We all knew that this week was to be a time of reckoning with the delivery of painful provincial and federal austerity budgets that seek to aggressively get our public finances under control against the headwinds of a sluggish economic recovery.
It’s a week where tough decisions had to be made about what government can’t do.
But while restraint is essential, restraint alone can’t be a plan for our economic future.
We need to find different ways to advance what we can do – indeed, what we must do – to accelerate our economic recovery and establish the conditions for long-term economic competiveness and prosperity.
This week, the Toronto Board of Trade is seeking to spark a strategic conversation about our economic future. We want to drive different ideas as to how we can better compete globally and prosper locally. Many of these ideas are not new. Many are overdue.
Our starting point is that, to think strategically about our economy, we need to think regionally about our economy. We have known for decades that global economic competition is increasingly organized at the level of city regions.
To better understand how the Toronto region measures up against other global cities, the board, with the support of the Certified Management Accountants of Ontario, produces a comprehensive annual benchmarking study to surface the critical data points we need to understand if we’re to better compete against them. Our scorecard measures more than 30 indicators of economic performance and labour attractiveness.
On Monday, we issued our fourth Scorecard on Prosperity report. The good news is that, against 23 other global cities, Toronto places fifth. The sobering news is that, when our focus is on very recent North American economic indicators, Toronto finds itself lagging behind most of our continental competitors.
Not surprisingly, our worst indicators are found in measures of productivity and productivity growth. This nagging facet of our economy pops up in most every study or analysis.
In taking stock, we have looked closely at what our international regional competitors are doing differently. We discovered that these city regions are organizing themselves geographically to respond to the global reality that this is how prosperity is generated.
Why, then, are we not organizing ourselves along these same regional lines?
It would be easy to point the finger at government. Indeed, there has been a surprising reluctance by all levels of government to embrace the necessity for geographically oriented economic policies targeted at the Toronto region. All the more surprising, given that the Toronto region represents 45 per cent of Ontario’s GDP and 20 per cent nationally.
But international experience shows us that government is not always the best leader on matters of regional economic strategy. More often this leadership emerges from the private sector with government playing the role as a key partner.
Typically, and most successfully, this private-sector leadership takes shape along industry sector lines. Industry players within a region have identified that many of their individual corporate challenges are, in fact, shared challenges across their broader sector. Many of these challenges (and, by extension, opportunities) relate to the eco system of indirect forces that are either working for or against their sector. Forces such as the availability of trained labour, access to capital, and fiscal policy.
Better understanding of the constellation of forces that lend themselves to increased economic opportunity and growth for competitive regional sectors has led to the ever-growing international best practice known as business cluster strategy.
Cluster strategies lend themselves to increased regional innovation and, by extension, increased regional productivity. It’s a case of lifting all boats. As a sector does better, it positively affects the economic success of others.
Toronto, of course, has a great international success story. The Toronto financial services sector, in strong partnership with the municipal, provincial and federal governments, has led to our international recognition as a top-10 ranking. Unfortunately, our financial services cluster success story stands more as an exception than a rule. Many of our region’s competitive industry sectors do not share the same level of cluster organization.
Internationally, regional cluster strategies are often much more advanced. Great continental examples include Boston, Seattle and San Francisco – which, incidentally, occupy the top three positions on this week’s Scorecard study of North American city regions.
Today, the board is convening an economic summit to better explore how our region can embrace cluster strategies as a driver of economic growth and competiveness. A key input is the Scorecard’s special focus on the performance of 10 of our leading industry sectors. Also integral to our discussion is Harvard Business School’s Michael Porter, who is credited as the founder of the regional business cluster strategy.
Our intent is that, by helping drive stronger regional cluster leadership within the private sector, we will attract stronger regional economic partnerships across the public sector.
This week will be remembered for the two austerity budgets that signal the limitations of what governments can do for our economy. Our expectation is that this week will also be remembered as a business-led inflection point where the Toronto region takes more control of our economic destiny, paving a path to accelerated economic growth and prosperity.
Carol Wilding is president and CEO of the Toronto Board of Trade. Merv Hillier is president and CEO of the Certified Management Accountants of Ontario.