Number 6

Alastair Fraser; Canadian Rural Revitalization – Public Bank Coalition Canada

The symptom is the loss of rural services due to a dwindling population base in rural Canada. Essentially the reason is a lack of investment capital for business other than for agriculture. The solution, a new Sparkassen inspired co-operative known as a Community Reserve Bank.

The Public Bank Coalition Canada advocates, as a means to address the destructive systemic condition of rural depopulation, the active revitalization of Rural Canada by instituting a private Rural Infrastructure Investment Reserve Banking Network.

A policy-driven chronic scarcity of rural capital, known as decapitalization, is the direct cause of our dying towns and villages in rural Canada. Policy-driven decisions that serve the interests of Big Corporations and the ideology of centralized Big Government has continually been pulling investment capital away from rural decision-makers. This decapitalization is killing rural Canada, little by little, for close to a Century through the Death of a Thousand Cuts.

Suffice to say, the present rural credit finance system has only acerbated the damage and failed to prevent rural depopulation. The rise of the dominance of the consumer credit system acts like a syphon drawing rural capital away to large urban centers where it is not available for investment in rural Canada.

Instead, visualize a national network of non-deposit investment co-operatives. These new financial cooperatives, member-owned, would work in tandem with and not in direct competition to present local credit financial institutions, whether they are a bank or credit union. This new financial network spreading across the nation would act as a rural infrastructure investment bank to actively pump investment capital back into the communities of Rural Canada.

Well, now you may ask, ‘Is this a solution looking for a problem’ or is the true business void simply hidden in plain sight. It is obvious that nearly all non-agriculture entrepreneurs, the micro and penny business sector, as well as small business in general, are not visible to the casual observer. Simply not being present means the nonagricultural business sector cannot find capital financing in rural environs that is designed or adequate for its development.

There is a common story that has repeatedly been played out in isolation across Canada. It demonstrates the ‘Death by a Thousand Cuts’.

“A well-established and successful farmer wanted a substantial but relatively modest capital loan from a local branch of a credit institution. The capital would be used to refurbish a building on his property and thus he was confident this investment would increase his business income.

The farmer possessed substantial land capital inherited from his father and his grandfather before him. He felt confident that the loan would be forthcoming. His family has been a long term depositor and customer of the credit institution in his local village.

The local manager was receptive to the loan application and after being provided with schematic plans, projections of the expected expenditures, together with documents which illustrated the extent of his family’s unencumbered assets and examples of both the present and projected business’ capital income, as monthly liquid cash flow; the branch manager assured the farmer that all appeared to be in good order.

All that was now required was approval from his colleague in the credit department which was located some hundreds of miles away in Toronto. A couple of days later, the Farmer was informed by the local branch manager that his loan request was turned down.
No explanation was offered for the refusal by the bank employee in Toronto. The local branch manager, like the farm capitalist person, was frankly mystified. After a brief conversation where the credit institutions local representative shared the farmer’s disappointment, he deftly turned the conversation to new business. The manager explained that Toronto had authorized him to inform the farm businessman that if the customer were to apply for a much larger loan and agree to increase his business operating size and also to enlarge his personal debt guarantee, a much larger loan amount would be approved.

The manager’s superiors in Toronto felt that the larger loan was the most practical business decision which the farmer could make under the conditions of today’s business climate. The farmer was informed that the much larger loan as a means to provide a solid foundation for the farm business enterprise and frankly it would improve his family’s future business and financial prospects well on into the next generation.

Disappointed and frankly little angry, the small farm business capitalist, returned home to discuss the new circumstances with his family. Faced with a dilemma, they had to make a choice, more debt, risk and larger cash flow or instead they could farm a few more years as is, retire early and rent his land out to a neighbour, who apparently decided to go bigger, with deeper operating debt, as advocated by the credit institution’s urban-based credit managers.”

There is no judgement as to which decision is better or correct. The story simply illustrates the credit push which is causing the rural landscape to undergo radical sculpturing and alteration of not only the land capital but the human resources and culture by what is actually external forces.