Paul Summerville is a Senior Fellow at the Centre for Global Studies at the University of Victoria, British Columbia
Update: This post was included in the Carnival of Wealth #10
Biography: Paul Summerville is a Senior Fellow at the Centre for Global Studies at the University of Victoria, British Columbia. Paul has held senior positions as an economist, equity research director, and Asian regional head at several prominent global investment banks in Tokyo, Toronto, and Boston. He completed a Ph.D. from the University of Tokyo (1988) with a thesis on the Japanese automotive industry, and also studied at universities in Toronto, Jerusalem, Edmonton, Geneva, and Osaka. Paul is currently contemplating the future of Canada as an exemplar of modern social democracy. Paul ran for the NDP in the Federal Election of January 2006 in the riding of St. Paul’s, Ontario finishing third.
First off, Paul, let me thank you for agreeing to discuss your book Canada’s Excellent Future, your website www.excellentfuture.ca and the global economy. I stumbled onto your website doing some random Google searches and have recently become an avid reader of your daily ‘smart picks’. What got me interested in the ‘smart picks’ was that embedded in your comments were a plethora of links to other sites, many of which took a different view on the issue at hand that you had taken.
Q: What is that all about?
A: I suppose it is a kind of anti-blog, where most blogs tend to be highly opinionated, the purpose of ‘smart picks’ is to create a dialogue from the best global media about the world we are in, and what Canada has to do to in order to ensure that the next 25 years or so is, well, excellent for Canadians.
There are some other sites like Barry Ritholtz’s The Big Picture, and the Economist’s Link Exchange that do a similar type of thing. The difference with Excellent Future is that we are using the daily process of writing ‘smart picks’ to build out the ideas that will populate a book.
Q: Why are you doing it that way?
A: Well my partner Evan Lesson, whose firm Catalyst Internet is one of North America’s leading social networking leaders, convinced me that rather than go into a cave for a few years and come out with ‘a book’, that instead, the process of researching and writing Canada’s Excellent Future could be a like a conversation if we took advantage of social media.
Q. A conversation?
A: Yes, first a conversation that begins everyday by me reviewing and sharing a wide range of opinions about what is happening in the world that sometimes I may reference back to Canada, and second, an ongoing conversation as key themes emerge that sometimes I reference back to the book. Importantly, already about 20% of ‘smart picks’ is made up of content that is sent in to me by readers of the site, and that is only about half of what I actually get.
Q. Could you give us an example of a theme that has been developed on your site since it started?
A. Sure, let me give you two that will help your audience understand a little about how I think about the economy and how that speaks to intelligent investing. In my years in investment research I developed a differentiated approach to thinking about how economies worked by analyzing countries in terms of the interconnection between the economy, politics, and culture. This approach was a consequence of my education, and professional training including time with investment guru Kenneth S. Courtis who I met in Japan in the mid-1980s.
As Ken said to me once over some noodles in Tokyo, “everything is connected, everything.”
Of course, the challenge is to understand how the links are connected, and second how to invest accordingly. The more you are open to the connectivity between economies, politics and culture the more likely you will be able to price assets to reflect what is really happening.
For example, when the Berlin Wall fell in 1989 one of the best plays was to short the Japanese stock market because the end of communism meant that the post-world war II model that Japan had taken such intelligent advantage of, changed overnight. This took me about three years to figure out and the markets about ten. Another example, going forward, China’s one-child policy will undercut any hope that the country has of becoming rich making it very difficult for Beijing to allow the currency to rise and shift to domestic demand. China is heading for a terrible period of stagflation.
Q. So the two themes you mentioned specifically that have come out your ‘conversation’ with the web world are framed by the economy, politics, and culture?
A: Yes. First, the first theme is the immigration advantage that Canada has, and the second is the importance of distinguishing between individual rights and the idea of fairness to determine which countries will be successful in the first half of the 21st century.
Q: Please explain, it sounds more interesting than housing starts!
A: Sure. About a year ago I began to warn that the Obama Presidency would be threatened by high unemployment and persistent underemployment because it undermined how Americans look at themselves, what I like to call heroic individualism. Since 9/11 and after the economy fell away America has forgotten the transformative positive impact that waves of immigrants have had on the society and on the economy partly because the country has allowed an underclass of unilingual Spanish speaking immigrants to exist in a parallel universe to the rest of the country. Hollywood has tried to tell the story with the movie Crossing Over with Harrison Ford.
At the same time, immigration became a central issue in the election in the United Kingdom captured by then Prime Minister Gordon Brown getting caught on tape bemoaning the comments of a woman apparently unhappy with immigrants while France started the process of banning the burqa. A close look at the demographics of Japan and China reveal that both countries will face similar tremendous aging problems that immigration cannot solve for them. It was not long before the ‘immigrant’ issue began a conversation in the Canadian media rooted in loose thinking about the failure of multiculturalism in Canada.
How the immigrant issue is resolved in different countries will in part depend on the second theme, that is which countries recognize that individual rights are best protected in societies that are fair measured by inter-generational mobility a function of the rule of law, world class education and health outcomes, and a well functioning market, not ironically, laws that specially protect the rights of the individual to, for example, keep the bulk of their income, send their kids to taxpayer funded private schools, reserve the science of good health for the wealthy, and justice that is a function of what can be bought not argued.
Q. So what does that mean for Canada?
A: As I argued in a talk entitled ‘The Economies of Japan and China - Lessons for Canada‘ that I gave on September 22/10 to the Harbourside Rotary Club in Victoria, BC, Canada is in an immigration sweet spot because the current levels of immigration about 250,000 per year fill the gap in the population pyramid caused by falling fertility rates. More importantly Canada’s inflection to fairness in social policy, the rule of law, and a well functioning market economy has created the perfect conditions for the first born generation of Canadians to have the same average education, health, community and economic outcomes as second, third, and fourth born generation Canadians. Very few countries manage this feat.
How ironic that just as the failed multicultural debate started to heat up in Canadian newspapers that Calgary – of all cities – elected as its mayor the first Canadian who also happened to be a Muslim, Naheed Nenshi. I almost yelled hallelujah at my computer when I found out the news while researching my ‘smart picks’ blog the morning after he won.
Q. So does your optimism for Canada mean anything for the Canadian dollar? How will currency fluctuations in the Canadian or American dollar affect this outcome? Do you have any forecasts or projections for where the Canadian dollar will against the US dollar on a longer 1-2 year basis?
A: I learned when I was at Wellington Management in Boston that forecasts can trap your thinking because instead of reacting to new information forecasts force you to look backwards and try to defend old ideas. I also shiver a little when I find all these old breathless predictions I made while in Japan that the New York Times has so conveniently archived!
Instead, I would make the case that if Canada does the right things in terms of immigration and social policy that the Canadian dollar can stay above parity against the US dollar even in a time of relatively slow global demand for commodities.
Your readers may enjoy this 15 minute conversation I had last June with Steve Paikin, host of the public affairs program ‘The Agenda‘ about currencies.
Q. Paul, this not really what I expected when I asked you to answer a few questions about the economy! If possible I would enjoy the chance to reconnect in the New Year to discuss the keys issues that are emerging as you research Canada’s Excellent Future and your investment ideas.
A. Arjun, I would look forward to that very much. Congratulations on a great website. Thanks for having me.
Thank You, Paul!
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