Archive for the The Chairman’s Corner Category

ST LOUIS, MO – OCTOBER 09: Democratic presidential nominee former Secretary of State Hillary Clinton (R) speaks as Republican presidential nominee Donald Trump looks on during the town hall debate at Washington University on October 9, 2016 in St Louis, Missouri. This is the second of three presidential debates scheduled prior to the November 8th election. (Photo by Win McNamee/Getty Images)

It is easy to be amused, appalled and disgusted by most of what Donald Trump has offered American voters in the first two US Presidential debates.  However, it is equally easy to be disappointed by the absence of substance from Hillary Clinton.  It is apparent that Hillary and her strategists feel that either no substantive answers are required to counter Trump’s incoherent perv-speak or that the format of the debates do not accommodate or reward a substantive answers.  However, among the xenophobes, Nativists, anarchists and miscreants that make up the most disquieting portion of Trump’s base lie well-meaning Americans that have reacted both viscerally and reasonably to the kernel of truth that underlies his opaque critique of America’s role in the global economy.

On the assumption that it is the short answer bias of the debate format that has precluded Hillary from answering his screed, I challenged myself to come up with something pithy but substantive to answer the reasonable fears of average Americans that Trump has sought to exploit on the issue of global trade.  Here it is (picture me in a fetching pant suit with my hair just so):

“Donald says few things that I understand let alone agree with, but there is one element of his rhetoric that touches on a true and legitimate concern of Americans. Something has indeed fundamentally changed for working class Americans over the last forty years.  And that change is undeniably a consequence of the liberalization of global trade.  That is not to say that free trade is bad.  No government policy has contributed more to the rapid decrease in poverty around the globe and rising general prosperity in America.  There is no reputable economist in the world and no measure of practical experience over the last forty years that can refute this fact.  However, it is no less clear that the benefits of freer trade have not been realized simultaneously by each trade partner, and that the allocation of those benefits among members of specific groups in the economy have not been equitable.

 It is this reality that presents the greatest challenge to those of us seeking to make and sustain the case for freer trade among nations.  The benefits of free trade for advanced economies are by necessity deferred.  As the world’s most advanced economy, America seeks free trade globally by offering access to its established consumer economy of 330 million people.  In exchange, Americans gain access to economies of many multiples of that among nations that are only now developing a viable middle class.  This new global middle class will ultimately unleash a vast untapped appetite for the kinds of consumer goods that we ceased to view as luxuries two generations ago, providing enormous new markets for American products.  However, these benefits will be deferred.  In the near term, free trade creates opportunities for capital and knowledge, resources with which America is uniquely blessed, and for low cost labour, with which emerging economies enjoy a profound competitive advantage.

 This does not mean that all manufacturing will migrate from America.  Our knowledge-based economy has created many productivity-enhancing technologies and a better educated work force that offset some of the competitive advantage otherwise available through lower wage rates.  However, it is inevitable that some jobs will migrate as a consequence of the exchange of market access through free trade. Fortunately, over time, these effects will diminish, as rising prosperity in emerging markets drives the expectations of the working class to both increase the market for higher-value knowledge based goods and narrow the wage gap.

 Therein lies the challenge for policy makers.  We must develop policies that recognize and dampen theses inequities. The benefits of enhanced prosperity that accrue to American capital and knowledge must be redistributed through fair taxation that recognizes that their allocation owes as much to these policy choices as it does to the wealth and knowledge of the beneficiaries.  We must create jobs in the renewal of our infrastructure that cannot be outsourced to low wage economies and will enhance productivity by making our cities more workable, our extraction industries more sustainable and our agriculture more efficient.  We must reform our educational institutions and systems to make them more accessible to all Americans and maintain them as leaders in the global marketplace of ideas.

 Freer trade does present challenges, but these are not challenges that can be addressed by walls, either physical or metaphorical.  These challenges cannot be addressed by retreat, by the nurturing of unity in opposition to not only those beyond our borders but to the arc of progress itself.  These challenges can only be met by owning up to the nature of the transformation, seizing upon the opportunities it offers and embracing a common commitment to make it work for all.”

Two minutes and 34 seconds; I timed it.  A little over the two minutes that Hillary and Donald were granted for policy statements on issues, but well within the liberties that each of them took with that restriction in both debates.  It is too much to hope that civility and substance will make a miraculous appearance at the final debate next Wednesday, but for the sake of those that truly want to hear something substantive that addresses real issues that divide Americans if not the candidates, let’s hope Hillary finds the opportunity to say something like this.

On Tuesday of this week I attended an investor presentation by a very interesting new company that was offering equity investments to allow successful and sophisticated family farming operations to acquire additional land to scale up their operations as necessary to survive and thrive in the world of Big Agriculture.  I was interested in the concept for two reasons.  First, the company was offering units in a Fund that might make for a good diversification strategy for my personal portfolio.  But perhaps more importantly the program concept sounded like one that might well have some application to the area of succession finance, an aspect of the finance market for which TAO has immediate ambitions.

At the pre-presentation reception, I met a very earnest and thoughtful fellow who also had an interest in investing in the Fund.  He too had a second motivation for his interest in the program, but one that was indisputably more altruistic than mine.  He was an advocate of all things Green, and structured his professional and investment activities accordingly.  It was his believe that this opportunity would not only yield superior risk adjusted returns but would also further the cause of Green agriculture by expanding the application of the environmental stewardship that he believed to be characteristic of family farms.  His thesis, in simple terms, was that the continual growth in the application of toxins upon our food crops in the form of pesticides and herbicides was not a consequence of any real productivity benefits in the form of increased yields, but rather the conspiratorial complicity of corporate farm operations and multinational chemical companies to eschew more effective organic alternatives.  Being a reflexive contrarian and in a bit of an impish mood, I impudently suggested that, on the basis of my admittedly limited but not scant reading on the topic, the apparent ability of family farms to incorporate more organic techniques had less to do with corporate callousness to the health of the world’s population and more to do with the realities of maximizing yield and minimizing cost in the context of ever larger farming operations.

His exasperated smile made clear that he would be very interested in seeing just how far up my neck my tie could be tightened, but the increasingly tense conversation was cut short by the presentation.  Part of the show included a presentation from the head of a family farm that had utilized funding from the Fund to increase his acreage four fold to over 12,000 acres, with a corresponding increase in yields, enhanced capital investment, lowering of costs and a myriad of other benefits.  And, they proudly noted, a transformation that was achieved without losing sight of the necessity of addressing sustainability. My new friend beamed.

Then came the inevitable question regarding the extent of organic farming in the operation.  The farmer was again proud to detail their commitment to “rotational organics”, a cornerstone of their sustainability commitment.  Rotational organics is a strategy that sadly reflects a pedestrian commitment to profitability rather than a messianic devotion to a Green manifesto.  You see, produce that is certified organic can sell at prices that are twice as profitable as equivalent volumes of its non-organic counterparts.  However, after four or five years without the benefit of modern herbicides, the dry Alberta soil is inevitably riven with weeds that reduce yields by as much as 60%.  The answer is a seven year rotation – two seasons of conventional farming to beat back the weeds, three seasons of continued farming without new application of pesticides or herbicides as are required before a field can be certified eligible to produce organic produce, then two years of certifiable organic production until the returning weeds force the cycle to start again.  Continual organic production, it seems is only possible in small scale operations in which hand weeding and extensive irrigation are possible, but scale does not permit the cost of such an approach to enlarged acreages, and particularly not in the relatively arid soil of Alberta.

As you can see, this crop strategy does not incorporate a philosophical commitment to organics.  It is a strategy that adopts the nakedly capitalistic objective of maximizing crop value and productivity.  Yet the application of price signals to the business model through the development of consumer preferences for organic produce has resulted in a profit maximizing strategy that contemplates the application of pesticides and herbicides in only two of every seven growing seasons.  Whether or not this Western consumer preference is based on fad or fact, it is an excellent reminder of the power of consumers to effect change.  It seems that Adam Smith’s invisible hand has a green thumb.

The August star show has once again dazzled.  We shouldn’t be surprised; it is a regular recurring event.  We always know it is coming; we get plenty of reminders, but somehow we always wind up being unexpectedly mesmerized by the spectacle of an array of never before seen stars that briefly and delightfully captivate our attention.  Especially this year, when the Perseid meteor shower placed twice the usual annual number of fireballs into the night sky, the most since the most recent outlier year of 2009.

You can be forgiven if you thought I was referring to the Summer Olympics, now being contested in the middle of the Brazilian winter (talk about first world privilege; we even get to define the seasons!).  These two phenomena bear an eerie number of parallels.  The Perseid meteor showers are the product of the entry into Earth’s atmosphere of parts of the debris field left by the orbit of the Comet Swift-Tuttles.  The comet itself is 16 miles wide and has been orbiting the Sun for as long as the Earth has.  The portions of detritus left in its trail that burn up in our atmosphere are relative grains of sand; they are very ordinary bits of small debris in the galactic scheme of things. But it is the juxtaposition of that ordinariness with their brief and beautiful luminescence that so entrances us.

Every four years, the Olympic star show bursts upon our consciousness.  We are drawn by the big “comets”; Usain Bolt, Michael Phelps, the celestial bodies that have burned bright enough to draw the man-made illumination of celebrity culture and reality television.  We recognize that their sheen is at least in part artificial, and that our appreciation of them is tainted by the “otherness” with which we have anointed them.  They are not ‘everymen’; they are Usain Bolt and Michael Phelps.  And we are drawn to them in awe.

But each night, when the artificial lights dim slightly as those celebrity stars are absent from the stage, as we continue to stare hypnotically at the glow of their approach or the tail of their retreat, we unavoidably see smaller bursts of light that hold our attention just long enough to transfix us.  As we change our perspective enough to allow us to focus on those smaller, more ordinary lights, an amazing thing happens.  We find ourselves powerfully moved when we discover in those dimmer dancing lights the realization of the extraordinary despite if not because of their seeming ordinariness.  As Canadians, we are moved by the precocious humility of phenoms like swimmer Penny Olesiak and sprinter Andre DeGrasse, the graceful sportsmanship of rising stars like diver Jennifer Abel and pole vaulter Shawn Barber and the aching and stoic disappointment of fallen champions like kayaker Adam van Koeverden and swimmer Ryan Cochrane.  These are our Canadian everymen, but rest assured that every participating country has their own cosmic grain of dust that finds its opportunity to shine in the wake of the great comets.

The August summer sky is full of light.  Humans have looked into that light for eons and seen not only evidence of the eternal and superhuman but also the comforting reflection of our own essence.  This year is no different.