It’s time to revisit the story about RBC (Royal Bank of Canada) replacing 45 employees with workers in India or, to be more exact, hiring an outsourcing company to do this.

The reason for doing this is that the original story has already been revisited and been radically changed.

The theme of the first version of the story was that of outrage: Canadian workers were being shafted and, almost worse, were being humiliated because their last paid work would be to teach their replacements how to do their jobs.

The theme of the second version was of weariness at having yet again to explain to the huddled masses how the free market works.

In the National Post, columnist Andrew Coyne wrote that the first story was “mostly a fraud” and that those opposing outsourcing were engaging in the sin of “protectionism.”

In the Globe and Mail, the CBC business correspondent Amanda Lang wrote that “a dynamic economy isn’t created on paper or by central planning . . . (but) by allowing the natural forces of capitalism to work.”

In each instance, the exact opposite is true.

But for protectionism, our banks would be in severe difficulties, very probably even in terminal ones. Specifically, had the government not intervened to bring the natural forces of capitalism to a halt, a couple of our banks (of the Big Five) would almost certainly have gone bankrupt and had to be bailed out as in the U.S. and Europe.

The fact, well-known but often suppressed so as not to hurt the feelings of our bankers, is that they thrive because they are a protected cartel rather than freewheeling marketers. Foreign banks aren’t allowed to compete with them. Since Canadians are ideal bank customers — conservative and risk averse — it’s just about impossible for them not to make a lot of money.

Don’t misread the case I’m making. Our banks are among the best in the world. But a key reason they are so is because our government has sheltered them from the natural forces of capitalism.

The most dramatic example of this was in 1998. Two of our banks — RBC and BMO (Bank of Montreal) — announced that they were going to merge. Among the reasons given by one bank chair was that they could make larger loans outside of Canada. Two others of the five later announced they, too, would merge.

The government, in the person of then finance minister Paul Martin Jr., said “No,” quite literally so in a stormy meeting with the banks’ brass.

Had Martin yielded to the magic of the marketplace, we’d today probably only have two big banks, neither any longer really Canadian (any more than the CPR now is) and both, after going crazy as did their American equivalents, very likely having had to be bailed out by taxpayers.

This partnership between our banks and our government is one of our great national accomplishments. It allows them to do well, but within the framework of national interest.

The same applies to the issue of outsourcing, either directly in the sense of companies moving bits and pieces of themselves, or of their bringing in temporary workers to compensate for a shortage of qualified workers here.

Here the real problem is that Canadian companies spend almost nothing training their own workers or to operate apprenticeship programs. Their record on such matters is one of the worst among all industrial democracies.

Prime Minister Stephen Harper is now rethinking, as is long overdue, the temporary worker program, which has suddenly grown to more than 300,000 a year. Effective reform can happen only if governments (provincial and federal) work with corporations as partners.

Loading... Loading... Loading... Loading... Loading... Loading...

The one thing that won’t make things any better is for intelligent commentators to prattle on about the terrible consequences of protectionism and of being too timid to contain capitalism when it damages the national interest.

Richard Gwyn's column appears every other Tuesday. gwynr@sympatico.ca

Read more about: