June 2, 2005 Speech to the Empire Club by Peter Munk, Chairman, Barrick Gold Corporation – My Views On Globalization

The Empire Club of Canada, established in 1903, in Toronto is recognized as one of Canada’s oldest and largest speakers’ forums with a membership comprised of some of Canada’s most influential leaders from the professions, business, labour, education and government. Over its history it has been addressed by more than 3500 prominent Canadian and international leaders – men and women who have distinguished themselves in many fields of endeavour.

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Peter Munk – June 2, 2005

Thank you Bart. For a moment I thought you were the speaker. It was quite an introduction. I was about to step up here and thank you.

I think it is appropriate for me to warn you that I’m a lengthy speaker. I have difficulty containing my comments. As a matter of fact, I just told Michael that before the wedding of my last daughter she asked me to keep my comments down to six or eight minutes. Being very nice she said: “Daddy, after all it is not your affair. It is not about you.” I said: “Gee, I thought it was because I am paying the bill.”

But that did not convince her so I said: “Darling, you know I have really got a problem with keeping my speeches short. I will not be hurt. I have three daughters. You are the last one to get married. I really will not be hurt if this time you skip me. You have a brother. You have got friends.”

“No, no, no Daddy, you must speak.” So I got onto the podium and I really tried to contain myself and I do want to tell you that 48 minutes later I was given a standing applause. So remember just because it’s long it is not lousy.

But on this occasion I was fortunate enough to be asked by both Michael from the Canadian Club and Bart from the Empire Club. I asked them how long they would like me to speak and they said 20 minutes. I thought 20 minutes each; that’s 40 minutes. I think I’ll be alright. I think Michael then said: “Well that’s alright with us too, but if you don’t mind all of us will be leaving at 2 o’clock. So I said: “I don’t mind either.” There will be no hard feelings if anyone of you decides to leave.

To get on to a more serious vein, I don’t quite know exactly how the title of this presentation was verbalized. I did want to speak about globalization. I think it is the topic of the day. I did want to make sure that my presentation to you is globalization from a highly personalized view. Globalization is a theory that is now throughout the world. It is possibly one of the most debated, most discussed and most thought–about subjects currently in existence.

At this head table, from a Canadian point of view, whether you talk about the theoretical, the political, the academic or the conceptual approach to globalization, we have people like Allan Gotlieb who fought the battle more than anyone else where it really matters–at the U.S. Congress. We have people like Donald MacDonald who headed up the very commission that with enormous amounts of guts and courage did say that free trade is the answer. And we have people like Sylvia Ostry whose intellectual work with the WTO has never been paralleled by any of the so-called high-level international services.

I would hardly be the appropriate person to listen to for a great treatise on global free trade if you had this head table available. You wouldn’t pick on Peter Munk. But you have got me. Maybe I can add a different viewpoint and while I’m not theoretical, I’m not political, I’m not philosophical, I did embrace the subject of globalization at a very early stage for very highly pragmatic and most selfish reasons.

I was exceptionally proud to have been asked to give my first speech to the Canadian Club. I came to this country in 1948 and after the war I was the first non-native-born Canadian to address the Canadian Club. I remember weeks before I had to pinch myself to believe it. But the subject I spoke about in 1963 was a passionate pitch for opening up the borders for products. I don’t think we had the word “globalization” at that time. I was trying to sell a totally Canadian-manufactured very high-tech product for $700. The retail price of it in 1961 was $699.

For you who were certainly not economically active if you were alive at all, that was a time when a Volkswagen was $1,500. We sold an unprecedented 150 units the first year. By the time we sold 350, Clairtone was the first Canadian company to go public in the post-war years in the industrial sector. That was on April 15, 1960, the day you Anthony were born. People often accuse me of remembering going public more than the birth of my first child. That shows you my priorities. But we were the first Canadian company in the industrial sector to go public.

For us it was so easy to realize that after you sold 300 sets and then 1,000 sets and then 2,000 sets you simply ran out of Canadians to sell them to. You can be a brilliant salesman, you can have a magnificent product, but you need markets. So we had to grow and it was so obvious to us that rather than keep on growing from Montreal to New Brunswick and out to Halifax or going west to Winnipeg and on to Edmonton (which we did of course), it was so much easier to go to Buffalo. It was so much easier to go to New York. After all we had more Americans richer than we were in a few hours’ driving range than we had driving all the way to Halifax or Vancouver. We simply didn’t understand why we shouldn’t do it.

So we did open up the American market and to get back to my speech in 1963 at that time I was pitching free trade. I’m absolutely convinced that most of the people, maybe with the exception of one, thought that I was a crazy young hot-head talking nonsense. The press thought it was a laughing matter and the public walked away with skepticism fully justified. The only person who I think applauded and thought I was right was my father and I always suspected that that was because he didn’t speak English well enough to understand me.

And so my commitment to this crazy cause of free trade began with passion. I happen to be passionate. Business was very important to me. Growing a business was absolutely essential, especially when you had other people’s money and so I found that free trade in North America became part of my religion, part of my conviction.

Then for reasons, which I would be embarrassed to discuss with you, I was unceremoniously dismissed from Clairtone, the company I founded. I moved on to Sydney, Australia and I found myself in the ’70s running a hotel company that at that time was the largest hotel group in the South Pacific out of Sydney. It was called Southern Pacific Hotel Corporation and we had some 50-odd hotels. The hotels were right through the hemisphere–New Zealand, Australia and Fiji. We were growing fast as usual and the proverbial hit the fan. The oil embargo came in, the secondary banking crisis hit in ’73 and we were standing there with 50-odd hotels, mortgaged up to the hilt and very few people to fill the beds. And so again we had a problem of how do we get people. It was crystal clear. You did not have to be a genius or a Sylvia Ostry or a high-level academic to know that if Australia just opened up its borders and allowed people to come in, if you opened up the skies and allowed 15 airlines, not just Qantas, to fly in and out, you had a good chance of bringing in Indonesians, Indians, Asians. So we started the policy of “open sky.”

Six years later, Australia adopted the open sky policy. Qantas had its monopoly taken away and the rest is history. Australia prospered. And while these individual little tidbits on their own represent nothing more than a tiny anecdote in the overall picture, it’s the combination of things–the free movement of people, the free movement of products and the free movement of capital–that created the fundamental beginning of free trade that today is so universally acknowledged to being the greatest generator of wealth of any institution in the history of mankind.

I’ve taken you back to the sixties. I moved you on to the seventies and eighties. Now let me move you on to Canada. Let me talk to you about Barrick. Barrick started off, as most of you in this room know, as a small $100-million gold-mining company, in which we invested the money that we brought back from Australia. We bought a mine in Wawa Ontario. We moved on from there and then as a major acquisition we bought a half-bust company at that time called Camflo. Ten years later it was Trizec.

We bought Camflo and with Camflo of course we inherited Bob Smith and his spectacular management team. From there we moved into America. And from America we grew a company. We got lucky in Nevada, we got lucky in Utah and besides lucky we had a great financial policy. We had great management, we had great people and all the things that you do have when you build corporations. And that little $100-million company became a multi-billion-dollar company.

By the time we decided that we had to keep on growing, it was clear that we had to go beyond North America. This was exactly the same fundamental rationale that drove us to the American market 20 years earlier to sell our Clairtone sets. It was the same rationale that made me pitch the open sky policy in Australia and the same philosophy that made us pitch the globalization agreements that allowed a company like Barrick to move capital, people and expertise at will to those places where our shareholders had the best chance to get the maximum return.

Please let me be allowed to pat myself on the back. I’m not here to promote Barrick shares or my own company but it’s the one that I understand the most and I can describe clearly the kinds of human benefits that mankind receives when you multiply the Clairtone story a million times. For each successful Canadian entrepreneur who can create a Barrick, there are 1,000 sitting in Tokyo and 1,000 in Korea and 1,000 in Germany and 1,000 in Moscow and 1,000 in Buenos Aires. Over the past 25 years these people have enabled half the world’s population throughout Asia, China and India, who have been mired in eternal poverty, to enjoy the kinds of standards we have traditionally enjoyed. No government, no public agency, no WTU, no NATO and no UNO can do what a combination of millions of people engaged in the task of creating and generating capital can do.

Barrick today operates or has opened up or acquired some 30 area mines. The mines go from Tanzania to Peru, from Chile to Northern Ontario, from British Columbia to New South Wales. We truly are a Canadian corporation that spans the world. We built a company with a $100-million market cap in the sixties when we went public to $15 billion today. Clearly it is self-evident that thousands, tens of thousands of shareholders, have become wealthy and rich. That’s taken for granted and it’s algebraically demonstrable.

Clearly tens of thousands of people were given employment opportunities at a remuneration level and more importantly at a human challenge level that brings out the best from human beings. Let’s face it ladies and gentlemen ultimately it is not about money. Money is a measurement we use. It is all about self-fulfillment and optimizing our potential. That’s what life is all about. And Barrick has been able to do that in 17 countries in every remote corner over and over and over again by making its investors rich.

Barrick has done much more than that. Barrick has transferred technology, advanced high-tech know-how and competence into areas where the word was totally unknown, let alone the practice of high-tech applications and operations. And that technology often left us and moved on to other areas in those countries where it created additional and ongoing benefits. The employees of Barrick in Tanzania or in Chile or in the highlands of Peru have been able to elevate themselves from a subsistence level existence to a point where they have wages equal to Canadian wages. Their children have become educated.

We have provided health facilities to the tens of thousands of people we employ, especially in remote areas but I think even in Nevada. In some cases (and I refer specifically to our hospital in the remote part of Tanzania, where our big mine is) we have provided health care not just to the workers but to the whole community. We brought in fresh water, not because we are generous, not because we are church-going Christians, not because we wanted to share the wealth, but because of our own self-contained interest. You don’t want people working for you who are not healthy. You don’t want people working for you who do not get benefits such as pure high-quality water lines that were never available in the eastern part of Tanzania providing water for tens of thousands of people.

Of course Barrick has a cultural inclination to do the right things by its people. It inherited that from Bob Smith, our first president who came from Quebec where mining people back in the fifties and forties were getting sub-standard wages and had 10 children. It was Bob Smith who introduced the policy that every miner who worked for Barrick and who worked for at least three years had his kids educated through university at the company’s cost. That policy by the way has been adopted throughout the world and has been responsible for hundreds if not thousands of children now fulfilling their human potential to the maximum extent.

I could go on and on and on but I’m not here to talk about Barrick. I’m only trying to use Barrick as an example I’m familiar with. As I say again, Sylvia Ostry can talk to you about macro issues and Allan Gotlieb when he tried to convince the U.S. government to vote for free trade used wonderful academic statistics, but life is not about academic statistics. Life is about what you do in your family, in your business and what you can do in the communities where you operate. I’m convinced, regardless of what you read in the newspapers, that corporate America, corporate Germany, corporate Australia, corporate Japan, the corporate entities of the free world are driven by much of the same morality, the same motivation and the same desire to do the right thing as we are. And then if you add together the totality of that much human effort, of that much capital, of that much focus and determination, then you understand how free trade and free markets–globalization–moved the world.

Please bear with me and allow me to recall that in the 1950s, the United Nations established the Food and Agricultural Organization, the FAO. The biggest concern they foresaw was mass starvation. Hunger, about which none of you, especially the young generation, knows was a constant companion to mankind. It is not an accident that every major religion, whether Muslim, Buddhist, Jewish or Christian, starts off with a blessing to the Lord for having given us our daily bread. This comes from our grandparents where the single-most important priority was the daily bread.

Back in the 1950s, in the aftermath of the devastation of the Second World War and the enormous inequalities that the human race tolerated up until then, half the world’s population lived on an average per-capita income of $60 per head. Sixty dollars per head per year while in America we enjoyed $1,850. The $60 per head was too much to die but not enough to live. Famines reoccurred over and over again. The last famine recorded by the United Nations in 1927 in Bengal wiped out 11 million people. But before you actually talk about famines, there are tens of millions of people who are on the verge of famine. That lack of food, lack of nourishment and lack of calories undermines their ability to function.

I can go on and on and talk to you about housing. I can talk to you about lack of opportunities. I can talk to you about horrendous things but I’m sure you can all imagine what happens to a family who keeps on living in the same hovel, the same house, generation after generation and cannot scrape together enough for food.

Let me just point out to you that in 1961 when I went public with Clairtone, China and India combined had roughly half the world’s population. At that time, the world’s population was roughly 2.2 billion people. Life expectancy in North America was between 65 and 66 years. Life expectancy in Western Europe was between 55 and 58 years and life expectancy in China and India was 30 years.

Is there any argument left about globalization? You want to debate what happens to 1,500 removed textile workers in Leone who have been replaced by Chinese workers? You want to argue about what happens to some communities in Massachusetts who made high-priced T-shirts, which are now being replaced by Indian T-shirts? How can you compare the small issues with what we have done to humanity, to mankind?

Do you know that in 1962 the United Nations reported that in North America the number of infancy deaths, the ultimate measure of a human race’s ability to sustain itself because when you are living on the edge all your energies go to trying to help your children survive, was roughly 20 deaths per thousand births. That was North America. Do you know what it was in China and India? Two hundred and twenty. And do you know where they are today? Very close to us. But the problem is that the naysayers, and there are many of those, focus on the micro.

I would just like to draw your attention to this week’s event, the key event, as far as globalization is concerned, in France where Mr. Chirac ended up with a “no” to the European Union Constitution and then in Holland there was an even worse “no.” The poster child of the “no” campaign was a Polish plumber. Let me tell you about French plumbers. They have one of the strongest and most left-wing unions in France and nowhere in any country are they lazier. The lazier the people are the more they have to depend on unions. They push the unions to squeeze out more bucks for less work. There is no union as left-wing, no union as tough, no union as determined as the plumbers’ union in France. The plumbers’ union has 5,940 registered members. The average plumber when he comes to your home in Paris to solve your drain problem currently charges 79 euros per hour. You compare that to the average guy doing a great job in Beijing.

France and the Europeans allowed nine nations to join the EU. Suddenly the EU expanded and Slovakia and Poland and Hungary and Lithuania and Estonia became members. Then one Polish plumber got lucky. He went to France and working as a plumber he found out he could charge 79 euros. That was his weekly wage in Poland. So he must have called his friend, another plumber. So suddenly 168 plumbers from Poland arrived in France about a year ago. The Polish plumbers seriously undercut the French plumbers. They couldn’t speak the language but they knew how to clean drains. The Polish plumbers suddenly became very popular. You don’t hire plumbers for their linguistic knowledge.

The main debate on the whole European Constitution, the fundamental document meant to determine the future of Europe, was based on a poster of a Polish plumber with a headline underneath announcing: “Do we want more Polish plumbers? Don’t we want to protect our own lovely plumbers? If you don’t protect our plumbers what will happen to our electricians? What will happen to our stonemasons?” Those 168 Polish plumbers caused Chirac to lose the election.

What has been forgotten, ladies and gentlemen, is that after Poland joined the European Union and the Polish plumbers went to France, one and a half billion euros of French perfume, French textiles, French head scarves, Louis Vuitton bags and other French goodies have been exported to Poland. But the macro gets overlooked. The micro becomes human. The micro becomes good stuff for local advertising. The micro becomes headline stuff. It was lovely to show poor French plumbers marching up and down striking because they were now being given competition. Imagine the tragedy-getting competition from a plumber charging 79 euros. God forbid us from that plague.

This is the story of what is going on. There now exist groups of people who are united only by their wish to defy globalization, nothing else. The unifying force of the anti-global people is the ability to say “no.” They stand for nothing united. They consist of animal rightists and greens. They consist of left-wing Trotsky-ites and extreme greens and they go together to Davos, Switzerland where the World Economic Forum is or Seattle to smash windows. Boy do they get the press and do they get the sympathy!

I could go on forever but this is not the wedding of my daughter and I’m not paying for it so I don’t think I’ve got the same right. I’d just like to say to you that globalization is one of the most wonderful things that happened to mankind. The benefits are clear and obvious to everybody who is prepared to look away from the mini and the micro and look at it globally. Go to India. Go to Indonesia. Go to Latin America and see what it has done. I don’t think it’s a perfect system and there are many areas where there is room for improvement. We corporations have a fundamental responsibility, a major self-interest and a high ability to undertake improvements, but I’m talking about improvements in governance, improvements in methodology, not changing the system.

As Churchill once said: “Democracy is a dreadful system but it is by far the best we have so far come up with in humanity.”

Globalization may have many, many faults but by God it is by far the best we have ever come up with. Thank you very much.