The Canadian Government should provide cheap financing...

[KrazyHorse]

for foreign companies to buy out Canadian firms.

The rationale behind this is quite simple; namely, it has been demonstrated that labor productivity at Canadian-owned companies in Canada is relatively low compared to the US and Western Europe, but labor productivity at foreign-owned firms in Canada is similar to that in the US and Western Europe (I believe that the results I've seen control for size and capital depth of company, but feel free to correct me if I misremember).

It appears that Canadian management of Canadian workers is particularly inefficient. Why this situation persists may have something to do with regulatory hurdles in purchasing Canadian companies, the language barrier or simple isolationism of Canadian capital markets and relative stodginess of Canadian financial intermediaries.

This seems to be a slam-dunk; the Canadian government should attempt to pick up this free lunch, and lend money at favorable rates to foreign companies looking to bring better management to Canadian firms. The empirical and the theoretical justification behind this approach is quite sturdy, IMO.

Discuss.

[Kuciwalker]

It could just be that Canadian investors are persistently stupid.

[KrazyHorse]

I don't think that there is a free lunch to be picked up on the public equity markets; foreign investors can and do buy minority stakes in Canadian companies relatively easily.

There are significantly higher hurdles to taking a majority stake in a public Canadian company, or going whole hog and taking it private.

The problem therefore appears to be in Canadian management.

[KrazyHorse]

By the way, the productivity differential is truly staggering: Canadian productivity is 0.8-0.85 that of the US, despite similar levels of education, similar cultures regarding working hours etc.

One major difference may be that Canadian companies have been shown to place less of a premium on managers with university education or higher. Other than this, the inputs all seem the same. There is black magic at work here...

[Aeson]

I agree. I will buy Canada if you loan me the money.

[Al B. Sure!]

By the way, the productivity differential is truly staggering: Canadian productivity is 0.8-0.85 that of the US, despite similar levels of education, similar cultures regarding working hours etc.

One major difference may be that Canadian companies have been shown to place less of a premium on managers with university education or higher. Other than this, the inputs all seem the same. There is black magic at work here...

Here:

John Tylak P.Eng, a former manager with a Canadian manufacturing company said, "We never thought the Canadian dollar would be at par with the United States. By the time it reached 85 cents, we were no longer productive. Poor productivity cost us $1 million for every cent the Canadian dollar increased."

According to The Knowledge Management Group (http://www.tkmg.org) between 1996-2006 Canadian labor productivity growth lagged the US by 56%, the result of a 138% increase in hours worked versus the US. Given the increase in hours worked, Canada only showed a 0.2% increase in GDP over the US. Compared to Canada, the increase in US productivity was driven by a 150% increase in multi-factor productivity growth; a measure of technological progress and organizational change. The decline in Canadian multi-factor productivity growth is explained by a low Canadian dollar that favored the use of labor instead of investment in technological progress and organizational change.

Given the relative equivalence in today’s currency, Canadian manufacturers cannot use discounted labor as a means to offset poor productivity. This is evidenced in productivity statistics between 2000-2006. This period saw the Canadian dollar begin to rise while manufacturers realized a 200% decline in output per hour worked against the US, even though the growth in capital expenditures was the same in both countries. During this period, US technological progress and organizational change increased by 1800% fueled by a 33% increase in US labor composition compared to Canada.

Canadian technological progress and organizational change has fallen sharply compared to the US and led to dramatic declines in productivity. A continued decline will impede competition with the US, other countries, and may affect Canada's long term standard of living. To improve productivity, the Canada Revenue Agency recently raised federal tax incentives to stimulate technological advancement in an effort to increase multi-factor productivity growth.

Canada is like the Third World, apparently. Labor is relatively cheaper than capital.

[Combat Ingrid]

Canada = Upper Volta with poutine.

[Al B. Sure!]

Canada = Upper Volta with poutine.

I looked it up...

Poutine:



Fries, gravy, and cheese curds

[Combat Ingrid]

It's not a coincidence there's a poutine trailer just outside the Ottawa heart institute

[Cort Haus]

I agree. I will buy Canada if you loan me the money.

Then charge the interest payments to Canada. If you get any trouble, get a court in Texas to help you out. :hicksgillette:

[KrazyHorse]

Here:



Canada is like the Third World, apparently. Labor is relatively cheaper than capital.

a) One would assume that there is the mitigating factor of skilled labor/management also being cheaper
b) This may have been a factor through the late 90s and early 2000s, but the era of the cheap Canadian dollar has been over for a number of years, and productivity outside the resource sector (where it is largely driven by the international terms of trade, i.e. commodity prices) isn't showing a convergent trend
c) This still has no explnatory power for the difference between Canadian-run firms in Canada and internationally-run firms in Canada

[Al B. Sure!]

a) One would assume that there is the mitigating factor of skilled labor/management also being cheaper
b) This may have been a factor through the late 90s and early 2000s, but the era of the cheap Canadian dollar has been over for a number of years, and productivity outside the resource sector (where it is largely driven by the international terms of trade, i.e. commodity prices) isn't showing a convergent trend
c) This still has no explnatory power for the difference between Canadian-run firms in Canada and internationally-run firms in Canada

a) Talent flight? I mean you don't work in Canada.
b) Who knows how long it'll take for this to shake down, though.
c) Internationally-run firms in Canada are operating as if there were American conditions (ie- being more capital-intensive)?

[MikeH]

All the best Canadian workers (and KH) go to the States (or elsewhere) because Canada is **** and boring, when foreign companies take over they bring back good people.

[Al B. Sure!]

All the best Canadian workers (and KH) go to the States (or elsewhere) because Canada is **** and boring, when foreign companies take over they bring back good people.

Too sensibly irrational for KH... his theoretical understanding can not fathom it

But yeah, as I said above, talent flight may play a role in this, along with the relative cheapness of labor.

[MikeH]

The productivity difference is due to the flappy heads fighting about hockey.