty is serious about his commitment to innovation and the NGoJF – he needs to roll up his sleeves and take direct personal action in his government. Right now McGuinty and his government fall into the category of “Big Hat, No Cattle”.
Applications to Oxford and Cambridge rose 9.9%. The University of Exeter said it had an 18% increase in applications from British students and 88% rise in those outside the EU. New universities and smaller specialist institutions also reported record rises. Bedfordshire University had a 24% rise in home applications.
Enrollment/application numbers for Universities in the US and Canada for late 2008/early 2009 are hard to find, however here is what has been published so far:
In US, Universities share similar concerns as in Canada. In the US there is particular concern regarding decreasing endowment funds which are due mainly to the stock market decline:
… the average college endowment lost 2.7 percent in the fiscal year that ended June 30, 2008, according to Commonfund, an organization that manages many colleges’ endowments. A follow-up survey found endowments lost another 22.5 percent in the five months that ended Dec. 1, 2008.
In the US and Canada, Universities are likely to be beneficiaries of the various stimulus packages, which should off-set some of the concerns that are currently being expressed.
Business incubation has been identified as a means of meeting a variety of economic and socioeconomic policy needs, which may include:
Creating jobs and wealth
Fostering a community’s entrepreneurial climate
Technology commercialization
Diversifying local economies
Building or accelerating growth of local industry clusters
Business creation and retention
Encouraging women or minority entrepreneurship
Identifying potential spin-in or spin-out business opportunities
Community revitalization
Business incubators typically provide a range of services to clients that may include:
Help with business basics
Networking activities
Marketing assistance
High-speed Internet access
Help with accounting/financial management
Access to bank loans, loan funds and guarantee programs
Help with presentation skills
Links to higher education resources
Links to strategic partners
Access to angel investors or venture capital
Comprehensive business training programs
Advisory boards and mentors
Management team identification
Help with business etiquette
Technology commercialization assistance
Help with regulatory compliance
Intellectual property management
Facilities (e.g. office space, specialized lab space) and associated business services (e.g. security, receptionist, meeting rooms, phone service, photocopiers, printers, internet service)
Stats Canada released a report in late 2008 “The Business of Nurturing Businesses” which takes a look at business incubators in Canada based on survey data taken in 2005. Some key findings from the report include:
Almost all business incubators are sponsored by economic development organizations, governments, academic institutions, i.e. tax money
1 in 6 incubators offer facilities and on-site support services
Almost half of all incubators were focused on professional, scientific and technical services businesses
The top three most used services of incubators were: legal consultation, management guidance and assistence in obtaining financing
There are various lists of incubators in Canada, unfortunately none up-to-date, including:
Unfortunately, with the exception of Carleton University’s Tony Bailetti, there is little/no information available on the public incubators relative to return on investment of the tax money in the operation of the incubators – which would lead me to believe that compelling results do not exist.
From the perspective of efficiency, it appears that our tax money is being spent a bit recklessly relative to overlapping mandates and services. The Ontario government and Ottawa Municipal government have both being doing a review of how they are funding and delivering their economic development programs. I hope that as part of this review, they look towards stronger collaboration and reduced overlap of services between Provincial and Municipal programs.
A future blog entry will examine how business incubators role will evolve/change in the context of Business Ecosystems.
Eliminating all costs that add no or little value to customers
Selling services previously provided for free
Increasing efforts to steal customers of competitors
Improving operational efficiency
Eliminating inventory payments
Reducing payments to suppliers
There is some interesting analysis in a thesis report from Carleton University (COMPETITION DURING MARKET MELTDOWNS: THE PERFORMANCE OF TELECOMMUNICATIONS EQUIPMENT SUPPLIERS DURING 2001-2003, by Yanxia Hao, 2004) which suggests that:
“…companies should focus on a narrow range of effective actions to improve company performance during market meltdowns.”
Stats Canada released an interesting report in 2007 that seems to have gone almost un-noticed. The report itself highlights the impact that the high tech downturn in 2000 had. The report contained a few very interesting facts that were, and still are, relevant to Ottawa, including:
Among laid-off high-tech workers, about four out of five did not locate employment in high-tech, and about one out of three moved to another city. In Ottawa–Gatineau, about two in five laid-off high-tech workers left the city.
With the ongoing layoffs this trend will continue – resulting in the ongoing erosion of Ottawa’s tech workforce and capability – unless action is taken.
To understand how vulnerable the Ontario economy is to the current conditions of the US and Canada economy, it is useful to look at where the strength of the economy has traditionally been.
Structure of the Ontario Economy, 2007 Per Cent share of GDP
Some published reports that give some insights into the potential impacts on the Ontario economy and consequences include:
Current unemployment numbers and forecasts for Canada and the United States are discussed in this blog entry. We are not into Great Depression unemployment rates, but we are certainly on the same trend line:
Great Depression Unemployment Rate
Some interesting links related to the Great Depression and Canada:
If you are looking to create your own opportunities in the challenging economic environment, you might want to take a look at the work on Business Ecosystems.
If you are interested in knowing what businesses typically do well in recession conditions, please take a look at this blog entry
If you have an established business and are wondering what actions you can take to survive and prosper, please take a look at this blog entry.
I have experienced private medicine in the US in the past when I’ve gotten sick on business trips. My experiences in the US were generally good – fast, quality service, with current diagnostic tools – but for a price. When I walked into an emergency ward in Texas, the first words out of the reception nurse was not “What is the problem?”, but rather “How will you be paying?” In all cases I was lucky enough to have Blue Cross or company insurance cover the extra medical expenses.
I recently experienced private, two tier medicine in Canada. I visited MEDCAN in Toronto for their “comprehensive health assessment”. It took approximately 6 hours from start to finish and covered off tests that would have normally taken several days out of my time over a period of weeks to attend and then have the subsequent follow-up meeting with the doctor. The MEDCAN service was fast, quality service, with current diagnostic tools – but for a price.
I talked about the experience with a doctor friend of mine who runs a large family practice in Ontario. He was very much against two tier medicine in Canada because he feels it is undermining public medicine. He holds that medicine in Canada should be a public service – available to everyone regardless of wealth or position.
The following table is based on historical data from Statistics Canada, it shows the tight coupling of US and Canada unemployment rates, with the Canadian rates generally lagging the US. The Canadian unemployment rates have been historically higher then the US by anywhere up to 4%:
Click to Expand
The current unemployment numbers for the US and Canada are as follows:
United States Department of Labor states the current unemployment rate as 8.1% as of February 2009. States with double digit employment in January 2009 were reported as: California 10.1%, Michigan 11.16%, Rhode Island 10.3%, South Carolina 10.4%.
US Department of Labor, Feb 6, 2009 - Unemployment Rate
Statistics Canada states the current unemployment rate as 7.7% as of February 2009, with Ontario at 8.7% unemployment
Statistics Canada, March 13 2009 - Unemployment Rate
The historically tight coupling of the US and Canada unemployment rates mean that US forecasts can be reasonably used as a proxy for future Canadian unemployment rates. Some sources and their forecasts for the 2009 US unemployment rate follow:
Based on the current forecast US unemployment rates and past trends, I expect the Canadian unemployment rate to rise to over 10% and potentially over 14% nationally by 4Q09. (NOTE: Toronto Dominion bank’s March forecasts expect Canadian unemployment to reach 9.9% by 4Q09.)
The coupling of the Canada and US unemployment rates is interesting in many ways. In particular, there are academic papers that examine the question of Canadian government policy - specifically, can Canadian policy have any significant impact on Canadian unemployment numbers due to the tight coupling of our economy to that of the US?
My sense is our government, in general, has little hope of stopping Canadian unemployment rates from following that of the US. I believe that from a practical perspective, all our government can reasonably do is moderate the impact of the unemployment growth with special social and employment programs; and sustain our economy and workforce until the US economy recovers by driving infrastructure and entrepreneurial economic development programs.
In order to break the cycle, the Canadian government should be actively working to diversify our economy by aggressively fostering new small business development and developing export relationships and associated selling channels with other countries outside of the US.
Some interesting articles and papers on the US and Canada unemployment numbers include the following:
A factor that can have a big impact on the rate of unemployment growth is what protectionist actions are taken by Canada, the US and others. It is almost inevitable that if the recession continues to deepen — politicians will find protectionism as one of the last tools in their basket of options to try. Already the politicians are dancing around this topic – some articles on this topic are below:
March 12, 2009
