Politicians are much more obsessed than business firms are with short-term results
Many people unquestioningly accept the canard that corporations focus too much on short-term earnings and neglect investing in a long-term vision. Clayton Christensen of the Harvard Business School always claimed firms are too focused on the immediate needs of their customers to make important innovations. Firms that favour “downsize-and-distribute” strategies over “retain-and-reinvest” strategies depress longer-term economic growth.
The economist Tyler Cowen argues in his book Big Business that such criticisms are overblown. There are plenty of examples of firms focusing on long-term results. Most examples of supposedly excessive short-termism actually reflect another firm’s superior ability to anticipate emerging new trends, like Netflix’s innovative model for delivering home entertainment (or at least once-innovative model).
Amazon is a good example of a firm planning for the long term. It did not post its first profit until seven years after its founding and then cycled in and out of profitability for several more years before becoming the world’s dominant retailer by reinvesting its earnings in on-line retailing and cloud computing. Founder Jeff Bezos burnished the myth surrounding Amazon, telling Wired magazine in 2011 that “If everything you do needs to work on a three-year horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue.”
But Bezos exaggerates the uniqueness of Amazon’s emphasis on patient capital. Lots of other private sector firms play the long game. The business model of venture capital investing is predicated on absorbing numerous short-term losses in order to unearth a rare diamond that pays off handsomely. Nor is there compelling evidence that sectors shielded from the pressure to produce short-term profits, such as private equity investors or pension fund managers, significantly outperform their supposedly myopic competitors in publicly-held firms or index funds.
Canada’s large resource sector gives us an innate advantage in focusing on the long term. Our largest industry is energy, which these days is dominated by oilsands extraction. The oilsands industry necessarily focuses on the long term since it requires the commitment of capital for decades, unlike the short-term outlook of the frackers who dominate U.S. oil production. The result is that oilsands output and employment rarely stray from their long-term trends, not even during sharp price declines such as in the spring of 2020. This steadiness contrasts with the cyclical ups and downs of industries such as autos, housing and high tech to which our political leaders are attracted like moths to an LED light bulb. (Memory of the 2001 bust of Nortel and JDS Uniphase still resonates among Ottawa residents.)
The myth persists that Asian countries have a competitive advantage in long-term planning. Akio Morita, chair of Sony Corporation in the 1980s when it had the equivalent stature of Apple today, boasted that “America looks forward ten minutes; Japan looks forward ten years.” In reality Japan failed to anticipate its decades of economic stagnation. For years, Westerners have misinterpreted former Chinese Premier Zhou Enlai’s famous reply in 1982 when asked about the consequences of the French Revolution that “It’s too soon to tell” as meaning China’s leaders looked centuries into the future. Turns out he misunderstood the question, which referred to the May 1968 student uprisings not the revolution of 1789.
Politicians are much more obsessed than business firms are with short-term results. This reflects the imperatives of the electoral cycle, usually between two and four years, and the shrinking average tenure of G20 leaders from six years in 1946 to 3.7 years now. As Dambisa Moyo concludes in The Edge of Chaos, “The myopia embedded in the democratic process creates a mismatch between short-term electoral incentives and the long-term economic challenges that need to be addressed. Worse still, this short-termism exacerbates the headwinds that are already dampening economic growth.”
The University of Toronto’s Joseph Heath argues this weakness of political leaders is partly offset by civil servants, who supposedly are better able to play the long game. Central banks are also generally better equipped to focus on the long term since they are usually granted some measure of independence precisely in order to insulate their thinking from voters and elections. As one Swiss central banker recounted, the prevailing view used to be “We are responsible for the long run, so the short run can take care of itself.”
In spite of their supposed insulation from politics, central banks increasingly have focused on boosting short-term economic performance at the expense of long-term growth and financial stability. The problem of excessive focus on the short term is exacerbated by the long lead times involved in monetary policy. Former Kansas City Federal Reserve President Thomas Hoenig observed that “The short run was the focal point” of Fed policy after 2010, especially its policy of Quantitative Easing. Similar short-termism contributed to the recent build-up of inflationary pressures.
The dividing line between a focus on short-term “presentism” and long-term results increasingly follows the fault line between liberalism and conservatism. Liberalism has a hostility to past traditions and customs, summarized in Keynes’s famous dictum “in the long run we are all dead.” Hayek criticized Keynes’ focus on the short-term effects of economic problems “as a betrayal of the main duty of the economist … to stress the long effects which are apt to be hidden to the untrained eye, and to leave the concern about the more immediate effects to the practical man.” People who want a return to long-term strategies instead of relentless short-term stimulus should favour more corporate and conservative influence in our economy and politics, not less.
Philip Cross is a senior fellow at the Macdonald-Laurier Institute.
HALIFAX – Nova Scotia Premier Tim Houston says it’s “disgraceful and demeaning” that a Halifax-area school would request that service members not wear military uniforms to its Remembrance Day ceremony.
Houston’s comments were part of a chorus of criticism levelled at the school — Sackville Heights Elementary — whose administration decided to back away from the plan after the outcry.
A November newsletter from the school in Middle Sackville, N.S., invited Armed Forces members to attend its ceremony but asked that all attendees arrive in civilian attire to “maintain a welcoming environment for all.”
Houston, who is currently running for re-election, accused the school’s leaders of “disgracing themselves while demeaning the people who protect our country” in a post on the social media platform X Thursday night.
“If the people behind this decision had a shred of the courage that our veterans have, this cowardly and insulting idea would have been rejected immediately,” Houston’s post read. There were also several calls for resignations within the school’s administration attached to Houston’s post.
In an email to families Thursday night, the school’s principal, Rachael Webster, apologized and welcomed military family members to attend “in the attire that makes them most comfortable.”
“I recognize this request has caused harm and I am deeply sorry,” Webster’s email read, adding later that the school has the “utmost respect for what the uniform represents.”
Webster said the initial request was out of concern for some students who come from countries experiencing conflict and who she said expressed discomfort with images of war, including military uniforms.
Her email said any students who have concerns about seeing Armed Forces members in uniform can be accommodated in a way that makes them feel safe, but she provided no further details in the message.
Webster did not immediately respond to a request for comment.
At a news conference Friday, Houston said he’s glad the initial request was reversed but said he is still concerned.
“I can’t actually fathom how a decision like that was made,” Houston told reporters Friday, adding that he grew up moving between military bases around the country while his father was in the Armed Forces.
“My story of growing up in a military family is not unique in our province. The tradition of service is something so many of us share,” he said.
“Saying ‘lest we forget’ is a solemn promise to the fallen. It’s our commitment to those that continue to serve and our commitment that we will pass on our respects to the next generation.”
Liberal Leader Zach Churchill also said he’s happy with the school’s decision to allow uniformed Armed Forces members to attend the ceremony, but he said he didn’t think it was fair to question the intentions of those behind the original decision.
“We need to have them (uniforms) on display at Remembrance Day,” he said. “Not only are we celebrating (veterans) … we’re also commemorating our dead who gave the greatest sacrifice for our country and for the freedoms we have.”
NDP Leader Claudia Chender said that while Remembrance Day is an important occasion to honour veterans and current service members’ sacrifices, she said she hopes Houston wasn’t taking advantage of the decision to “play politics with this solemn occasion for his own political gain.”
“I hope Tim Houston reached out to the principal of the school before making a public statement,” she said in a statement.
This report by The Canadian Press was first published Nov. 8, 2024.
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REGINA – Saskatchewan Opposition NDP Leader Carla Beck says she wants to prove to residents her party is the government in waiting as she heads into the incoming legislative session.
Beck held her first caucus meeting with 27 members, nearly double than what she had before the Oct. 28 election but short of the 31 required to form a majority in the 61-seat legislature.
She says her priorities will be health care and cost-of-living issues.
Beck says people need affordability help right now and will press Premier Scott Moe’s Saskatchewan Party government to cut the gas tax and the provincial sales tax on children’s clothing and some grocery items.
Beck’s NDP is Saskatchewan’s largest Opposition in nearly two decades after sweeping Regina and winning all but one seat in Saskatoon.
The Saskatchewan Party won 34 seats, retaining its hold on all of the rural ridings and smaller cities.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Press. All rights reserved.
HALIFAX – Nova Scotia‘s growing population was the subject of debate on Day 12 of the provincial election campaign, with Liberal Leader Zach Churchill arguing immigration levels must be reduced until the province can provide enough housing and health-care services.
Churchill said Thursday a plan by the incumbent Progressive Conservatives to double the province’s population to two million people by the year 2060 is unrealistic and unsustainable.
“That’s a big leap and it’s making life harder for people who live here, (including ) young people looking for a place to live and seniors looking to downsize,” he told a news conference at his campaign headquarters in Halifax.
Anticipating that his call for less immigration might provoke protests from the immigrant community, Churchill was careful to note that he is among the third generation of a family that moved to Nova Scotia from Lebanon.
“I know the value of immigration, the importance of it to our province. We have been built on the backs of an immigrant population. But we just need to do it in a responsible way.”
The Liberal leader said Tim Houston’s Tories, who are seeking a second term in office, have made a mistake by exceeding immigration targets set by the province’s Department of Labour and Immigration. Churchill said a Liberal government would abide by the department’s targets.
In the most recent fiscal year, the government welcomed almost 12,000 immigrants through its nominee program, exceeding the department’s limit by more than 4,000, he said. The numbers aren’t huge, but the increase won’t help ease the province’s shortages in housing and doctors, and the increased strain on its infrastructure, including roads, schools and cellphone networks, Churchill said.
“(The Immigration Department) has done the hard work on this,” he said. “They know where the labour gaps are, and they know what growth is sustainable.”
In response, Houston said his commitment to double the population was a “stretch goal.” And he said the province had long struggled with a declining population before that trend was recently reversed.
“The only immigration that can come into this province at this time is if they are a skilled trade worker or a health-care worker,” Houston said. “The population has grown by two per cent a year, actually quite similar growth to what we experienced under the Liberal government before us.”
Still, Houston said he’s heard Nova Scotians’ concerns about population growth, and he then pivoted to criticize Prime Minister Justin Trudeau for trying to send 6,000 asylum seekers to Nova Scotia, an assertion the federal government has denied.
Churchill said Houston’s claim about asylum seekers was shameful.
“It’s smoke and mirrors,” the Liberal leader said. “He is overshooting his own department’s numbers for sustainable population growth and yet he is trying to blame this on asylum seekers … who aren’t even here.”
In September, federal Immigration Minister Marc Miller said there is no plan to send any asylum seekers to the province without compensation or the consent of the premier. He said the 6,000 number was an “aspirational” figure based on models that reflect each province’s population.
In Halifax, NDP Leader Claudia Chender said it’s clear Nova Scotia needs more doctors, nurses and skilled trades people.
“Immigration has been and always will be a part of the Nova Scotia story, but we need to build as we grow,” Chender said. “This is why we have been pushing the Houston government to build more affordable housing.”
Chender was in a Halifax cafe on Thursday when she promised her party would remove the province’s portion of the harmonized sales tax from all grocery, cellphone and internet bills if elected to govern on Nov. 26. The tax would also be removed from the sale and installation of heat pumps.
“Our focus is on helping people to afford their lives,” Chender told reporters. “We know there are certain things that you can’t live without: food, internet and a phone …. So we know this will have the single biggest impact.”
The party estimates the measure would save the average Nova Scotia family about $1,300 a year.
“That’s a lot more than a one or two per cent HST cut,” Chender said, referring to the Progressive Conservative pledge to reduce the tax by one percentage point and the Liberal promise to trim it by two percentage points.
Elsewhere on the campaign trail, Houston announced that a Progressive Conservative government would make parking free at all Nova Scotia hospitals and health-care centres. The promise was also made by the Liberals in their election platform released Monday.
“Free parking may not seem like a big deal to some, but … the parking, especially for people working at the facilities, can add up to hundreds of dollars,” the premier told a news conference at his campaign headquarters in Halifax.
This report by The Canadian Press was first published Nov. 7, 2024.
— With files from Keith Doucette in Halifax
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