We need a serious growth plan for Canada, like the EU’s

TORONTO—A majority of Canadians fear the country is on the wrong track. They have reason to be worried. The sharp increase in food prices, worries about access to health care, and fears over the cost and availability of affordable housing are all driving pessimism and a fear for the future. As recurring polls and two critical byelections suggest, Canadians appear to have lost confidence in the Trudeau government. Yet, nothing we are hearing from either the Conservatives or NDP shows they know how to do better. So what can be done? In the short run, not much. There are no sliver bullets. The Bank of Canada will accelerate interest rate cuts, which will help in the short term. The government is increasing federal mortgage insurance levels so people can afford more expensive homes while stretching out repayment periods. But this will have little impact on the supply of housing, or on rents. But there’s not a lot more the federal government can do that has immediate effect. Its fiscal cupboard is not empty, but it is approaching that point. What the country clearly needs is a strategic growth agenda that builds confidence in the future with real deliverables, while acknowledging this will mean real short-term pain for long-term gain. Yet, a lack of realism abounds. Abacus Data pollster David Coletto, for example, argues that as a new parliamentary session begins, “Parliament and the federal government need to find ways to instil confidence in Canadians that there is a clear economic strategy in place to create wealth, grow the economy, and secure their future.” This is wishful thinking, and not just because of pre-election manoeuvering. Much hard thinking is needed. While Canada has talent and ideas, we don’t know how to convert that into commercial success. Moreover, the provinces have to be onside, given their shared responsibilities. It is clear we need to create wealth, grow the economy, and secure the future. This is what the challenge of innovation and productivity is all about. Right now, we are not creating the wealth for a better future. Only by investing in intangibles—research and development, patents, software, new business methods, branding, and skills—and in tangibles—machinery and equipment, buildings, infrastructure and equipment including trucks and planes—will we achieve the kind of progress we seek. The Canadian dream will fade away without a clear growth plan for the future. A great failing in Canadian politics is our political parties' failure to underline the link between innovation-driven productivity growth, and our capacity to provide well-paying jobs and to finance health care, education, and the needs of an aging society. Our MPs have failed to be up front on the huge challenges we face as a nation. It’s not that we have lacked facts on our sluggish performance relative to leading nations on innovation, investment, and productivity. Our ongoing decline in per-capita GDP is a bottom-line demonstration of our failure. Moreover, we have in recent years seen many reports underlining our failings. For example, the C.D. Howe Institute, to its credit, has delivered many reports on underinvestment by business in new technology and productive investment, though less so on the intangibles economy. The latest report, by William Robson and Mawakina Bafale, again spells out the challenges. But there are two problems with the C.D. Howe report, Underequipped: How Weak Capital Investment Hurts Canadian Prosperity and What to Do About It, as there are with similar papers. First, it fails to explain exactly why Canadian firms are underinvesting—offering many possible explanations, but falling short of any clear explanation. Second, its suggested remedies are insufficient to bring about the real long-term change and restructuring we need. The two authors cite many past and current reasons that might explain underinvestment by business. These range from our low population, cold climate, overreliance on resource revenues, weak business spending on research and development, interprovincial trade barriers, overinvestment in real estate, and a “hostile regulatory environment” for oil and gas projects to an economy with an excess of small and mid-size businesses, the attraction of investing in the United States after the 2017 U.S. tax cut legislation, and a complex Canadian tax system. One could add to their list aggressive protectionism under the Buy America Act, a U.S. subsidy war to attract investment to the that country as set out in the U.S. Semiconductor CHIPS Act and Inflation Reduction Act, the failure of the Canadian financial system to finance the scale-up of promising home-grown firms, poor management, risk-aversion and short-term corporate thinking, and the failure to support growth companies through government as a lead customer. These are easy rules that allow foreign multinationals to buy up our promising growth firms so that large Canadian businesses don’t develop, a lack of technology diffusion programs or provision of manufacturing centres where innovators could test new ideas, and a weak policymaking capability due in part to lack of demand at the political level as well as an over reliance on outside consultants so in-house policymaking strengths are never developed. At the same time, the suggested remedies—while useful—are insufficient to solve our underlying problem of weak innovation, poor productivity, and the reliance on an economy that is increasingly stale-dated, and that cannot deliver the increase in incomes and the wealth to support needed public goods such as education and healthcare. Without serious change, our weaknesses can only get worse. So we need a serious growth plan for Canada, one with deliverables rather than aspirations. The European Union provides a good example with its report, The Future of European Competitiveness, drafted by Mario Draghi, the former European Central Bank president. This is a solid piece of work that sets out priorities, a plan, and an estimated cost. This is what we need: something solid and serious for our future. We have nothing like that today, which is one reason why Canadians are losing confidence in their future. David Crane can be reached at crane@interlog.com. The Hill Times

We need a serious growth plan for Canada, like the EU’s

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We need a serious growth plan for Canada, like the EU’s

The European Union's recent report sets out priorities, a plan, and an estimated cost. This is what we need: something solid and serious for our future. We don’t have that today, which is why why Canadians are losing confidence in their future.

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