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Coffee Trends: Sustainability And The Unabashed Capitalist


April 30, 2009
By Brian Martell

Topics

Economic cycles do not come and go, they revolve around a pivot
commonly known as confidence; either consumer or investor but usually
both.

“Once I built a railroad, I made it run ­­– Made it race against time. Once I built a railroad, Now it’s done – Brother, can you spare a dime?” Yip Harburg and Jay Gorney, Brother Can you Spare a Dime

Economic cycles do not come and go, they revolve around a pivot commonly known as confidence; either consumer or investor but usually both.

These two are essentially from the same animal that gives life to the structure of our economy. And as sure as blood flows through our veins, then so too does this engine move based on the production and consumption of the people who are reading this.

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The economic slowdown that has officially put Canada into recession was started by a global collapse of world financial markets due to the capricious lending practices promoted and encouraged through government policy, most notably by our friends to the south. Now they have a new president and he is committed to a stimulus package in excess of one trillion dollars (I can’t even imagine how much that is); and what is this supposed to stimulate? Your confidence, of course.

But wait, what if you’re still scared that the stimulus won’t reach you or your family; what if the money you originally paid in taxes or more appropriately, taxes you have yet to pay, goes to those who have an “inside track?”

How will this affect your confidence?

In short – it won’t.

The rampant Keynsian fever overtaking popular economists, western governments and those of the so-called BRIC (Brazil, Russia, India and China) is a political knee-jerk reaction to do something, anything, so as to be seen as proactive and looking after the best interests of the average citizen. What if the actual outcome of the current crisis will be something closer to the Great Depression? We cannot know with any certainty what the next page in this saga will be let alone the next chapter, but we do know what happened 80 years ago when the developed world was plunged into an economic dark age.

In Canada we had R.B. Bennett, the U.S. had Herbert Hoover and then Franklin Delano Roosevelt; what all three had in common was a driving force to be seen as “doing something” and that usually meant trying to change the economy.  FDR had his five-year plan, which involved state sponsored price fixing under the National Industrial Recovery Act.

Now I want you to imagine in your mind’s eye civil servants sitting around a table with the heads of competing companies determining what the prices of their products would be. This also was joined by other FDR initiatives which saw state-sponsored trade unionism in private companies, specifically those who joined state sponsored cartels as mentioned above.

It has been successfully argued that FDR prolonged the misery of the Great Depression by at least five years with his policies.

And to make matters even worse, almost every western government engaged in rampant protectionism, making less expensive imports unattainable.

Bennett decided to hitch his wagon to the British Empire, erecting trade barriers to imports outside of the Commonwealth while trying to boost exports to other Commonwealth countries.  Trouble was, the U.S. was, and still is, our greatest trading partner – one that Bennett turned his back on but then didn’t have much of a choice as Roosevelt already shut Canada down at the border.

Trade with the United Kingdom, which was also experiencing the Depression, was Bennett’s great hope. But like Newfoundlanders who looked to Great Britain for economic relief after the First World War, feeling they were owed something for the massive bloodletting at battles like Beaumont Hamel, none was to come (the economic relief was needed because Newfoundland borrowed heavily to help Great Britain in the war and Great Britain repaid Newfoundland’s generosity by grinding them into abject poverty).

Bennett should have realized that the Empire under Great Britain didn’t give a damn about the frigid colonials, as he was already in politics in 1903 when Great Britain genuflected to the U.S. on the disputed boundary of the Alaskan panhandle.

So, why the history lesson? It is an unfortunate truth that we do not learn from it, but alas, hope springs eternal.

What’s changed and what hasn’t? We now have a hugely popular American president, who was elected in the midst of an economic upheaval; FDR was elected for the first of four terms in the midst of economic upheaval.

FDR was president when a Democratic Congress passed sweeping protectionist laws in the U.S., Barack Obama is president when a Democratic Congress is about to pass stimulus legislation with “buy American” clauses that skirt NAFTA by allowing States to spend the money.

U.S. environmental legislation is being drafted that will see imports being levied with a carbon tax, making them less competitive against U.S. domestic products.  He is also planning on strengthening Homeland Security measures, which translates into more costs at the border to get goods into the U.S.

Canadian businesses have a lot on the line, especially under the economic reality that we are a nation with a comparative advantage regarding exports. We export more than we import (usually) and depend on exports to drive our economy. The vast majority of our exports are related to primary industry in mining, oil, and forestry, but these in turn drive the other part of our economy and have allowed for manufacturing and an ever expanding service industry to flourish.

If we pull the primary and secondary industrial exports from out of the economic mix, tertiary industries may lose their sustainability. In other words, those industries that are not involved in mining, manufacturing and the export thereof will suffer from their decline.

Who are these companies?

Well, they are yours and mine. They are the large national B2B suppliers, the medium-sized regional service providers, the local entrepreneurial businesses serving other businesses. This will ring true not only for office coffee services, but for all services.

The all too important economic indicator that really is responsible for prosperity still remains confidence. Governments continue to prove that they are not useless when it comes to affecting economic change, but downright destructive.

Confidence in our economy can only come from an environment where people believe that there is fairness in the system; where troughs and pork are solely agricultural terms.

Interestingly enough, a majority of Canadians believe that their government will get them out of the economic crisis; a belief fueled by faint hope and much fear. Perhaps we can learn something from the epiphany of one of the greatest philosophers of the Age of Enlightenment, John Locke, who proposed that there has to be a separation between the State and the Church for people to truly be free.

If we are to have confidence in our economy then let it be separate from the State as well.

Questions or comments? Visit Brian at www.heritage-coffee.com.