Friday Reading Roundup #11
Zombie firms, UK policy papers, and lessons for Toronto from Mamdani
Happy Friday! In today’s Reading Roundup, I share my recent opinion article in the Globe and Mail on Canada’s zombie firms. Barring any last-minute changes, I’ll be on BNN Bloomberg today at 4:20 PM to discuss it, so if you want to hear me talk about it some more, check it out!
Today’s post also examines the avalanche of major policy documents from the UK this week on industrial strategy and trade policy before finally turning to an op-ed on the lessons Toronto can draw from Zohran Mamdani. I hope you enjoy it, and have a great weekend!
Let’s Kill Off Our Zombies
Hudson’s Bay was a ‘zombie firm.’ Canada is full of them and they all need to die - Tom Goldsmith, The Globe and Mail
Last week, I wrote in the newsletter about taxing our way to innovation by forcing low-productivity firms to exit. Yesterday, the Globe and Mail published an opinion piece by me that looks at that question from a slightly different angle - our zombie firms.
In it, I explored how these firms act as a major drag on our economy and productivity. They suck up talent, capital, and government subsidies yet continue to perform poorly over time.
The persistence of these zombies reflects a broader decline in business dynamism and creative destruction, here and across the world. That is bad news for the societal outcomes we want to see, given that innovative firms tend to pay higher wages and provide better career opportunities, combined with destroying the rents from past innovators.
I argue that rather than continuing to give corporate subsidies to these firms, we should let them die and use the money to fund genuine reform of Employment Insurance. Given EI’s massive coverage gaps, we’d be better off reforming that to enable workers to take the time to find the best job match for them.
Freeing workers from our failing zombie firms and helping them find new roles would be a major boost to our stagnant productivity and would also help build a more equitable society.
If you want to hear me talk more about this (while hopefully not making a fool of myself in the process), then don’t forget to tune in to BNN later today.
Lots of big reports from the UK
The UK’s Modern Industrial Strategy
8 Industrial Strategy Sector Plans
Now, I’m not going to claim that I’ve scratched the surface yet on all of these documents released by the UK government this week. Combined, they are hundreds of pages long and get into a hell of a lot of detail.
The executive summary of the Industrial Strategy alone sets out 30 commitments, and they each go far deeper than that. To get a flavour, just check out this post (and thread) from one of the authors of a previous UK industrial strategy:
The fact that they go into this kind of detail (with the screenshots above identifying the senior responsible public servant down to what is more or less ADM level) is impressive in and of itself.
These documents are thorough, set a stake in the ground on what they think the UK’s problems are (foremost “the critical need to increase business investment”), and make real choices (the industrial strategy explicitly picks what the government assesses to be the “highest-potential” sectors).
They also evolve the UK’s thinking away from some two-dimensional approaches. This is true in the Industrial Strategy, but is also apparent in the Trade Strategy, where it takes a more nuanced view of the importance of imports as well as promoting exports, and how free trade agreements are only one part of the toolkit rather than the be-all and end-all, than the previous Conversative government ever exibited.
Whether these strategies are deliverable and will have their intended effects is a different question entirely. There are many legitimate criticisms, including the fact that many of the announcements are recycled from previous ones and that no significant new money is put towards these bold ambitions. Another question is whether Labour’s consistent pandering to the far right will derail any well-intentioned industrial and trade policies.
I plan on returning to these strategies soon. In particular, I want to dive into the technology adoption paper. There has been a lot of work published recently on tech adoption in Canada, primarily around AI adoption, and I’d like to look at those side-by-side with the UK paper, too.
Drawing Lessons From Zohran Mamdani’s Victory
He just won a shock election in New York by promising free buses and rent freezes. Toronto could learn from it - Christin El-kholy, Toronto Star
I’ve been thinking a lot about Zohran Mamdani’s primary victory this week. I’ve been thinking about how he achieved it, the kind of vision and policies he put forward, the barriers he faced in winning, and the racist and Islamophobic backlash he has faced since he won. There is a lot to take in, and there are lots we should be thinking about that are far beyond what I scratched the surface with on Wednesday.
I even drafted an op-ed on whether Toronto will learn from Mamdani’s example & build a coalition to tackle big problems through a new, progressive lens. I then realized that Christin El-kholy had already published a much better version of the same argument.
El-kholy makes that case that:
In a city that so often feels stuck, Mamdani’s ethos offers something sorely missing here: urgency, creativity, even joy. Toronto may not have its own Mamdani. But the potential is there — and it’s clear the city desperately needs someone to step up.
I could not agree more.