How to maximize Canada’s COVID-19 economic recovery

It is often said that history repeats itself. It is how we respond to history that makes a difference. If the 2008 recession spearheaded by the collapse of Lehman Brothers was the “great recession,” then the 2020 COVID-19 pandemic is pushing us to the brink of an even economic disaster. For Canada to recover as a global economic leader, we must learn from the mistakes made more than a decade ago, which, arguably, left Canada as an innovation laggard compared to other countries. The government of the day largely focused its economic measures on tax relief, skills training, and resource-sector bailouts. It was a safe approach that experts credited with saving more than 200,000 jobs and provided stimulation to a consumer-based economy with things like home renovation tax credits. However, when it came to really investing in innovation, Canada was nowhere near countries that gambled on “creative destruction," backing the next big disruptive thing, tearing down, and building anew. Some countries, such as China and Korea, used sovereign wealth, while others (U.K., Germany, France, and Italy) used major investments and in some cases, significant ownership stakes, to grow and reshape global companies that they headquartered or represented multi-thousand person workforces. The U.S. doubled down on “Buy America,” and like other countries and governments, funded industry to meet new challenges, develop next-generation solutions. Equally important, they actually bought what their own companies produced. Not so in Canada. Manufacturing never recovered. Venture capital was a fraction of what it was in the tech boom of the 1990s. By 2012 and onward, studies showed innovation and research and development investment was down by double digits compared to pre-2008. In 2015, when it came to power, the Liberal government put a priority on innovation as a guiding policy. Some $2.5-billion was earmarked for innovation in the Strategic Innovation Fund, another $950-million for the feds' superclusters, and billions more through other granting agencies and the six regional development agencies. Canada co-invested in artificial intelligence startups, and Montreal became a globally recognized AI cluster. In general, funding could flow faster, but the underlying vision is there. A prescient 2018 report by the Council of Canadian Academies, “Competing in a Global Innovation Economy: The Current State of R&D in Canada,” concluded that countries that invest in innovation, prosper, “Countries that do not provide such support or cultivate such skills risk becoming unable to participate in world-leading research and equally unable to reap its eventual social and economic benefits.” The CCA went on to say, “Canada is not producing research at levels comparable to other leading countries on most enabling and strategic technologies.” Research spearheads innovation and innovation leads to wealth creation. As we have seen in response to the COVID-19 crisis, governments are refocusing the existing funding apparatus to transform Canadian companies into producers of emergency medical protective gear and ventilators. When governments want to, they can act in days and weeks, instead of months and years. While the some $225-billion (and counting) in emergency measures outlined, and billions of dollars more provincially seems impressive, it will likely be dwarfed by the quantum leap in government investments needed for the recovery post-pandemic. Canada will need something much more strategic, bold, and daring than the 2008 response. Other countries will use this as an opportunity to reposition themselves on the global economic ladder and hopefully, so, too, will Canada. While everyone is in emergency/survival mode, it is vital to start thinking now about what the medium- to long-term future holds. The federal and provincial budgets that have been postponed to the fall are being reframed as recovery and rebuilding budgets. Those budgets will give substance to growth and renewal strategies for what will no doubt be a generational opportunity. So, what does this mean for Canadian industry, academia, researchers, and innovators? In a nutshell, don’t wait, plan now. Someone in your organization should already be asking strategic questions such as: What ground-breaking research and development can we undertake now if we had the right funding or investment? If we were to transform our business into something entirely new, how long would it take and what would we need from government to make it happen? What do we need from an investment perspective to leapfrog our competitors? To be number one or two in the world? What do I need to become the next Amazon, Google, SpaceX, Shopify, Impossible Foods, or Rent the Runway? What help do I need from government to make it happen? What regulations need to change? What fiscal policy needs addressing? Not only will this put companies on a quicker path to recovery, among other things it will instil confidence in employees, even those that are currently laid off, that their company has an exciting future, retain their loyalty, and be ready to bounce back even better than before. Stuart McCarthy is senior vice-president at Bluesky Strategy. Editor's note: The post has been updated to reflect the government's additional spending measures. The Hill Times