Mr. Speaker, it is a pleasure to rise today speak to Bill C-237, an act to amend the Bankruptcy Act.
When I review the intent of the bill a couple of things strike me. First, the intention behind it is certainly good. It says something about the person who has moved the bill, that they want to protect the employees of a business that has gone bankrupt. Certainly all Canadians sympathize with people who would be denied their wages because a business has gone
bankrupt and they are not at the top of the list of the secured creditors but are well down the list.
Having said that, I am also struck by another concept that I read about some time ago and recently reread. It just really impressed upon my mind how often we get away from this whole idea in government when we are making important decisions that can affect individuals and businesses across the country.
I remember reading in a book by an economist by the name of Henry Hazlitt about how often one of the greatest failures of economists and people who are making decisions that affect economies is to not foresee the secondary and unseen effects of the measures they are proposing. With respect to my hon. friend in the Bloc I think that is what we have done in Bill C-237, an act to amend the Bankruptcy Act.
One of the unseen effects of the legislation-and other members have referred to it-is the kind of incentive there would be for banks and providers of capital to continue to provide that capital to businesses.
Banks are already very reluctant to provide capital to businesses for a number of reasons. My hon. friend from Kootenay West went through a litany of the things that banks require before they will lend a business money. Now the amendment to Bill C-237 is proposing to put one more impediment in place that would cause banks to think twice about funding a business.
That is a great concern to me. It is a great concern to the government across the way and I believe to the Bloc. As has been referred to many times in the House, the great engine of the economy in Canada is small business. Small business creates 85 per cent of all jobs in the country.
On one hand the bill appears to be protecting employees. On the other hand we do not see all the jobs it would prevent from being created because banks and other providers of capital would be reluctant to lend the money knowing their loan is not secured under the proposal.
That is something we have to be conscious of, particularly in the competitive environment we have today not only within Canada but within North America and certainly around the world. There are all kinds of different advantages that other countries have and will try to use against us to get their share of the market.
We are a relatively wealthy country. We can attribute that to the small and medium sized business to a great degree. We have to be conscious of the types of burdens we impose upon them when we propose to do what seems on the surface to be a very good thing. Canadian businesses, small business in particular, are the creators of jobs and all that wealth out there.
I am not certain the hon. member has really taken that into consideration. Banks and anybody else who provides capital have many options when they think about where they want to invest their money. Capital is very fluid. It flows to where it gets the highest return and where the risk is the least. One thing that may happen if the bill were passed would be that banks would start saying that they do not want to fund small businesses because they are not going to be a secured creditor. Another thing that could happen is that they would fund them but raise interest rates. They would put on a risk premium because they are concerned about losing their money.
We already have a problem in the country where we have some of the highest real interest rates in the world, which again hurts our competitive position. We have to think long and hard about the repercussions. If we are in that position where businesses are forced to pay higher interest rates then we will have a situation where there will be less jobs created.
Those are the things we never see and are never reported in the newspapers: the jobs that are not created and the businesses that are not started because of legislation. It is very easy to point to a plant closing somewhere and say: "Is it not a shame those people did not get their two weeks' pay?"
Is it not also a shame when people do not go into business because they know the bank is going to turn them down? The bank is not confident it will get its money back because it is not at the highest level on the list of claims; it is not a secured claim.
We can take a look at what the government is proposing in many areas. Infrastructure would be a good example. Any time the government prepares to intervene in the economy we have to think about the secondary and unseen effects.
There is another aspect that I would ask hon members in the House to consider. What if a supplier to a business is barely hanging on and has a lot of employees who are trying to keep their jobs? They do not want to end up on the unemployment or welfare rolls, yet all of a sudden the position of the struggling business is not secure any more. The government has extended the misery a little further down the line. The next guy down the line is in a position where he may be forced into bankruptcy and people may be out of a job because of the situation the government has imposed by approving Bill C-237.
There are effects that go beyond the banks and interest rates. There are also the effects on suppliers. Suppliers may be very reluctant to extend supplies or inventory to anybody but the most secure businesses.
In this environment in this day and age we know that no such businesses can be completely guaranteed against failure. Over the last recession we saw businesses fail that were in operation for not only tens of years but in some cases over a hundred years. That speaks volumes about the competitiveness of the environment and perhaps a bit about the instability of the business environment. Even in the best of times businesses cannot be counted upon to survive because they always have more and more competition.
I know members of the Bloc are supporters of free trade. We now have trade deals with the United States and Mexico. I am not aware of any such legislation in either the United States or Mexico that would parallel this legislation. In other words, we would be putting a burden on Canadian businesses, Canadian suppliers and Canadian providers of capital that does not exist in some other countries around the world, in this case particularly the United States and Mexico.
A couple of things could happen. First, businesses in the other countries will have a competitive advantage over Canadian businesses. Entrepreneurs from this country and Quebec can go south of the border. Perhaps they can go to Mexico if they have any type of business idea that will prosper no matter where it starts up. They can go there to escape the type of legislation we are talking about here.
Another thing that can happen is that capital can flow out of this country to more friendly environments where capital is treated with a little more respect. Maybe another way to put it is that the business environment is a lot more friendly. As I pointed out a minute ago, capital always flows to where it can get the best return and where there is the least risk.
In this day and age in this environment in Canada we have a $535 billion debt and we are going into debt at a rate of $40 billion a year or perhaps even more than that. We have some of the highest interest rates in the world. We have some of the highest taxes in the world. We have all kinds of competitive disadvantages. We have hot competition because of free trade with the United States and Mexico. Through GATT we have more trade pressures from around the world. Given all these factors I think it would be foolhardy to support the legislation. Therefore I will be voting against it.