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The Making It! Business Blog
by Nelson Davis

 

Thursday, February, 2010
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THIS EDITION: AMERICA VS CANADA

I had never heard of something called The Index of Economic Freedom until recently. The 2010 edition of this index published by the Heritage Foundation and the Wall Street Journal tells me that Canada, our frozen neighbor to the north is now economically freer than the United States! That was a head turning surprise to me. I thought that being born in America and living in California placed me in the spacious corner office of the headquarters for economic freedom. As it turns out, I was wrong, really wrong.  The most famous Canadian entrepreneurs that I knew of left that country to build their empires. Jack Kent Cooke moved to California to own media companies, the Los Angeles Lakers and The Forum. Roy Thompson, a nerdy newspaper owner moved to Britain where he became Lord Thompson of Fleet. They certainly weren’t letting any Canadian ice form under their feet or chill their ambitions.

 

You see, I grew up on the Canadian border in Niagara Falls, New York and I worked in radio and television in Canada’s capital, Ottawa for over ten years. My first business ownership was there when, with a partner, we opened Fat Albert’s Subs and Pizza. While every country has its entrepreneurial class and awe inspiring success stories, I never thought of our frigidly frolicking neighbors as being really business friendly. In fact, a feeling of heavy taxation and questionable national priorities is what prompted me to return to the U.S. and to work my trade here in the much warmer Golden State.

 

Economic freedom is measured in 10 categories by the Heritage Foundation, and they’ve been issuing their report for the past 16 years. For 2010, America took a tumble from sixth place to number eight behind Canada. The top 5 are Hong Kong, Singapore, Australia, New Zealand, and Ireland. Note that Asian-Pacific countries dominate the rankings. But you’ll be delighted to note that some logic does prevail since Cuba, Zimbabwe, and North Korea are at the very bottom of the list.

 

So what did the U.S., a country built on the entrepreneurial spirit, do to lose our footing? According to The Heritage Foundation, we are now lacking in the areas of monetary freedom and property rights. Our government’s reactions to the economic and financial crises of the past couple of years are seen as interventionist. They say that the Washington gang’s actions discourage entrepreneurship, accelerate job losses, and weigh us down with record setting deficits. In countries such as South Korea, Germany, and Poland (yes, Poland) they defied the economic pressures and maintained or expanded economic freedom as measured by Heritage.

 

I agree with the Heritage Foundation folks that private and free enterprise does the best job of reducing poverty. Heavily regulated economies have an internal friction that slows or prevents forward movement and puts a chill on ambition. The public sector simply does not create value in the marketplace or incentivize its participants to be better and faster. High rank elected officials often talk about change, but they are really mired in the status quo. A wise and wealthy friend of mine recently said regarding political office seekers, “Nelson why wouldn’t anybody question the motives of a person who spends $5 million in pursuit of a $200,000 job? They will owe their soul to people who simply want their own gravy train to keep on running.”

 

The delicate balance between free enterprise capitalism and useful regulation is difficult to achieve. We have had it before in the U.S., and we need to get back to that place. When the sticky stuff hit the financial fan a year and half ago in our country, I called a couple of Canadian real estate friends in Vancouver and Ottawa. They were not having a mortgage meltdown, and their banks were not begging for outside help. It seems that their regulations had saved them from playing the same foolish games that our bankers had been allowed to indulge in. Perpetual vigilance is demanding but necessary. Economist Adam Smith wrote in his 1776 book, The Wealth of Nations, that “When institutions protect the liberty of individuals, greater prosperity results for all.”

 

We should be humbled by the fact that the economic freedom that lifted America to be the most prosperous country in the world is being systematically eroded and compromised. Increasingly, the small business community is on the front line in defense of the entrepreneurial spirit and values. When our friendly neighbor to the north, whose primary export seems to be winter weather cold fronts, moves above us in the economic freedom ranking, it may be time for us to put on a parka and learn something—eh!

 

 

Let me know your thoughts by e-mail: nelson@makingittv.com

 

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