Fast Lane

Linda Nazareth is an economist, author and television broadcaster. Since 1999, she's been the in-house economist for Business News Network (BNN). She also writes widely on the economy and business, and as a commentator has been quoted everywhere from the The Wall Street Journal through to Wired magazine. Prior to joining BNN, Linda was a Senior Economist with CIBC. There she spent ten years honing her analytic skills and becoming a sought-after speaker and media commentator. Earlier in her career she was an economist with the federal government where she specialized in demographic and labour market forecasting.

Momentum: How do you see the present economic climate?
LN: It will be fascinating to see how this recession is different from the others. Given all of the technological advances in things like inventory management, many enterprises are better positioned than they were in the 90s. I am still an optimist on the Canadian economy for the next 5 or 10 years. Yes, this is a major slowdown: it is going to take longer to climb out of than many analysts think, and employment and export numbers will get worse. But Canada is in a fairly strong position in terms of its fiscal position and human resources. I am not too worried about the Canadian dollar: the US will stabilize, and this will boost commodities and provide some support to our dollar.

Momentum: What's the best way to weather this storm?
LN: I would hope that businesses would continue to invest with an eye to long-term economic gain. That means the right technologies to ensure competitive improvements. I don't blame companies for being frightened - these are extraordinary times - but there are advantages here, too. One of the major problems during the 90s was that companies couldn't respond quickly, but now they can. Things are cheaper now - even money is cheaper if you have the credit - as are facilities and resources. And organizations that can map out their situations will do fine, because they'll be able to respond appropriately.

Momentum: That sounds like a good argument for business intelligence. What about productivity?
LN: My biggest worry a year ago was that the credit crunch would slow the flow of funds to SMBs, and that's turned out to be the case. There isn't a simple answer except for the importance of keeping balance sheets as healthy as possible. There is always the opportunity to improve productivity by investing wisely, and that includes technology. During downturns companies tend to invest in capabilities - we saw that in the 80s when resource companies became more capital intensive. We'll see this again. People will pare back and invest in efficiencies, and that means technology.

Momentum: That sounds like a good argument for business intelligence. What about productivity?
LN: My biggest worry a year ago was that the credit crunch would slow the flow of funds to SMBs, and that's turned out to be the case. There isn't a simple answer except for the importance of keeping balance sheets as healthy as possible. There is always the opportunity to improve productivity by investing wisely, and that includes technology. During downturns companies tend to invest in capabilities - we saw that in the 80s when resource companies became more capital intensive. We'll see this again. People will pare back and invest in efficiencies, and that means technology.

Momentum: You've written a lot on the time crunch, and even wrote a book titled "The Leisure Economy." Does that thinking still apply in a downturn?
LN: It does in that I also wrote about the leisure divide and the coming boom in parsimony. Many people will see their portfolios decline, as will their house values - and many of these people have been using their houses as piggy banks. More people over 50 will plan on staying involved in the economy. The focus will shift to saving money and spending time. Rather than going out and buying an experience, people will be more inclined to stay in, prepare and cook their own food. North American companies that are currently paying out literally billions of dollars in health related costs for their time-crunched employees will get a bit of a break.

Momentum: Sounds like companies will have to change the way they think.
LN: They'll have to dramatically change the way they think and operate. Companies will have to shift their thinking from how they can save people time to how to stay profitable but still serve customers who have more time and will spend it selectively. A bank will still want to move things quickly, but we may find that value is driven out of increased services and more specially trained staff.

Momentum: Can an enterprise find new opportunities in this climate?
LN: They can, but they need to plan for the changing climate. This means investing in technologies that keep high-value workers. As we shift out of a "time crunch" economy the focus will be on other things, and companies need to adjust to this. So, invest in technologies that focus on things like higher-touch customer service, doing more with less, and enabling people in new ways.

Momentum: Is there a role for governments here?
LN: The government has a role to play. I'm a firm believer in free markets, but the United States needs to stimulate its economy right now. We'll need some here, too, although the Canadian economy is not in anywhere near as bad shape as in the United States.

Momentum: What other cultural shifts might we see?
LN: Young people like to enjoy themselves, but they are also very conscious of their time, and during times of economic uncertainty they can become more politically aware. Most recently, young people came out in pretty large numbers for Obama. There's nothing like a recession to get people aware of the economy and the environment around them. But this generation has only grown up with wealth - they have no experience of an economic slowdown. Their response will affect how we get through this. We are going to see a more activist population. Both younger and older households will have more time to organize and lobby government. For boomers, that might be about the pension system, or it may be about grandparents rights, or it may be just about civic ordinances. What we have seen so far from the AARP is just the tip of the iceberg. Younger households are likely to want tax credits.

Momentum: Education will be a part of this.
LN: Yes, we will see education numbers go way up. By next September you might see enrolments in graduate schools spike. Of course, with the context of technology retraining will be huge. And when thinking of education it's important to realize that this is for any age group, even retirees. Adult education is set to boom.

Momentum: When telecom stocks imploded during the last bubble overcapacity was an issue. Where can we see that this time?
LN: Many companies have overbuilt in the expectation of a demographic boom. That's certainly true of the golf industry, where there was a frenzy of construction in the 1990s. And keep in mind that not only the economic crisis but also demographics do not support the notion of a housing boom over the next couple of decades. That will make it easier for the next generation of new home owners.

Momentum: What will be the end result of this recession?
LN: Technology has made it easier for companies to gain visibility into their business, and for even small and medium size businesses to extend operations around the world. As a result, investments in technology have opened up huge doors for Canadian companies. Following this recession, we should be able to realize these benefits even more.