Prime Minister Justin Trudeau travelled to Davos, Switzerland, this week to spark interest in trade and investment in Canada. This kind of rhetoric usually gets a bit of press but is largely ignored by the general public.
Should the average person be interested?
In order for our society to operate effectively, every citizen is expected to assume some responsibilities. So we should all show some interest in this kind of initiative.
If I were in the audience, here’s how I’d see the exchange:
The Canadian PM stands in front of the rich and elite of the world and touts Canada’s openness for business and the various frontier investment opportunities. He points out some facts that purport to show that money invested in Canada is relatively safe and will provide the investors with substantial returns.
But why, someone asks, should someone from Europe or New York invest in Canada if Canada and Canadians won’t invest in their own country?
Obviously the PM won’t have an answer. All of his briefings suggested that if you want money to flow into the Canadian economy, you must go to the centres of capital. Supposedly these are the people who control the money supply, so you must go there and beg for their help.
In reality, most of the people in the audience politely applauded and went back to their own lives, quickly forgetting the plea.
What we have here is a great dichotomy.
The PM is asking non-Canadians to spend some of their investment money in Canada. At the same time, Canada’s public sector institutions and Canadians’ savings accounts have massive amounts invested around the world. Yet virtually none is invested in or directed to the Canada’s economy.
Here are some examples (and there are many more) of the entities that hold or manage these massive funds:
- Canada Pension Plan – This Crown corporation manages the contributions of more than 20 million Canadians and has investment assets of more than $328 billion;
- Canadians’ tax-free savings accounts (TFSA) – Savings registered in these accounts since 2009 have assets in excess of $85 billion;
- Canadians’ registered retirement savings plan (RRSP) accounts – Savings registered in RRSPs since 1957 have assets of more than $900 billion;
- Alberta Investment Management Corp. – This Crown corporation manages the Alberta government pension and the Local Authorities Pension Plan, plus several other trusts and funds, like the Alberta Heritage Trust Fund and the Alberta Heritage Foundation for Medical Research fund. It has investment assets of more than $81 billion.
These four examples alone account for more than $1.4 trillion in investment accounts. (And there are dozens of other similar examples with huge funds.)
So there would appear to be no shortage of money in Canada.
Yet virtually none of this money is being directed to fulfil the needs the PM has described.
So why does Trudeau have to beg for help from European and American bankers? Couldn’t he simply ask the folks who manage these massive caches of Canadian money to direct some of it toward the needs he’s identified?
As I’ve written previously, people in droves have yielded their investment decisions to the new army of investment advisers that populates our financial institutions. The same condition exists with the people who manage the massive funds listed above.
We need to get our heads out of the sand. If there are investment opportunities in Canada, surely the first people who should invest in them are Canadians and the funds that hold these massive amounts in trust for Canadians.
Will Canadians invest in Canada? They would if they were confident that projects and companies had promising futures. That means they must be built locally and managed locally.
There are two compelling reasons to resolve this issue quickly:
- It could mitigate the threat of the North American Free Trade Agreement (NAFTA) being cancelled. Otherwise, the constant boom/bust nature of our economy will plague us again and again.
- It could give Canadians a Canadian return on their money. What better way to show patriotism and reap the rewards?
Joe Batty, chief financial officer for Troy Media Digital Solutions Ltd., is an accountant with a specialty in new asset management. Joe has more than 40 years of experience in finance and accounting. Email him at [email protected]
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