We have to find out why we’re an innovation laggard, then take it from there

TORONTO—The Trudeau government has been spending a record amount of money, as well as providing generous tax incentives—with promises of much more to come—to make Canada an innovation nation. But how is it deciding where to spend money and how? What milestones has it set its array of programs? How will we know whether the expected results have been achieved? We don’t know the answers to any of these questions. That’s the problem. Some of this innovation spending will undoubtedly deliver benefits. But the overall spending may still fail to advance the economy to deliver the good jobs, competitive and world-class businesses and the resulting growth-generated tax revenues we need to restore fiscal sustainability and meet the needs of a growing and aging population. The key challenge is to build a stronger, more innovative economy that can prosper in an increasingly competitive global economy. Finance Minister Chrystia Freeland’s 2021 federal budget was high on ambition, but short on how this might be achieved. In the budget, Freeland outlined plans to spend $6.1-billion in new money over five years—on top of the significant sums already committed under existing programs—purportedly make Canada an innovation superpower. She also planned to spend another $4.5-billion in new money—all of this also on top of existing programs—over five years for the transition to a green economy, making us a clean energy leader. Unfortunately, we are not the world leader we like to think we are. We rank 16th in the Global Innovation Index. Our companies are failing to invest in the future, compared to their counterparts elsewhere. And we are the only G7 country, since the Paris Accord on climate change, with increased greenhouse gas emissions. The budget, Freeland said, aimed to deliver “a growth strategy that builds on the unique competitive advantages of the Canadian economy” and “translate Canada’s world-class leadership in research into innovative products and services for Canadians, and for the world.” The budget, she promised, “will cement Canada’s position as a world leader in research and innovation.” At the same time, she said, Canada was already “a global leader in clean-tech innovation” so much so that “Canada’s well-educated workforce, energy sector know-how and trade relationships position us to be a leader in the clean economy of the future.” But what are the “unique competitive advantages of the Canadian economy?” We are laggards in innovation. We under-invest in new technology and research. We have a culture of risk aversion. We run a chronic current account deficit with the rest of the world because we do not produce the high-value goods and services the rest of the world wants to buy. We have a reasonably well-educated population and some areas of research excellence in our universities. But we have few Canadian-owned and run global corporations while many of our potential growth companies and their intellectual property are too often sold to foreign buyers instead of moving to the next stage of growth. Much of our talent and university expertise is employed in R&D branch plants producing valuable intellectual property for foreign corporations. Despite the roughly $60 billion the federal government claims to have spent so far on climate action and clean growth, how many world-competitive technologies or scaled-up companies can we point to as a result? There are many start-ups, but it is hard to find clean-tech companies with the scale and scope for future growth that have emerged. The largest part of Freeland’s new money for innovation will go into an open-ended pool of capital, the Strategic Innovation Fund and the Net Zero Accelerator, which will be used for grants to support electric vehicle and battery projects, largely from abroad, and for high-carbon industries. The Net Zero Accelerator received $3-billion in December and in the 2021 budget, was promised another $5-billion over seven years. There are plans to support future technologies—artificial intelligence is to get $443.8-million over 10 years, quantum commuting $360-million over seven years, photonics $90-million over five years, genomics $400-million over six years, and clinical trials $250-million over three years. But what are these commitments based on and what is expected to result? What are the strengths and weaknesses of Canada in these sectors, and what commercial benefits should we expect? In the federal election, the Liberals also promised to create the Canadian Advanced Research Projects Agency, modelled on the U.S. Defence Advanced Research Projects Agency, with a launching endowment of $2-billion. How it will work has not been explained. Past and future spending will almost certainty deliver some benefits. But they do not constitute an innovation strategy and there’s no assurance they will ramp up Canada in the world innovation leagues. There is no well-developed strategic framework or plan. If we are to do better, and we must for a successful future, then we need a much better understanding of where we have to do the hardest work. We need a much better understanding of why we are an innovation laggard, and, for example, why our companies under-invest in new technologies and intangibles, or where our science, engineering, and business practices need to be strengthened. Without that knowledge it is hard to design the most effective policies. That means we need the institutional arrangement—including a 21st century version of an economic council—that can provide the analysis for an informed public understanding of our strengths, weaknesses and opportunities, the capacity to make policy recommendations, and provide an ongoing public monitoring of programs to see what is working and what isn’t. Right now we are spending a lot of money but we don’t knowing whether it is effective or if it will deliver the innovative economy we urgently need. This must change. David Crane can be reached at crane@interlog.com. The Hill Times