The Implications of the Rob Ford Scandal for Canadian Business

17 11 2013

Cities trade on their images, as do countries and companies. The Rob Ford scandal has tarnished Toronto’s brand and has put the city on the world’s radar for all of the wrong reasons. It is worthwhile giving some thought as to what the possible consequences of the scandal for Toronto’s place in the world economy.  I don’t normally comment on contemporary politics. However, ass someone who studies international business, is originally from Toronto, and who has seen how the media in the UK has covered this amusing (to them) scandal, I think that I am qualified to say something about this issue.

Toronto used to have a wonderful brand. To a certain extent, it still does. Along with Vancouver and Calgary and some cities in Australia, Toronto consistently ranks near the top of the Economist’s rankings of cities for liveability. In the 1980s, Sir Peter Ustinov quipped that Toronto was like “New York run by the Swiss” (i.e., a cleaner, more efficient, safer version of a big American city).

It may be that the scandal surrounding Mr. Ford’s personal life has zero impact on levels of foreign investment and tourism and the city’s ability to attract high-quality immigrants. People in other countries may simply dismiss the personal problems of one individual as irrelevant to the prospects of the entire city.  The best-informed investors will known that Canadian municipal governments have far fewer powers than their American counterparts. The danger, however, is if Mr. Ford’s antics, and the inability of the Canadian political system to remove him from office, are incorporated into a wide narrative of ungovernable North American rust belt cities. Detroit, another Great Lakes city, recently declared bankruptcy.

Here are some things to keep in mind.

First, people outside of Canada know little about Canada. I’ll use the example of the UK, a country that is geographically and culturally close to Canada. Although many British people are aware that Canada is a separate country from the US and has its own currency, their knowledge base doesn’t extend much past those facts and perhaps a few stock mental images of natural landscapes, beavers, trees, etc. I would suggest that less than two percent of the population of the UK could name Canada’s Prime Minister and less than 20% could name Canada’s capital city. Canada’s national elections get page seven coverage in British newspapers. The Rob Ford scandal has been covered in the British media because of its undeniable human interest element. Sky News, a 24-hours news channel, appears to really like this story. See here. (I suppose it helps that the 5-hour time difference allows 24-hour news channels in the UK to fill slow airtime in the late evening with news about Toronto’s scandal).

All of this means that Rob Ford is probably the best-known Canadian politician in the world right now. He may be the best-known Canadian politician in recent memory. Radio hosts in the UK seems to find it amusing to play clips of Mr. Ford’s statements, particularly his recent comments about sex.  The scandal has also been covered by newspapers in China and Japan, but I would suspect that the full impact of Mr. Ford’s crude remarks will be felt most acutely in English-speaking countries where people would understand some of the more colourful idioms used by Mr. Ford.

House in Detroit

Here are some possible consequences of this scandal.

1)      Canada’s position in the Transparency International rankings of corruption may decline. These rankings are based on the subjective impressions of executives.

2012 Corruption Perceptions Index -- Results

2)      Foreign companies may hesitate to sign contracts with a municipality with a dysfunctional chief executive.

3)       The international media have repeatedly referred to the use of crack cocaine. These references may create the impression that Toronto is suffering from a crack cocaine epidemic similar that experienced by many American cities in the 1980s. Nobody wants to invest money in the middle of the city that resembles 1984 Los Angeles as depicted in the motion picture Boyz in the Hood.   An inaccurate image of Toronto as a city of crime-ridden, crack-ridden ghettos may discourage tourism, investment, and immigration by entrepreneurs and skilled workers. I’m not suggesting that Toronto is actually like that, but perception is almost as important as reality. Tourists and potential immigrants, as opposed to investors, are most likely to be put off by this image.

I suggest that in selecting their next mayor, Torontonians should ask: “Will the candidate I’m considering supporting make this city a more attractive place for, say, an immigrant investor whose wife is a tiger mother?” If the answer is no, please reconsider your choice.

The curious thing about this scandal is that the Toronto’s business elite has been largely silent about the scandal. It may be that Toronto’s financial elite is reticent about intervening too publicly in the political process for fear of being seen to dictate policy. In the post-Occupy Wall Street era, big business is reluctant to be seen as wielding too much political power.

A couple of years ago, I happened to be chatting at a social event with a couple who worked in very demanding occupations in the City of London. Both of these people were originally from East Asia but had been educated at elite institutions in the United States and other Western countries. Both are employed by huge, “household name” financial institutions. In short, they are type of people whose skills Toronto would need if it ever to realise its potential of becoming a global financial centre. Neither of these people have ever visited Canada or knows anything about Canadian politics.

Anyway, when I mentioned that I was from Toronto, the woman said, “I heard that the Governor of Toronto said that Orientals were like dogs and were taking over the city.” Clearly, this individual had heard a garbled account of a rant Mr. Ford  had delivered in 2008 on the subject of the work ethic of East Asians. Mr. Ford’s actual words were:

“Those Oriental people work like dogs. They work their hearts out. They are workers non-stop. They sleep beside their machines. That’s why they’re successful in life. I went to Seoul, South Korea, I went to Taipei, Taiwan. I went to Tokyo, Japan. That’s why these people are so hard workers (sic). I’m telling you, the Oriental people, they’re slowly taking over.”

Please note that Toronto doesn’t have a Governor, which is a US term. Please note that Mr. Ford was apparently attempting to compliment East Asians. It was clear the woman I met was not impressed by this comment, which indicated to her that Toronto and/or Canada was hostile to Asian immigrants. (We had previously been discussing anti-immigrant sentiment in Switzerland, another country that tries to attract immigrants under a points-based system).  The woman very diplomatically changed the subject of the conversation to Toronto’s redeeming features, which included, according to her, Stanley Park and the proximity to the Pacific Ocean. (Clearly she was confusing Toronto with Vancouver, the actual location of Stanley Park). Anyway, this little incident suggests to why Mr. Ford’s behaviour is indeed damaging Toronto’s image.

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