Canada lacks capacity for effective policy-making, and we’re not alone

TORONTO—In a succession of recent budgets, the Trudeau government has been committing billions upon billions of dollars of public funding and incentives which it says will lead to a badly needed high-innovation economy based on the industries of the future. This, we are promised, will bring about well-paying jobs, a higher rate of productivity growth, and the wealth creation that can deliver a tax base to support our public programs along with ongoing investment for a better future. Government support is clearly necessary to share the risk, build new capacities, and create new markets for next-generation technologies. Much of today’s standard of living is the result of well-tried past public and private investments in education and skills, research, and development, commercialization and innovation, and the creation of markets for new technology. But will all this spending work? We don’t know how or why today’s policies and technology priorities were chosen. Is there a clear strategy with projected outcomes, or is this just shooting in the dark? What is the government’s capacity to think strategically and to make hard choices? Is there a plan to ensure that Canadian technology and Canadian companies play key roles or will much of the money be spent to create branch plants here and import foreign technology? The 2021 federal budget, for example, set aside $1.2-billion for a quantum computer strategy, and $7.2-billion for the Strategic Innovation Fund (on top of the $3-billion announced at the end of 2020), $1.7-billion for the aerospace industry, $443.8-million over five years for its Pan-Canadian Artificial Intelligence Strategy, $400-million for a Pan-Canadian Genomics Strategy, and $250-million to fund clinical trials in the hope this would lead to increased commercialization. It also pledged $1.7-billion to help small and mid-size businesses move into the digital age. The 2022 federal budget continued the promise of more aid, including an investment tax credit for clean-technology manufacturing, estimated to cost $4.5-billion over five years, and another investment tax credit for hydrogen, estimated to cost $5.6-billion over five years. Some $1.7-billion of support was pledge for a critical minerals strategy, $1-billion for a Canadian Innovation and Investment Agency, and $1.5-billion for a Canada Growth Fund, as well as $670-million for the superclusters project. There was also $45-million to kickstart a Canadian semiconductor strategy, following a commitment of $150-million to support investments in the development and production of semiconductors. For its part, the 2023 federal budget included tax credits costing $4.5-billion over five years for investments in clean technology manufacturing, which will followed by a further $6.6-billion in tax credits for additional investments made between 2028-2035. Then there's the investment tax credit of $5.6-billion for clean hydrogen projects, one for $6.3-billion for clean electrify projects along with an additional $1.1-billion in direct support for clean electricity, and $516-million for an investment tax credit for carbon capture and storage projects. The fundamental challenge is that we have an economy that is unprepared for a different future. The economy that delivered past prosperity is not the one that can deliver future success. Yet for all the support, there seems to be limited take-up from domestic firms. It’s as though they don’t see themselves as part of the solution. For example, Canadian business is a significant under-spender on research and development despite the incentives. The National Science Foundation in the United States recently reported that America business, in 2021, performed US$602-billion of research and development, a 12.1 per cent increase from 2020. It spent US$528-billion of its own money—a 13.2 per cent increase from 2020. What about our businesses? According to Statistics Canada, Canadian business performed C$18.8-billion of R&D in 2021, a 3.3 per cent increase, and spent $17.6-billion of its own money, a 3.5 per cent increase. If we convert the Canadian numbers to U.S. dollars at an average rate of US$0.80 in 2021, then in 2021 our business performed US$15-billion of R&D and funded US$14.1-billion. It will be no surprise, then, that the latest Global Innovation Index from the World Intellectual Property Organization again ranks Canada 15th globally. The top 10, once again, include Switzerland, Sweden, the United States, Britain, Singapore, Finland, the Netherlands, Germany, Denmark, and Korea. China ranks 12th. An underlying problem is that we lack the capacity for effective policy-making. We are not alone. As Erica Fuchs, a leading engineering professor from Carnegie Mellon University in the United States, told a congressional committee, “we lack the intellectual and institutional foundations to guide our nation on how to act.” She contended that “the U.S. government’s experience with and capacity (institutional as well as data and analytics) to make large-scale decisions related to technology is not only limited but has also atrophied over the past 50 years.” The CHIPS and Science Act in the United States, for example, required the administration to have a National Technology Strategy to link emerging technologies to global and domestic challenges, and identify needed U.S. investments. But it left open how this was to be achieved. To advance, the National Science Foundation is funding a pilot study for a National Network for Critical Technology Assessment. Fuchs, who is helping lead the project, says that a key goal is “to demonstrate how analytics could uniquely inform National Technology Strategy across government missions and to define a vision for critical technology assessment, including current capabilities, gaps, and the national investment and organizational form needed to realize that vision.” There are Americans who do recognize they have to find a better way to identify how to create an effective national strategy that will drive innovation. Where are those voices in Canada? There are some, but too few. Yet the need for better-informed strategic thinking about our future has never been greater. Without improved analysis and thinking about the prospects for Canadians, the future could be quite grim. The world is changing but why aren’t we? David Crane can be reached at crane@interlog.com. The Hill Times