Politicians will be talking a lot about jobs and prosperity as they seek our votes

TORONTO—As we head into the upcoming federal election, we will hear a great deal from competing politicians on jobs and prosperity as they seek our votes. Canadians will need to decide who would be best at building a successful economy—and society—for the future. This is critical for good jobs and the wealth creation needed to support the public goods such as education and health care that we value. Much is at stake. We live in a world that is transitioning rapidly to a new economy where investment in intangible assets such as research and development, software, human capital and training, branding and marketing and new forms of business organization—intellectual property—are more important than traditional investments in buildings, machines and equipment when it comes to driving economic growth and job creation (though we need more investment in both). To succeed, in a different kind of economy, we need new and different economic policies. Other countries are moving ahead and we cannot afford to be left behind. This is the new knowledge-based economy and it is urgent that Canada share in the new sources of growth, wealth, and good jobs that will emerge. But the policies that worked well for physical capital are not be the ones we need for an economy based on knowledge-based capital. While the Trudeau government is taking some steps in the right direction it is too often through uncoordinated half-measures rather than as part of an articulated and overarching innovation strategy. The importance of intellectual property and intangible investments more broadly has been known for some time. But much greater attention is being paid today as the search by countries for new sources of economic growth and competitiveness accelerates. This requires much new thinking and analysis, but the Trudeau government has been weak on analysis and secretive on the basis for its innovation policies. As Industry Minister Navdeep Bains put it in first announcing plans for an innovation strategy, “we don’t need any more studies.” But it is painfully clear we do. One of the biggest weaknesses in the government’s innovation policies is the lack of serious analytical research on the nature of our innovation challenge and how best to address it. Meanwhile, innovation strategy seems to be completely missing from Conservative Party thinking on the economy. In what was billed as a major speech by Conservative Leader Andrew Scheer on Conservative economic priorities should they win the October election, innovation and the knowledge-based economy of intangibles were ignored. Instead, Conservative priorities are to balance the budget and build oil pipelines, reflecting a backward-looking view on the sources of economic growth and good jobs. In what was billed as a major speech by Conservative Leader Andrew Scheer, pictured on March 19, 2019, on the Hill, on Conservative economic priorities should they win the October election, innovation and the knowledge-based economy of intangibles were ignored. The Hill Times photograph by Andrew Meade Much of the research on the knowledge-based economy has been conducted by the Organization for Economic Cooperation and Development. Its researchers point to three categories of knowledge-based capital: computerized information (software and data); innovative property (patents, copyrights, designs, trade secrets, trademarks and mineral exploration); and economic competencies (brand equity, firm-specific human capital, networks of people and institutions, and organizational know-how that boosts business efficiency). They are all necessary assets for future growth and jobs. This means, for example, paying much more attention to patents, copyrights, and other forms of intellectual property as key assets, and how we work to ensure greater Canadian ownership of intellectual property as a key asset for the future. It means paying much more attention to competition policy to block monopolization by big firms like Google, Amazon, and Apple so that new knowledge-based firms do not face barriers to entry or predatory business practices. It means more attention to the diffusion of new ideas to small and growing businesses, including as well how best to retain control of their intellectual property. It means reviewing tax policy, including tax incentives for research and development, to ensure they facilitate the growth of knowledge-based businesses. It means recognizing data as the critical new business asset, with policies on ownership of data, privacy and open access. It means using public procurement to help create markets for knowledge-based Canadian companies (such as creating a Canadian consortium to develop Toronto’s smart waterfront instead of awarding the contract to Google). It also means investing in the education and training of talent, not just in science and technology but also in the arts, since many of the skills needed in the knowledge-based economy require creative thinking. It also means much better data collection by Statistics Canada and corporate reporting by businesses on intangibles investments. It means focusing on young growth companies, regardless of size, rather than on small companies simply because they are small, since young growth companies play a disproportionate role in the creation of new jobs and business dynamism. And it means finding better ways to fund the growth of young companies whose main assets are intangible and hard to use as collateral in financial markets. In the knowledge-based economy, for example, intellectual property is a crucial business asset. It can be incorporated into a new product, service or process to create a competitive advantage, as is the case for example with a leading Canadian company such as CAE or Shopify. It can be an important source of revenue through licensing, as we see with the reborn BlackBerry. So strengthening ownership of intellectual property by Canadian companies is a key source of future wealth creation and employment. Growing and scaling up Canadian companies with strong intellectual property and other intangible investments should be at the centre of Canada’s innovation and growth strategy. In the best book on the subject, Capitalism without Capital, British economists Jonathan Haskel and Stian Westlake argue that “because intangible investments, on average, behave differently from tangible investments, we might reasonably expect an economy dominated by intangibles to behave differently too.” And it does. It is vital that our MPs, and future MPs, understand this means new kinds of economic policies. David Crane can be reached at crane@interlog.com. The Hill Times