An interesting juxtaposition on CBC last week: headline news story, “CRB Payback Will Close My Business.” The next commercial: “Half of New Businesses Close Within Ten Years.”
Purveyors of Free Market Capitalism are happy to reap the benefits of our socialist nation. They transport their goods on national infrastructure, they pay their workers less because all have medical benefits, and they whine for protective tariffs on the basis of national good. But even so, 20% of new businesses fail in the first two years. Other data suggests the failure rate for ten years is 60%. Doesn’t sound like a stable economic system.
National Emergencies
Sometimes the federal and provincial governments function as huge insurance companies, using their borrowing power to provide relief in the form of low-interest loans for foundering businesses. But once the emergency is over, businesses have to prove their worth again.
I’ll repeat the data above from another angle. In a normal year, 90,000 businesses fail in Canada, and nobody notices. At the moment slightly less than 800,000 businesses still owe CRB repayments. These facts don’t match one-for-one, but you can see that, despite government help, about 10% of those companies will fail for a complex set of reasons.
Depending on who you ask, between 13 and 37 percent of companies have made full payment. One would be justified in floating the opinion that the rest are still in “socialist” mode, milking the interest-free loan for all it is worth and politicking madly for the government to forgive $7 billion in loans completely. Meanwhile, their conservative confreres are complaining about how much money the government is spending.
A yacht is a hole in the water into which you throw money.
Whether the government of the day is of liberal or conservative leaning, those in power are constrained by the realities of budget. And while all Canadians feel empathy for someone whose family business is about to go under, the government has to do what’s best for the nation in the long run. As numerous historical examples have proven, giving money to businesses rarely works. (Dare I mention the $4 billion given to Bombardier?)
A failing business should not be a hole in the ground into which the government throws money. The COVID pandemic was hard on Canada in total. Helping businesses was a good idea. That’s socialism at its best. Nobody is surprised that the help wasn’t enough for those companies too weak to survive the hit or adapt to the changing market that resulted. Loans must be repaid, and some companies will go under. That’s capitalism.
The Bottom Line
A failing family business makes a great news report, useful for all sorts of political purposes that have nothing to do with business or the economy. The true problem lies in the myth of Free Market Capitalism. Stop blaming the government. Start looking for ways to stabilize our economic system.