Ignorance won’t grow an economy

2 weeks ago, I discussed how Mark Carney deliberately walked away from a US trade deal as part of his larger plan to align Canada with Europe.  Ursula von der Leyen let the cat out of the bag when she invited Canada to become an associate member of the EU only days after Carney scuttled the US trade deal.  It turns out that not only did Ursula jump the gun she also took creative liberty calling the relationship associate membership.  I know this because the actual document has been leaked and it says nothing about associate membership.

Even though Carney was negotiating this in secret the document is not all that damning.  Like most political documents it is mostly meaningless fluff.  It does, however, have some positive goals like increasing trade between Canada and the EU.

We will mobilize investment to catalyse job creation, grow strategic industries, and ensure our workers and critical industries succeed – while prioritizing competitiveness and protecting our interests. Together, we will build reliable and secure supply chains, world-class innovation ecosystems, and an economy that is resilient, competitive, and sustainable on both sides of the Atlantic.

For the record I think being less dependent on the US would be a good thing, but this is hardly revolutionary thinking from our “genius economist” Prime Minister.  Every Prime minister in my lifetime going all the way back to the original Trudeau moron has stated this goal.  Yet for 2 good reasons it has never happened.

1. It is way easier to trade with the world’s largest consumer economy we live next to than it is to ship goods across oceans.
2. Every single Prime Minister in my lifetime, despite party affiliations, has been a liberal moron.

There is a difference between liberals and conservatives.  Liberals think that conservatives are just a stick in the mud afraid of change.  But to paraphrase Reagan, “the problem with our liberal friends is that they know so much that isn’t so”.  Conservatives are not afraid of change.  They just understand that things are the way they are for a reason.  You should not change anything then unless you understand why things are that way now.  Liberals on the other hand are certain that things are only done this way because no one as smart as them have come along to fix it.

Canada trades with the US because we don’t have the ability to trade with anyone else.  To trade with other countries, we must get our goods to a port and on a boat.  We do not have the infrastructure to do that.  It was only 10 years ago that we struggled to get Saskatchewan’s grain harvest to the coast.  The number one reason we don’t have the infrastructure is over regulation and squabbling between the provinces for political purposes.  You can sign all the trade deals you want but if you physically can’t increase trade, you will not increase trade.  The people in Ottawa do not understand this.  They think that once their huge intellect points us in a different direction it magically happens.  It never dawns on them to question why this hasn’t happened even though the same things were proposed a half century ago.

Most people have jobs where they never need to consider the sausage making happening in the background.  They do not understand what it takes to make anything happen only their piece of it.  Even people who make it to management often have never been exposed to the machinery.  But many of them convince themselves that they have.  They believe they have the knowledge to make decision when they do not understand the implications of the decision.

At one time I worked for a company that was purchased by a national oil company from another country.  The head office sent their people all over the world to work in all their subsidiaries.  They were all nice well-intentioned people but not one of them knew anything about how oil gets out of the ground and to a sales meter.  None of them had any hands-on experience.  They all worked in the head office and rarely or never even visited the field where the oil and gas are produced.

I spent 12 of the first 14 years of my career living and working in rural areas.  You know where the product is produced and processed.  One of my jobs after being acquired by the foreign mother Corp was to act as an operations consultant.  They sent me to some of their other operations.  One of them was in Kazakhstan.  We flew into Almaty and met with the office staff there.  Then we flew to Aktobe and drove another 5 hours to the field.  After more than a week of staying in the field camp working with operations staff we returned to Almaty and met again with the office staff.  They were very interested in what we observed because they had never been to their only producing field that was on the other side of the country.

The office staff in Almaty were very much like bureaucrats in Ottawa.  They had never bothered to leave Almaty because Almaty is a nice place to live.  But that did not stop them from making decisions about a place they had never seen and did not understand.

Later the company asked me to be the vice president of operations for their Canadian subsidiary.  The groups that I supervised spent all the money, sometimes quite inefficiently, so I set about restructuring some of the groups and I was having success with bringing our expenses down.  While I was doing this the market was doing what the market always does, change.  Oil prices started to collapse.  This caused a panic because our debt level was high due to financing a pet project forced on us by the mother Corp.  An emergency meeting was called, and all the executives and senior managers were told to attend.

It unfolded how I imagine most meetings in Ottawa unfold.  Someone who had no idea what they were talking about told us what we had to do to fix our problem.  And by us, I mean me, because my groups spent all the money.  His genius solution was that we should just cut operating costs by 20% immediately.

All the heads nodded in agreement and then turned to me to see if my head was also nodding.  I had to burst their bubble.  First, I reminded them of what I told them almost 2 years before when they asked me to take over.  Operating costs are not a switch that can be turned on and off.  Cutting costs takes time because it means doing thing differently and changing human behavior.  Costs had already started to fall due to what my groups had been doing over the last 2 years.  They would not suddenly change just because we wanted them to.  Then I explained just how absurd the 20% target was.

40% of our costs were for 2 things, electricity and taxes.  The power company was not going to accept 20% less and neither was the government.  So, what he was really telling me was that I would need to cut 33% of everything else.  My next 3 largest costs were well servicing, chemicals (mostly corrosion inhibitor) and wages.  Cutting well servicing costs immediately by 33% would mean not fixing wells when they stopped pumping.  That would reduce our revenue, which we could not afford to do.

Cutting chemicals means incurring higher operating costs due to corrosion.  Our well-service costs had already fallen because of the corrosion inhibition programs we started.  If I stop our costs will go up, not down.  We started using chemical in the first place because we could show that every 1$ in corrosion inhibitor saved us $5 in well servicing.

That brought us to people.  Through my restructuring we already had fewer people in the field.  Apparently, he believed I restructured the field and still had 100 people I did not need.  Cutting more was stupid but possible.  It would cause production interruptions.  Again, the needle went the wrong way.  I pointed out that while the field restructuring had led to layoffs the staff count in the head office (outside of my groups) over the same period went up.  I was hoping they would take the hint, but they did not.  We could have easily cut people out of the head office, but these were groups I did not control.  We had the most overstaffed head office of any company I had ever worked for by a huge margin.  It wasn’t even close.  We had 40% more people in the head office as a company that size should have had.

Think about that for a minute.  Someone who worked in the industry was that ignorant about how the company really worked.  It was obvious to him that we just needed to cut costs by 20% and that it never happened before because no one as smart as him had ever thought of it.  He didn’t understand what he was talking about but that did not stop him from speaking with great authority.  He would have made a great liberal politician.

We can’t trade with other countries without building more infrastructure.  Canada is no longer a country that builds, it is a WOKE country that blocks.  No one in Ottawa understands why we need infrastructure or how to get it built.  But that does not stop them from signing agreements and making press releases.  We are doomed.  The collective ignorance about anything that really matters in our capital cities will kill us.