Brad Ferguson, President & CEO
January 10, 2017
Check Against Delivery
As Edmontonians, we don’t shy away from winter. In fact, we are often at our best when it’s cold and dark – forcing us to be inventive, courageous, cooperative – knowing that the solutions we need don’t come from outside; they come from within.
So, how are we all going to get out of this mess?
In 1904, Alberta was about to become a province, Edmonton was a new city of 9000 people and the Canadian Northern Railway had arrived from the south side of the river, crossing over the new Low Level Bridge. Seven of my eight great grandparents migrated here that year, leaving behind various parts of Quebec and Ontario with nothing more than some basic possessions and the chance to build a life on a few plots of land scattered around what would now be St. Albert, Morinville, Tofield, Carrot Creek and Edmonton.
Think about the winters back then. A cold isolated place. People like my great grandparents worked outside raising dairy cows, in the coal mines on the river bank, installing these new things called street lights or loading wheat onto railway cars. And, at the end of the day, they sat down around a wood or coal-burning stove, often with their neighbors, figuring out how they were going to make it through the upcoming winter, the great depression, another year of drought or the draft that would send their kids off to war.
Around here, we have a long history of figuring out how to make it through tough times and long winters. And not only have we survived, but we’ve prospered, and created a place that has become a beacon of opportunity, a community that welcomes everyone, a people that trust and rely on one another, and a culture that is industrious and entrepreneurial, and traditionally where you earn your keep and can keep what you earn.
Government didn’t get us through these harsh winters. It was brave individuals and courageous entrepreneurs who took responsibility for themselves, their families and their communities. And it was they who built the foundations upon which we stand and who made this place so strong.
The MacTaggarts, the Spenellis, the Meltons, the Comries, the Shockters, the Allards and so many others helped build this place we call home – and they should be honoured.
Today, in a world where kids are often taught that business and capitalism are fundamentally based on the pursuit of greed, selfishness and exploitation, there is a need to re-introduce and re-romanticize these entrepreneurial names, the lifeblood of our community, our history and our economy.
Entrepreneurs start things. They try things. They see the world as a system full of gaps, of opportunities, and they set out to solve those problems by envisioning something better. They set out on a wonderful journey of purpose, adventure, risk and creativity, not to exploit, but to see if what they imagined is, in fact, possible and if they can improve the lives of those around them.
That is what fuels the hearts of entrepreneurs.
They envision new ways to deliver groceries, package potatoes and manufacture advanced drill bits to work in extreme climates. They create better ways for dentists to serve the poor and they improve the ways developing countries access fresh drinking water. They imagine new video games for teenagers and new dumpsters for our waste. They design new vaccines that improve the lives of impoverished children, and technologies that reduce the reclamation of tailings ponds from 50 years to just seven. And they also start the shoe stores and daycares and construction companies and cafes and corner stores that we all come to rely on.
Entrepreneurs not only solve some of our most difficult challenges, they also sign the paychecks that feed, clothe and shelter 70% of our local families. They not only represent the largest contributors to charities and non-profits, their pursuit of free enterprise innovation and social cooperation has led to unprecedented prosperity for humanity.
Over the past two centuries, free enterprise and socially-minded entrepreneurs have brought extraordinary economic growth and prosperity to hundreds of millions of people around the world. Extreme poverty has declined from 85% of the world’s population to 16%. The undernourished population has declined by 50%. Average income per capita has increased 1000x, with only 5% of that population living in North America. Sanitation, medicine and agricultural productivity have progressed to maintain a world population that has grown from 1 billion people to 7 billion. 84% of the world can now read. And average life expectancy has increased from 36 years to an astonishing 86 years.
Our world is far from perfect … we have much more to improve … but we also need to take stock of the progress that has been made.
Governments didn’t accomplish these feats … entrepreneurs did. They innovated. They experimented. They took risks. They tried new things. And guess what? When their solutions worked and people derived value, their businesses grew and became profitable … which allowed them to reinvest in more ideas, create a broader vision, pay more taxes and extend their solutions to new markets.
That’s what changes our world. That’s what improves our communities. That’s what matters.
So, as we move forward and continue progress on the major global challenges like the environment, inequality, health care, food security, animal welfare, and others …. let’s let entrepreneurs continue to be the lifeblood of innovation, of our communities and our economy …. and as they move from a small business of 10 people to a medium sized business of 100 and then to a large employer of 1000, let’s stop punishing them through higher and higher taxes, turning them into feedstock for government programs, reducing their ability to reinvest and eventually driving them out of business or certainly out of the province.
Because that’s what we are dangerously close to doing.
The year ahead is going to be tough. Revenues are down. After-tax income is down. Our cost structures have gone up. Unemployment is up. Our governments are running multi-year deficits and accumulating operating debt that will echo for generations. Our regulatory environment remains slow and uncertain. Investment continues to sit on the sidelines. And that little country south of us called the United States of America has regained their hunger to get back to their winning ways, and will be putting America’s interests first, including the reassessing and restructuring of any and all trade deals that have previously been signed … because that’s what we can expect from this new President.
It is nice that Canada boasts having an educated workforce, a stable banking system and an entrepreneurial spirit, but the United States has all that too, but with a much more investment, tax and regulatory friendly climate with which we will struggle to compete.
The top US personal tax rate will soon be reduced to about 38% while Canada’s will be at 53%. This could result in a brain drain similar to what we witnessed in the 1990s. Corporate income taxes will be cut from 35% to 15%, versus an average of 20% in Canada. When a business starts shifting profits from here to there, corporate income taxes get paid south of the border, investment heads south and eventually head offices go too. The US will then implement a one-time 10% tax on the repatriation of capital parked outside the US – about $2.5 trillion in profits – and that will spark a massive investment back on US soil in the areas of infrastructure, new equipment, technology and productivity tools and, of course, used for US-led acquisitions of their supply chain partners in Canada, all at a 30% discounted Canadian dollar.
Most political leaders around the world were convinced that we were moving towards a global love-in, when suddenly we find our Americans friends turn our policy environment and competitiveness right upside down. It’s not so much an issue when you live in Europe, but when you sleep next door to a 10-tonne elephant who is dreaming about loosening regulations to give business more leeway, lowering corporate taxes and reducing restrictions on carbon emissions, you best get ready for that elephant to roll over.
The ability for Canada to attract investment and skilled workers will be under attack like never before, and we need to respond with a very clear strategy on how we (1) build the brand, (2) expand immigration opportunities, (3) enhance our education system from primary through post-secondary, (4) establish preferred free trade agreements and (5) welcome foreign investment, very similar to what Chrystia Freeland, our new Minister of Foreign Affairs, is doing so well at the federal level.
But while she and our Prime Minister are out marketing Canada to the world, we at home need to become a lot hungrier, a lot more competitive and a lot more urgent when it comes to enhancing and extracting the value from each individual region of our national economy. Whether it be accelerating bio-tech development in Quebec, investing in the fin-tech industry in Ontario, building hydro tech in Manitoba, intensifying ag-tech production in Saskatchewan, exporting cleaner energy-tech from Alberta or deepening digital-tech in British Columbia, we desperately need a national vision and economic strategy that builds on our natural advantages and unites us as a country.
Ladies and gentlemen, leadership starts with how you show up. And it starts with a globally competitive mindset, which we don’t have. We have a provincial mindset, which has us focused on short term issues, subsidies and tax breaks, regional disparities and at times suing each other. It builds a culture of divisiveness, protectionism and small thinking when just the opposite is needed. If we are going to get out of this mess, we need leadership that rises above this – public and private sector leaders, institutional leaders and entrepreneurial leaders who think big, competitive, long-term and global.
In China, they are making plans to invest $360 billion to become a renewable energy leader. In Singapore they provide talent incentives to become the leading biotech manufacturer. The US is the epicentre of entrepreneurship and venture capital. In Germany they lead with automobiles and automation. In Australia it’s skin cancer therapies. And it’s happening in places like the Netherlands, Luxembourg, Chile, Finland, Sweden and the UK where they are all doing their part to improve the world, but they are also leading with an industrial growth strategy that brings well-paying jobs, wealth creation and social inclusion to their people.
Over the past twelve years, we have become fiscally dependent and enslaved by our economy, as opposed to using our economy as a means of achieving greater things. We stopped dreaming, thinking big, being courageous in our ways. Eight-five percent of Alberta companies generate 100% of their revenues from within our provincial borders because things were too good for too long. We stopped exploring new markets, we stopped learning new languages, our international travel focused on places like Phoenix and Palm Springs instead of emerging centres like Shanghai, Mumbai and Dubai.
But one thing we know, that IF we have the courage to compete globally, and IF we have the desire to take risks, and IF we start flying more to Amsterdam on KLM or shipping more products on Air China Cargo, THEN we’ll start igniting that entrepreneurial spirit and we will start getting serious about getting out of this mess.
It’s hard to believe this is our fifth IMPACT lunch, where we talk about our reality, outline the challenges before us and present ideas on the path forward. I remember our first one in January 2013 when we set out the long-term goal of outperforming other jurisdictions whether the price of oil was $140 or $40. The following year we talked about making a drastic improvement to the Edmonton brand, which at that time I ranked as a 1.5 out of ten. In 2015 we talked about complacency and had the late Jim Prentice on stage talking about the looming dark clouds ahead for Alberta and the need to get our fiscal house in order by reducing the size and cost of government and carefully evolving our fiscal dependency away from energy. And then last year, we talked about the need for a tempered approach to policy implementation, one that balances the pace of environmental, labour, energy and social reforms with continued economic growth, otherwise we could find ourselves in a vortex of despair.
Each year I’ve told stories about my two sons, Evan and Michael, who were only 10 and 13 when I first took this role, and who are now strong young men who understand the importance of being engaged with their city and being grounded in sound economic principles. I remember shortly after the 2014 IMPACT lunch I got called to the principal’s office because my son, Michael, was spending too much time challenging his Grade 8 teacher, standing up for his belief that the only way you have a strong social system is if you have a strong economic system, and not the other way around. And the principal nicely told me that the classroom was no place to discuss political beliefs.
That’s when I realized that what we talk about here, how we set priorities and how we respond to challenges, will form the foundation of who the next generation will become. And it is so very important to talk about our current challenges truthfully, how we got here and how we are going to find our way out.
If we don’t learn how to convene, talk, listen, understand, debate and compromise, then we are destined to continue on our current path of dogmatic recklessness. For it is only by transcending the political spectrum, making decisions on a common set of values and always in pursuit of compromise and harmony, that we will solve today’s challenges.
Our modern concept of the political left and political right was born at the time of the French Revolution, and it’s time we left such ideas in the past:
The left wants to fight a world where aristocrats and industrialists own the means of production and power, to deliver the protection of workers’ rights and jobs, national ownership of industry, redistribution of wealth and an expanded welfare system.
The right wants to promote entrepreneurism, innovation, globalization and low taxation to deliver individual freedom and mobility in a world of profit-oriented enterprises and small government where workers choose to work hard and benefit by getting to keep the bulk of what they earn.
This left/right debate has widened and disconnected us from each other, leaving us adrift in a political vacuum, where each ideology is rooted in separation and creates exclusion and suffering. Our past government was guilty of such thinking and our current government and current opposition are behaving in an identical manner. Motivated by self-serving soundbites and propaganda at the expense of progress, our elected officials are preventing themselves from sourcing fresh ideas and compromised solutions through proper consultation that can actually solve the problems in front of us.
And Alberta is suffering as a result.
Few people in positions of power are able to shine light on a positive vision of, and a compelling narrative for, an inclusive form of economic growth – a model of inclusiveness that sees economic policy and social policy as indivisible, where we are as concerned about the number of jobs as we are about the quality of jobs, such that as a community we continue on the path of economic growth and rising prosperity, with income inequality narrowing as it goes up, as opposed to narrowing as it goes down.
In these times of uncertainty, we need leadership that is unprejudiced, able to unite economic and social policy in a way that re-establishes our industrial base, promotes inclusive growth, creates full-time production jobs versus part-time service jobs, fuels social programs, and returns Alberta to a position of leadership and respect.
In this time of need, that kind of leadership is what we should expect and demand as a community. And today we have 1100 people who are in this room and came to help. Because that’s the Edmonton way.
So how do we all get out of this mess? When I first started laying out my thoughts, I divided tasks into the roles of the public sector and the private sector. And that’s where I got stuck. I got stuck because if we want to: (1) have an inclusive economic strategy; (2) make strategic investments; (3) operate with one vision and one voice; (4) get our financial house in order; and (5) become globally minded and globally competitive, then the only way to move forward is if the public sector and the private sector move forward together. And as the politics of rage have shown us in recent months, the need to come together has never been greater.
Robert Reich, Professor of Public Policy at University of California Berkeley and former Secretary of Labour, whose pro-labour policies normally get me a bit nervous, actually stated the problem perfectly. To paraphrase, “There are two forms of populism. The first is where leadership comes through an authoritarian regime like Trump that channels blame towards identifiable scapegoats like foreigners, immigrants and minority groups. The second is where leadership comes through inclusion and democratic reform, where a community, a province/state or a country comes together to create a unified vision for lifting the whole people up, together.”
Maybe that is what Henry Marshall Tory, the first President of the University of Alberta, was suggesting when, in 1908, he advocated that “The modern state university has sprung from a demand on the part of the people themselves ….The people demand that knowledge shall not be the concern of scholars alone. The uplifting of the whole people shall be its final goal.”
The only way we can be progressive, competitive and globally relevant today, with an inclusive economy, is if the public and private sector operate with a unified strategy and with a unified voice. And the only way that can be achieved, is if we put down our guns and learn how to convene, talk, listen, understand, debate and compromise. And that’s where the solution will be found.
The Way Forward
If we can do that as a city, a region, a province, a country, then we will be blessed with an abundance of opportunity that will dwarf our existing problems.
IF we come together with good intention … THEN we can have meaningful consultation and dialogue that can unlock the benefits of a unified economic and social policy;
IF we have meaningful consultation and dialogue … THEN we can discuss fiscal reform and the pace of policy implementation that keeps our economy growing while we make incremental and impactful changes to social reform;
IF we can compromise on fiscal reform and the pace of policy implementation … THEN we can create a stable investment environment that brings private capital back to this province;
IF we can create stability in our investment environment … THEN we can accelerate the speed of innovation and competitiveness in our existing industries and start asking different questions like:
What if the Oil Sands could become part of our climate change solution instead of part of its problem? What if SAGD operators in Northern Alberta could become big producers of electricity using natural gas, thereby accelerating the retirement of coal-generated power far more quickly and less costly than under the current climate leadership plan?
IF we can accelerate the speed of innovation … THEN we can start doubling down on solutions that extend the life and extract the value from our natural resource assets, as opposed to abandoning them, and ask different questions like:
What if we considered CO2 a resource as opposed to an emission? What if we doubled down on our COSIA Carbon XPrize technologies showing ways to make carbon neutral fuels like methanol, butanol and propanol or technologies that separate carbon from oxygen to make graphene or carbon fibre materials that can be used to make everything from ski boots to fishing rods to clothing, dies and ink?
That’s the recipe for an inclusive model for economic growth.
IF we can change our mindset about innovation and what we should be investing in … THEN we can also focus our efforts on disrupting our health industry, our agriculture industry and start exploring new industries where we have unique advantages, such as autonomous vehicles, robotic manufacturing, artificial intelligence and machine learning, and even marijuana-based food products.
Imagine the progress we could make, in a very short period of time, if our post-secondary institutions, our entrepreneurs and business community, and our political leaders came together with good intention and meaningful consultation to redesign an industrial growth strategy for the next 20 years.
One thing I have learned in my almost five years at EEDC, is that if we operate our business units separately like the rest of the world does, it is extremely hard for us to compete.
However, if we unite, in pursuit of objectives under a unified strategy and speak with one voice, we have a different kind of competitive advantage based on alignment and speed and intention that is most difficult to replicate but becomes the core reason why we win and win and win.
As my friends at Deloitte often remind me, it’s going to take courage to lead. But what a year to do it – Canada’s 150th anniversary, where people from nearly 200 countries around the world will be watching us with envy and will be going to bed with hopes that one day they can experience all that we have.
As the 5th largest city of this G7 Nation, responsible for one quarter of all net new jobs in Canada over the last five years … Are we going to be lying in the corner licking our wounds? Or are we going to stand tall and show the world who we are … and how we are going to win?
Today, we are all faced with a choice:
We can embrace discord and division, be short-sighted and provincial in our thinking, and risk missing out on our potential because we failed to come together in conversation; or today
We can choose to set aside our ideological differences and pursue compromise and unity, built on a common set of values, with the goal of inclusive growth that lifts up the whole people.
I know which path our EEDC team and Board has chosen, and I hope you will join us, together,
as this is our time … to once again … be at our best.
Thank you very much.