The enemy within

It's long been said – by me, at least – that if you torture a statistic long enough, it will always tell you what you want to hear.

For example, a recent Conference Board of Canada report that decried Canada's economic performance, particularly in the areas of productivity. This added to several reports that highlighted B.C.'s even worse performance.

B.C., it seems, is a major slacker in the productivity department. And, apparently, we're masking this shameful lotus-land thinking by producing raw resources for big bucks, which we spend on...stuff.

Can't argue with that. Too much of our economy is geared to either digging up or cutting down, and servicing retirees with nice steady – but unproductive – incomes.

But it's the experts' fingering of the culprit that bothers me. According to them, in B.C. we have too many small businesses, which in 2006, contributed 27 per cent of the province's GDP, the highest proportion in the country.

Small business makes up 98 per cent of all businesses in B.C., and 83 per cent of those are micro-businesses, having fewer than five employees. More than half are self-employment businesses with only a single “worker” who, as the Vancouver Sun's Harvey Enchin pointed out, “is not likely to make the kind of investments that will increase capital intensity.” Rather, the experts say, the solution for BC is more big companies with big capital investment budgets.

Wrong! (And I'm not saying that because I'm not too far removed from being one of those guys working with a laptop out of my home.)

It's wrong because these economists – and the people who slavishly follow them – use a 19th and 20th century measurement of success and apply it to the 21st. It measures economic output in terms of goods produced.

And guess what? Under those measurements, we in B.C. clearly suck as productive workers. I guess if we just had a couple of hundred more factories pumping out consumer trinkets , everything would be right again.

Unfortunately, that's no longer the world we live in, and perhaps these economists might want to start using different measurements that capture the value of intangibles that make up much of the economy today. Maybe the real situation is that B.C. – like much of the Western world – is rapidly moving into a knowledge world, where the production of high-value (and high-profit) services based on knowledge

As an example, look at Germany, where GDP is stagnant, but much of the country is happily creating extremely high-value services such as environmental technology. Or how about Silicon Valley, where everybody's office seems to be a coffee shop, but the economy runs in to the many many billions – almost all of it intangible?

Any independent or small business person will tell you that they have to be entrepreneurial in B.C., usually by selling their knowledge or skill, because, there aren't many traditional big company jobs.

So the solution might not be more old-fashioned capital intensive big businesses pumping out more and more goods, a la Ontario. It isn't going to happen, and they're hurting anyway because of foreign competition.

Instead of complaining about how they're a drag on the economy, it might be that we need more of those independent consultants and micro businesses. And then we help them grow into intensive knowledge-based businesses.