For years, I’ve been meaning to start a podcast series, and I finally got around to it last month when my son and I launched it with a feature on Brexit. To get it off the ground, I conducted an interview with my 91 year-old father, who you will hear is as sharp as he was at forty – having in fact been recently told by the doctor that he has the heart of a man that age (when I heard the news, I laughed it would be a difficult adjustment for my father to accept he was actually that old).
As you hear, the snippets of the interview I used dwell on the contrast in the 1950s between Britain, where he was born and raised, and Canada, to where he migrated. But in the course of our long conversation, most of which ended up on the metaphorical cutting-room floor, my father said another thing that stuck out for me. He said that in Canada, in the 1950s, ‘if you could do it, you could do it.’
What he meant was that provided you had the personal capacity and desire to do something, you could do it. He used the example of his mother, who came to live with us during the years that straddled my birth. Trained as a nurse in the old system, in which young women got their education on hospital wards, my grandmother picked up enough knowledge about nutrition that when she got to Canada, she successfully turned herself into a dietitian.
My father was quick to add that Canada today is no longer like that. Few Western countries are. Over the last few decades, there has been a steady expansion in what can be called policy-induced rents. This happens when a given interest group pressures the government to enact a policy that inflates the value of an asset they own, from real estate to a university degree. And so, for instance, if you want to become a dietitian today in Canada, you have to first go to university then register in a college.
Such occupational licensing has spread to many jobs in Canada, the result being to raise barriers to entry, limit the pool of entrants, and thereby inflate wages. Beneficiaries of such guild-like protections will say the added qualifications have raised their productivity, but there’s actually little evidence to back this up. The truth is that for most jobs, beyond a high-school education, the productivity-returns on each additional year of schooling diminish quickly. And so in Western countries, over the last half-century, incomes have risen more than productivity, in no small part because we’ve built in these rents.
Biggest of all may be the value of real estate. In the time since my parents moved to Canada in the 1950s, incomes have risen roughly four times over. House prices have done so ten times over. Why? Because government policies stimulate home-buying and inflate asset-values (just think of how central banks rush to cut interest rates each time there’s a sharp fall in home values). The effect is that we need more income just to stand still. And that goes for any new business venture.
I live in London, where my father was born. There, a two-bedroom flat will set you back so much that you’ll break your back just to make your rent payments. You want to set up a new business? Good luck with that – you’ll have to get off to a flying start just to make your first month’s rent. But, for example, if you move to Johannesburg – another city where I spend a lot of time – that same amount of rent will get you a four-bedroom home on a half-acre plot of land, complete with swimming pool, patio, upstairs terrace and a fully-equipped cottage. So if you want to open a small bookstore, you don’t have to move much volume to stay afloat. If you’re an artist who wants to devote your time to your craft, you can get a loft in a trendy part of town for a couple hundred pounds a month. And on it goes.
The result is that if you can do it, you can do it. Whereas the rate of new business formation has been declining in Western countries, in much of the developing world, it is picking up. Not surprisingly, venture capital has been reorienting itself away from the West, and particular the United States, and towards the developing world. I’ve written about this before, and shown how the future dynamism in the world economy will increasingly be found in the global South.
Go West, young man, Horace Greely famously advised ambitious young people to do after the Civil War. Today, someone with energy and high hopes might do better to go south (and east). My father did well by migrating to Canada in the 1950s. But this generation might want to consider moving to more distant shores.
Image: The sun rises over the Indian Ocean, Durban