Canada’s trying to become a true nation of innovation

TORONTO—Canada is trying to become a true nation of innovation, as it must. Our future prosperity, including our ability to generate the taxes we need to finance future education, health care and other public goods, depends on our success as innovators. In fact, the need is now greater than ever. As the growth in the labour force continues to slow, innovation and the productivity growth it can fuel will become even more important for sustained growth in living standards. Yet despite successive efforts by the Mulroney, Chrétien, Martin, Harper, and Trudeau governments our efforts continue to fall short. We lag as an innovation nation, despite some areas of strength and potential. This is not just a failure of public policy. It is also a failure of Canadian business to invest in innovation, choosing to buy back shares to boost share prices rather than put those billions of dollars in profits to work for a stronger economy from more innovation. Too many of our corporations are underinvesting in new production technology, in research and development and the resulting intellectual property, in employee skills upgrading, in management systems and in other intangibles that constitute the real wealth of a 21st century economy. But business cannot afford to continue this way. Big shifts are underway, what have been called tectonic shifts. The world must urgently respond to looming threats from climate change, with a needed and rapid transition to new energy systems, face all the challenges of a world with nearly two billion more people barely 25 years from now, and address the benefits and costs of rapid technological change and a much more digital world. This is the role of innovation. Policy-makers and decision-makers will be put to the test as they never have been before. But a world facing so many urgent needs, will also create many opportunities. Where Canada fits in—winner or loser, or just mediocre—remains to be seen. But it will all be about innovation, not just in technology, but in how we manage change. Take the digital revolution. The transformative impact of digital technology is well described in a new book by the renowned British economist Diane Coyle—Cogs and Monsters—which is about “what economics is, and what it should be." Much of the book is about the ways in which digital technology is upending how economies perform and raises big questions on whether we understand what is going on in the economy, how economics itself has to change, and how we almost certainly will need new kinds of policies. In recent decades, she writes, “the scope of the changes the world has seen ranges from the automation of manufacturing from the 1980s on, and the waves of outsourcing and offshoring, to Tim Berner-Lee’s invention of the Web, to the 2007 confluence of smartphones, 3G/4G, and algorithms that have us all online, everywhere, always,” Coyle writes. “Global production chains, e-commerce, social media, digital platforms, are all made possible by the technological and business innovations. And there is more to come as AI advances, and merges with other areas of innovation such as genomics, additive manufacturing, green energy and transport transition, or advanced materials.” Yet we are only really beginning to think about how this may affect Canada and we have limited understanding of the policies, institutions, research, education and investments that will be needed. The necessary transition to net zero emissions will be equally challenging. Moreover, as the U.S. publication, Issues in Science and Technology, observed more than a decade ago, “stimulating innovation and directing it to the proper ends is not easy.” Canada’s experience bears that out. “To begin with,” it stressed, “innovation entails much more than inventing clever new gadgets. Even with gadgets, it involves design to make the gadgets appealing, safe, and easy to use, manufacturing processes that avoid waste and ensure quality, marketing systems for distribution, business management systems that coordinate all these activities, financial mechanisms to provide capital where it can be best used, government policies that protect workers, preserve intellectual property, and facilitate trade, and an education system that will provide the skills needed to keep all of these activities going in the future.” These same activities will be essential to achieve innovation goals in the expanding service sector as well. It was Paul Martin, as finance minister, who was among the first to advance the goal for Canada to become one of the world’s five most innovative nations. More recently, Industry Canada, in its 2019 report 'Building a Nation of Innovators,' even boasted that the Trudeau government’s current innovation strategy was already having big impact and that would succeed in “branding Canada as one of the top five most innovative countries in the world.” But we have far to go. The IMD World Competitiveness Ranking puts Canada at 14th spot, as does the World Economic Forum’s Global Competitiveness Report, while the World Intellectual Property Organization’s Global Innovation Index puts us at 16th. In fact, the WIPO report ranks us at 24th spot in creating intangible assets. And the OECD ranks Canada 21st in R&D intensity. So what to do? The fundamental problem is that we lack the analysis that would let us do better. Finance Minster Chrystia Freeland, in her mandate letter from the prime minister, is instructed to establish a permanent Council of Economic Advisers to “provide the government with independent advice and policy options on long-term economic growth.” Outside advice can be useful. But we require more than more advice. We urgently need serious and well-researched analysis of innovation and other big issues facing Canada. This is why we need an independent economic council which can undertake serious analysis, which an advisory body can’t. Its reports would be in the public arena to raise the level of public understanding. We have to face the fact that our innovation policies are not up to the challenges we face. Better analysis and understanding are a crucial first step if we are to do better. We can’t start soon enough. David Crane can be reached at crane@interlog.com. The Hill Times