We need a bold new nation-building strategy

TORONTO—If we are to successfully transition from the current pandemic to future prosperity we need a bold new nation-building strategy. This is quite different from hoping that once the pandemic is over we will go back to where we were before the pandemic hit. That won’t happen. The world will be different and we will need to be much more strategic and much more innovative in how we respond. In fact, the world was changing even before the pandemic hit, though this was not widely recognized by our political and business leaders. This will require both a vision that identifies and defines the strategic goals of a nation-building strategy and the practical policies to implement the strategy and achieve its goals. We will need new ways to drive prosperity—to build a sustainable economy where Canadian talent and knowledge build Canadian companies that can compete in the world economy and build wealth here at home. This new economy is one that recognizes intangibles—intellectual property, branding, marketing, and business organization, for example—as the drivers of prosperity. This is quite different from the industrial economy, based on tangible assets such as machinery and equipment and economies of scale. Our nation-building strategy should be one that accelerates and strengthens our capacity as an intangible economy, and the companies that create such value. Yet much of our economic policy today, leaving aside aspirational rhetoric, remains focused on the tangibles economy. This can be seen, for example, in current business supports to offset the impact of the government’s shutdown of much of the economy. There is much attention to bailing out the airline and oil industries but little to meeting the needs of the future knowledge economy. The Canada Emergency Wage Subsidy program to keep employees on the payroll is readily available to companies in the tangibles economy, from auto parts to sawmills. But it is not accessible for many of the future drivers of prosperity, our knowledge-based tech companies or innovative start-ups. Promising tech companies, such as Ecobee, Touch Bistro, Borrowell, Rangle.io, Nulogy Corp., Swift Medical, Think Research Corp. and Mogo Inc. are being forced to layoff employees, after investing heavily to build up their human capital, and cut back product development at a time when they need support. Many of these companies have worldwide sales and strong growth prospects. They are exactly the kind of companies Canada needs for jobs and wealth creation in the post-pandemic world. Without support for our intangibles economy and the companies driving it we will see even more of our Canadian talent hired away by foreign Big Tech companies such as Google, Apple, Facebook, Microsoft, Uber and Amazon to expand R&D branch plants here to generate wealth for their foreign parents. This will weaken our own future capacity for the needed wealth to support our valued public goods, including education, healthcare, infrastructure and a clean environment. With their deep pockets, these same Big Tech companies are also well-positioned to buy up promising Canadian tech companies, as they have been doing for some time. But with the economic collapse from the pandemic shutdown, more Canadian tech companies face financial challenges and could easily become takeover targets. Germany, for example, is said to be planning a fund of a half-trillion euros (almost $750-billion) to support struggling companies and help defend them from foreign takeovers. In Canada we have an institution, the Canada Development Investment Corporation, which could be re-energized to take equity stakes—perhaps preferred equity—in promising tech companies that have growth potential but lack long-term patient capital. CDIC was created in 1982 to manage government-owned commercial businesses—Canadair, deHavilland Aircraft, Telesat, and Eldorado Nuclear—and prepare them for privatization as well as to be a source of advice for the federal government on industrial strategy. When Newfoundland’s fish processing plants went through a wave of bankruptcies, CDIC created Fishery Products International to create a viable fish processing corporation. It held and managed the sale of government shares in General Motors Corp. Today it holds government’s shares in Canadian Hibernia Holding Corp. and Trans Mountain Pipeline. Canadian history shows us we are capable of nation-building strategies to build a viable and independent east-west society. Building the transcontinental Canadian Pacific Railway was one early example and the establishment of the National Research Council in 1916 another. In the 1930s, in the midst of the Great Depression, we created a number of institutions to strengthen Canada, including the National Harbours Board, TransCanada Airlines (later Air Canada), the CBC, the Bank of Canada, and introduced new supports such as unemployment insurance (though constitutional arguments delayed its introduction until 1940). In the aftermath of World War II, Canada created the Business Development Bank, initially run by the Bank of Canada, and the Export Development Corp. In 1961, Canada established the National Oil Policy to develop Alberta’s oil industry by requiring Ontario consumers to use Alberta’s more expensive oil. Later, as research and development became more important Canada created the Industrial Research and Assistance Programme in 1962 to help small and midsize businesses across Canada develop and adopt new technology. In 1969, we spun the Medical Research Council out of the NRC to help develop Canadian capacity in the medical sciences—reconstructing it in 2000 as the Canadian Institutes for Health Research. In 1978, it spun the Natural Sciences and Engineering Research Council of Canada out of the NRC to support university and industry research across Canada. Today, we need similar creative thinking to establish the institutions and programmes for the new knowledge-based economy, where intangible assets such as intellectual property and data are the sources of good jobs and wealth creation. This will require a willingness and ability to develop fresh think, institutions and policies that will work for the new intangibles economy. This may be our biggest economic challenge. If we don’t succeed we will become a poorer and weaker nation. David Crane can be reached at crane@interlog.com. The Hill Times