Canada’s not broken, but it can do much better

TORONTO—Despite claims that Canada is broken, it isn’t. Many things work well in our country and many success stories—as well as setbacks or failures—can be found. A better way to put it is not that Canada is broken, but rather that Canada can and must do better. One place to start is with our economic performance—indeed, it is the most important place to start. As Statistics Canada reports, our economy is not improving its competitiveness. For the fourth consecutive quarter, productivity has declined, and more so than in the United States. Labour productivity is below where it was pre-COVID. Yet productivity is the key determinant of economic success. Not surprisingly, then, our unit labour costs have been rising significantly. In the core tradable goods and services part of the economy, performance has been disappointing. Real gross domestic product in manufacturing, for example, is still below pre-COVID levels. Yet so much depends on our ability to improve our economic performance—including our country's national unity and political stability. When the tide is rising, we are happy to share because there is something left over for others. But when the economy is doing poorly, we are less willing to share because there is less to go around, and we can become more inclined to hostility against others, including immigrants and racial minorities, more partisan and less civil, and more open to conspiracy and other destructive theories. Public policy clearly plays a critical role in shaping economic opportunity and potential. Tax policy, interest rates, investment in education and training, quality of infrastructure, support for research and development and incentives for innovation all matter. But ultimately it is also up to business to play a major role in delivering an innovative, productive and sustainable economy with good jobs and an improving standard of living. And this is where we have been failing. There is a serious lack of business leadership. So is business up to playing its role? A recent poll for The Globe and Mail by Nanos Research surveying “an elite group” of business leaders portrayed Canada as on “the wrong track” when it came to trade and investment. Taxes are too high, incentives (subsidies) too low, regulation and red tape are holding investment back so “bad policies are impeding the country’s competitiveness,” the executives complained. While not too much should be taken from the survey—only 30 business leaders responded—the themes are not much different from many business lobby groups and individual business leaders. If things are not going well, it is always the government’s fault! But this is a cop-out. Business leaders have become whiners. What ever happened to capitalism’s fabled animal spirits? Where are the nation-builders? Can business do anything today without first asking for a government cheque? There are, to be sure, leading Canadian companies with a global presence based on excellence from innovation. In auto parts, there’s Linamar Corp., which recently announced an investment in giga-press die-casting technology, the first by an auto parts supplier in either North America or Europe. MDA Ltd. Is a leading Canadian company in space technology. CAE is a global supplier for flight simulators. Canada Goose is successful firm producing specialized outerwear. Constellation Software, Kinaxis Inc., Open Text and the Descartes Systems Group Inc. are leading software companies. Maple Leaf Foods is an example from the food industry. Potash Corp. is the world’s top potash producer. And Manulife has been an international success in financial services. These show we can do it. But in a world of creative destruction, we need more successes—successes based innovation in both tangibles such as machinery and equipment, and investment in intangibles such as research and development, marketing, brand identification, employee training and up-skilling, new business models and global strategies. We have to be much better at scaling up smaller firms and taking steps to ensure we have Canadian headquarters and domestic ownership. This is even more of a challenge in a world of artificial intelligence, quantum computing, software and biosciences. Compared to most Western countries, our businesses invest much less in innovation as a share of our gross domestic product. A recent report by Canadian Manufacturers and Exporters agreed that “Canada is a global laggard in technology adoption. This has hindered growth in the manufacturing sector and in the economy overall.” The result, it concluded, was “sluggish labour productivity growth, the single most important determinant of a country’s standard of living.” In fact, it said, in recent years Canada has “ranked near the bottom“ among advanced economies in the growth of non-residential capital investment. In 2016-2020—pre-COVID years—Canada had the second weakest business investment performance among 31 advanced economies. Our businesses, it said, are reluctant to invested in their operations. But it’s not just underinvestment in tangibles. Canadian firms are also serious laggards when it comes to investment in intangibles, notably innovation and intellectual property. In its recent report on the most innovative companies worldwide, the Boston Consulting Group underlined that “for the third straight year, the evidence is mounting: companies that both prioritize innovation and make sure that they are ready to act are widening the gap over less capable competitors.” These companies, it said, “are consistently delivering new products, entering new markets, and establishing new revenue streams. The laggards struggle to make headway beyond incremental improvements.” With some exceptions, too many of our businesses are among the laggards. We need to know why. We need much better analysis of the strengths and weaknesses of our business sector, a much better understanding of the global competitive environment we face, an objective review to determine what works and what doesn’t, and a much better grasp of the actions and policies we need to do better. This is a key reason why we need to create an economic council that brings together our best minds in non-partisan work for a prosperous, sustainable, and equitable future. Canada is not broken but we have to really improve. David Crane can be reached at crane@interlog.com. The Hill Times

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Canada’s not broken, but it can do much better

Canada needs to create an economic council that brings together our best minds in non-partisan work for a prosperous, sustainable, and equitable future. Canada is not broken, but we have to really improve.

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