What do Canadian businesses need for economic survival and recovery?

In this time of crisis, Canadian businesses are facing many challenges. These vary by sector, but fall into two groups. The first is how to survive in the short term. The second is how to grow and thrive again as the crisis eases.

In the short term, many businesses are struggling to survive and pay their bills as the pandemic forces many Canadians to stay home. Despite emergency government supports for both wages and rent, many companies have been forced to downsize or close. This has led to mass layoffs, and thus more people seeking employment insurance and other emergency benefits, that they may or may not qualify for. Without satisfactory bailouts or emergency funding for these laid-off workers, and commercial rental assistance for applicable businesses, it is inevitable that there will be more bankruptcies and homelessness in the near future, severely affecting economic recovery potential. Short-term policy measures to support business should remain focused on those most vulnerable and most in need. This means support aimed at front line workers rather than executives, and at small businesses rather than large corporations. The disadvantage of this short-term approach is that it does not take into account the reality that some industries are dying, and that financial support for businesses in these sectors ultimately may be futile. This is where longer-term policies to support business growth must come into play.

As the effects of the pandemic ease, the unemployed will be eager to return to work. However, those businesses that do survive will need to maximize efficiency in their business models. Their efforts to reduce labour costs may become permanent. These intersecting challenges will likely bring about a shift in economic activity between sectors in Canada. The result may be more competition for some skillsets and reduced demand for others.

As economist Milton Friedman once said: “Only a crisis – real or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.” As in the recovery from the Great Depression and other downturns since, this crisis can catalyze an evolutionary leap. It is of the utmost importance that the Government of Canada utilize the right ideas that are “lying around,” ones that do not enrich the 1% at the expense of the poor and middle class. That being said, it is crucial that any policies formed to protect Canadian businesses in times of crisis, prioritize those most in need, and the building of future economic resilience.

Planning for economic recovery must be done in such a way that it builds toward respecting and preserving life as opposed to getting rich, does not depict infinite growth on a finite planet, does not exploit earth’s resources, but recognizes their value to human life as well as the importance in conserving the quality and functioning of the ecosystems that provide these resources[1]. The imminent climate crisis certainly cannot be ignored in planning for future growth. Canadian businesses and industries must restructure with this in mind, or face consistently worsening cycles of economic, social, and environmental collapse. The response to one crisis must not fuel another.

A rebuilding and growth policy therefore should include a stimulus that aims to create “green” jobs that will ultimately replace dying fossil-fuel industries, counter systemic inequities by increasing opportunities for insecure working families, communities of color, and Indigenous communities, and tackle the climate crisis through both mitigation and adaptation methods[2]. As in any revolutionary economic transition, such an approach does have downsides. These include industrial backlash and temporary supply-demand imbalances. Because of the many different challenges facing individual industry sectors, there is no simple one-size-fits-all solution.

The recommended path forward must use multiple tools. These will include subsidies for individual skill-building, direct government investment, direct and indirect government loans, and a supportive tax and regulatory environment. Much can be achieved through existing vehicles such as the Infrastructure Bank, the Business Development Bank of Canada and the Canada Small Business Financing Program. What is required is to look at support for business through a new lens. Moving beyond the pandemic, the government cannot afford to make the same mistakes by trying to support a delicate economy, but instead must focus its financial and policy levers on creating a more resilient and holistic economy that will be better equipped to survive the next inevitable crisis.

Endnotes

[1] C. Hings, “Building an Economy for the Ecozoic,” Waterloo Journal of Environmental Sciences, vol. 1, no. 1, 2019. [Online]. Available: http://wjes.ca/building-an-economy-for-the-ecozoic/.

[2] Green Stimulus Proposal, “A Green Stimulus to Rebuild Our Economy.” [Online]. Available: https://medium.com/@green_stimulus_now/a-green-stimulus-to-rebuild-our-economy-1e7030a1d9ee

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