How to get a better Canada
TORONTO—How do we get a better Canada—one that is both prosperous and sovereign, a country optimistic about its future? This is our big challenge at a time of disruptive change, an affordability crisis for many, and a sense of pessimism among too many young people. The good news is that there is a way to do much better.
The answer lies in implementing and advancing the skills and knowledge we already have, and adopting the innovation results. It’s through innovation that we can build a more productive economy. With a more productive economy, we can generate higher incomes and, as a country, afford to do things we cannot afford to do today.
So we have to address the innovation-productivity challenge much more ambitiously than in the past. As a recent study from the International Monetary Fund—Innovation, Human Capital, and Taxation: Evidence from a Structural Model of the Canadian Economy—put it, while Canada “ranks highly in international measures of innovation inputs—such as scientific output and public support for research—its innovation outcomes and productivity growth have shown limited upward momentum over the past decade.”
Despite having among the most generous tax incentives for R&D among advanced economies, for example, Canadian business investment in R&D lags leading innovators.
So what to do? This is the question Savvas Chamberlain, a scientist and entrepreneur, is posing in a series of public lectures by innovation experts he is sponsoring in Waterloo, Ont.: how do we build productivity and prosperity.
The consequences of weak productive growth are becoming starker, Chamberlain said in a recent lecture: “Our children are finding it harder to buy a home, harder to accumulate wealth, and harder to achieve the standard of living that previous generations took for granted.”
Yet, Canada does not suffer from a flow of good ideas. “What we often fail to do,” Chamberlain argues, is “to adopt, implement and scale innovation as effectively as we should," with the result that too often our innovations end up acquired and adopted elsewhere. We start companies, but don’t grow them.
But if our productivity is weak, then our businesses become less competitive internationally, investment flows to jurisdictions that can generate higher returns, our talent and entrepreneurs are attracted to countries that offer greater opportunity, and the gap in living standards, compared to other countries, widens. This is the critical challenge we face today.
“A country can generate excellent ideas, inventions, technologies and research,” Chamberlain argued, “but if those innovations are not adopted and implemented, they create little economic value.” As he argues, “we have to become better at adopting, implementing and scaling the innovations we already create.”
This includes creating strong Canadian value chains. “When Canadian companies buy from, collaborate with, and support other Canadian companies, the benefits multiply throughout the economy. Knowledge stays in Canada, expertise grows in Cabada, jobs are created in Canada, and wealth circulates within Canada.”
The problem is that while governments are good at supporting the development of talent and funding research, they cannot force businesses, hospitals, institutions or individuals to adopt new technologies and new ways of working. So resolving our biggest challenge also depends on businesses, hospitals, public service providers and individuals supporting the ideas our entrepreneurs are developing and the companies they are building.
Yet, there are many barriers. Chamberlain cites the example of Canadian hospitals which purchase $34-billion of equipment, supplies and services every year. “This represents a substantial home market that could help Canadian companies innovate, improve, and scale.” But big multinationals have a strong foothold in this market, so that without access to customers, innovative domestic firms “cannot gain the experience, references and scale needed to compete.” So our institutions and businesses must become leaders in adopting technologies developed by our entrepreneurs.
Digital sovereignty is now one big opportunity to create the kind of economic future Chamberlain is talking about. It is about building the infrastructure and systems that ensure this country's data is managed and stored in Canadian-owned and controlled cloud and computer systems, beyond the reach of foreign governments, and which enable Canadians to capture much of the value from data and intellectual property developed here.
Today, as the Canadian Shield Institute points out, “foreign companies dominate the Canadian cloud market at every level, and the American government has legal avenues to access most data stored in cloud infrastructure sited on Canadian soil.” However, “government procurement is one of the most powerful tools Canada has for advancing digital sovereignty.”
That’s because government is the largest purchaser of good and services in the economy—this means not only the three levels of government, but Crown corporations and other government-owned services (public transit is just one example), school boards, hospitals, and other public entities and they have huge data cloud and computer needs.
Federal requirements alone range from the Canadian Revenue Agency and the RCMP, to Fisheries and Oceans tracking lobster populations in the Atlantic Ocean. This purchasing power can create a market for domestic-owned and controlled digital infrastructure companies and help build Canadian networks of suppliers. The storage of critical Canadian data—such as the tax or health records of Canadians, and security and defence data should be stored on Canadian-owned and controlled systems.
There are many other challenges, to be sure. One of the most critical is access to capital, with government today being forced to play an ever-expanding role in providing equity and other capital to businesses as the financial system fails to meet this country's needs.
But perhaps the most promising change now underway is that Canadians are being forced to recognize that the slipping economic performance has finally caught up with us and we have to do something about it. United States President Donald Trump has helped. Next, we must get over risk aversion and embrace and adopt the new ideas that can lead to a better future.
David Crane can be reached at crane@interlog.com.
The Hill Times