William Watson: Strategic nonsense

‘Strategic’ talk aims to extract special favours from government

We’re hearing a lot these days about “strategic” assets, “strategic” investments, even “strategic” industries, like potash and, we learned last month, stock trading. Who would have guessed stock trading was “strategic”?

I think I have a good working knowledge of what the English word “strategic” means. People are strategic if they look ahead, if they plan things out, if they’re shrewd. But I’ve never understood what “strategic” means when applied to assets, investments or industries. It often seems the best synonym for “strategic” in these contexts is “my,” for it’s mainly people who work in the industries or are plumping the investments or assets who argue they’re strategic. Other good synonyms are “protection-worthy” or “favour-deserving.” Those who argue their assets, investments or industries are strategic are almost always seeking some sort of favour or protection from the government.

When you think about it, aren’t all assets “strategic”? The assets I own — many of them underperforming, alas — are part of a personal strategy for making sure I’m not impoverished during my retirement. Or, even more strategically, to make sure I have a retirement in the first place. Pretty much all assets, even your summer cottage, were brought into being by someone who had some sort of motivation, which means they were all part of somebody’s strategic thinking.

What makes an industry “strategic”? No doubt it’s very nice for Saskatchewan to be sitting on top of the biggest pile of potash in the world. But what’s “strategic” about that? If people elsewhere want to buy potash, then people in Saskatchewan will be able to make money selling it to them. The more they want it, they more money Saskatchewanians — and anyone else who participates in the industry — will make. This is “strategic”?

True, if you own the resource, you may have to decide whether to sell it now or sell it later. That’s a strategic decision, I suppose. But it’s not exactly rocket science. If you figure the price is going to rise by more than the carrying cost of the resource, you wait.

Now if you’re a government, you’ll probably figure that having a valuable asset like a potash deposit in your backyard does require some strategic decisions from you. Let me be the bearer of good news. It doesn’t. Really. If money can be made digging the stuff out of the ground and selling it, lots of people will come forward to do that. You don’t actually have to do anything.

Yes, if you’re responsible for roads, sewers and the like, you may have to decide how many of them to build for the convenience of your potash industry. But the rules of cost-benefit analysis are pretty clear. Hire yourself a couple of economists and they’ll tell you whether there’s enough profit in the potash to justify building the roads. And if you’re dubious, you can tell the industry to build its own roads. If they decide the potash isn’t worth the roads, you’ll have dodged a bullet.

Of course, if you make the mistake of hiring management consultants instead of economists, they’ll tell you you should be “leveraging” your strategic industry. (Maybe the true meaning of “strategic” is that it’s something you’ll be tempted to “leverage.”) In its least harmless meaning, “leverage,” the verb, is synonymous with tax. The best thing about your strategic leveraging is that it will bring you revenue.

You’ll probably be tempted to go further, though, figuring that if God gave you so much potash maybe he must have meant for you to be good at doing value-added things with potash. Don’t. You are wrong. If God had wanted you to be a good value-adder to potash, He would have given you a large industrial base and situated you close to major markets. But people do insist on thinking this way. I heard the Premier of Quebec say this week that his province was going to leverage its cheap electricity into a world-leading electric car industry.

What is true of potash is also true of stock trading. Sure, it’s nice to have a stock trading industry. Stockbrokers are fine people, some of them at least. Well, maybe a few of them. A capital market is certainly a useful thing. It gets people who have money together with people who can put money to interesting purposes that make more money. In what possible way, however, is either it or a particular ownership structure for it, “strategic”?

People with money and people who would like to use money to make more money hunger for each other. Are we seriously to believe that if a particular institution for getting them together changes its form or ownership or even goes out of business, they’ll never connect again? In the age of the Internet, the most amazing technology for getting people together ever devised?

If the stock market isn’t owned and operated by Canadians any more, then Canadian firms with good ideas won’t find funding? Foreign owners and operators won’t want to make money if they have to deal with Canadians to do so? Only Canadian stockbrokers will be patriotic enough and sympathetic enough to give Canadian businesses a chance? Do remember these are stockbrokers we’re talking about.

Most talk about strategic this and strategic that is designed to get governments to hand out special favours. It seems the only thing that’s really “strategic” is the nonsense.