We asked 10 Canadian economics experts:
What is the one policy idea that would have the biggest impact on the economy if it were enacted by the next government?
On a scale of 1-5, how would you rate the chances of this happening?
Canadian businessman, former CEO of Research in Motion
Canada needs to begin teaching the commercialization of ideas in a global context to public- and private-sector actors involved in Canada's innovation ecosystem.
Domestic and international judicial strategies, IPR [international property rights] strategies in treaties and trade agreements, technology standard forum strategies and private-public sector co-operation strategies are just some of the examples in which Canada lacks capacity, which explains our dismal innovation output over the past 30 years. Ideas commercialization is how wealth is generated in the global innovation economy and geopolitics is at the heart of it. In order to scale up globally, Canadian entrepreneurs, leadership at universities, incubators, accelerators, and policy makers all need to learn how to effectively compete in the complex, predatory and state-sponsored international-ideas ownership and licensing game.
It's time we stop celebrating our startups selling for pennies on the dollar to U.S. companies and start building capacity to compete and scale up globally, where real money is made. Canadian startups have potential to generate great wealth, so it's urgent that we create a Canadian-specific private and public framework designed to capture wealth from Canadian ideas. And that begins with a strategy to teach the geopolitics of ideas commercialization.
Chances of this happening: 2/5
Stauffer-Dunning fellow in global public policy at Queen's University
Ottawa should appoint a royal commission on Canada's economic future. It has been 30 years since the Macdonald Commission set the background to shift policy more to market principles, including free trade. While seemingly sound in principle, that agenda never delivered the hoped-for boost to Canada's productivity. And now the economic context has changed. It is finally apparent we cannot ride unprocessed resources to prosperity nor can we take for granted strong employment and earnings in manufacturing. The global economic landscape has shifted away from our traditional trading partners in the developed world toward emerging economies. Policy tinkering will not allow the Canadian economy to reach its potential. Another reset in the economy's direction is required. And the bar is higher this time because we know the goal cannot simply be stronger growth. Policy must also be directed at ensuring growth is inclusive and sustainable. A commission offers the opportunity to closely involve stakeholders, including the provinces and territories, business, labour, and social groups.
Chances of this happening: 2/5
David K. Foot
Professor emeritus of economics at the University of Toronto
The government should support moderate increases in interest rates. Saving for retirement is essential in aging populations. Higher interest rates would encourage more retirement savings, improve retirement incomes for many and contribute to the security of all pension plans by improving yields and reducing discounted future liabilities. In addition, since interest rates and exchange rates move in tandem, higher interest and exchange rates are necessary to ensure that a low Canadian dollar does not precipitate a fire sale of Canadian companies, especially in the resource sector and what is left of Canadian manufacturing. Recent historically-low interest rates have not increased investment, productivity or economic growth, but instead have increased personal debt, house prices and future uncertainty. In Canada's aging population, slower economic growth is inevitable and not necessarily bad. The environment will benefit. Also, per capita incomes can still increase because population growth is slower. It is time to recognize that the downsides of low interest and exchange rates now outweigh the upsides, and adjust economic policy accordingly. The government should recognize this as should the Bank of Canada.
Chances of this happening: 1/5
Former clerk of the Privy Council and vice-chairman, BMO Financial Group
Canadian growth is lethargic, and it is a structural problem as much as a cyclical one. A key culprit: poor productivity growth compared with other economies with which we compete. The result: Canadian business productivity levels are now about 70 per cent of U.S. levels, and getting worse. The reality is that you cannot cut your way to sustained higher productivity growth, either as a firm or a country – it takes public and private investment in capital and technology per worker, in research and innovation, and in strategic infrastructure. The specific idea to improve the longer-term performance of the Canadian economy: Establish a "National Productivity Strategy," which would bring together not only federal and provincial governments but also business and higher education, with the clear goal of doubling Canadian productivity growth within five years and tripling it within a decade. Such a strategy means real choices, tangible commitments, shared accountability and a rejection of short-termism. Not easy. But do-able.
Chances of this happening: 2.5/5
Former Saskatchewan minister of finance and current professor of public policy at the University of Saskatchewan
The government should focus on expanding its trade externally and internally and informing Canadians of the benefits of enhanced trading opportunities. Consider the Trans-Pacific Partnership, a proposed trade agreement, involving the United States, Mexico and Asia-Pacific countries which represent about one-third of global trade. Coverage has focused more on what Canada might lose –for example, marketing boards for dairy and poultry – rather than on what it would gain in terms of economic growth and jobs. Also, little attention is being paid to the economic implications of Canada not joining if the United States and Mexico did join. Similarly, major benefits would come from eliminating economic barriers within Canada. Yet, efforts to reduce such barriers have been sporadic rather than consistent and focused. The New West Partnership, an agreement among the three most western provinces to remove barriers to economic activity, shows the benefits that come from opening our borders within the country. Public education about the benefits of enhanced trade and political leadership would be required, but considering that the federal government and some premiers – for example, Brad Wall and Christy Clark–– are committed to the task, there would be more than a 50-per-cent chance of success.
Chances of this happening: 3/5
Senior Fellow at the School of Public Policy at the University of Calgary
A national "carbon levy" of two cents per litre on all sales of gasoline and diesel. Revenues raised are returned to the province in which they are collected to be used for carbon-reduction policies in that province. With 60 billion litres of fuel sold annually, the levy would yield about $1.2-billion. This is not just another "tax-grab." Funds collected are exclusively used for provincial carbon-reduction strategies, not general revenues.
With fuel prices far off the heights of recent years a two-cent levy has minimal impact on consumers, and is not paid by Canadians who don't own cars or use public transit. It rewards low-carbon lifestyles. The levy focuses on energy consumption–the largest source of emissions. Eight per cent of the CO 2 produced by a barrel of oil comes out the tailpipes of cars and trucks. The carbon levy does not make our export industries less competitive. Unlike new corporate or personal income taxes, it does not kill jobs. It has virtually no additional administrative costs. It is not a disguised form of regional transfers. Funds raised in say, Manitoba, stay in Manitoba.
It rejects the "Ottawa knows best" syndrome. It respects and accommodates provincial differences. Alberta might use the funds to encourage technologies that reduce the carbon emissions from oil sands; B.C. to expand public transit. Each province decides its own priorities.
Chances of this happening: 4/5
Economist, author and broadcaster. A senior fellow for economics and population change at The Macdonald-Laurier Institute
I would love to see the next government make a massive push towards improving Canadian productivity. It would have the biggest impact in the long run – but it would mean doing some things that might not be politically expedient.
For example, one way to increase productivity would be to encourage foreign direct investment (FDI). The Organization for Economic Co-operation and Development has suggested that we do this by lifting restrictions on FDI in telecom, in broadcasting, and in airlines. Canada also needs to actively encourage companies to increase R & D – we lag other developed countries woefully in that area. To make that happen we need to increase grants to innovative companies, boost tax incentives, and make it easier for smaller firms to access financing.
Canada is headed into a tough decade. Demographic challenges combined with the shifting of economic power away from the West are two trends that are not going to work in our favour. If we do not want to get left behind we need to take steps now that might not yield benefits for years, so I'm not optimistic any political leader will do enough.
Chances of this happening: 2/5
President and CEO, Atlantic Provinces Economic Council
One big new concept with massive economic potential is a tax policy option called a "patent box" or "innovation box." An innovation box draws a line around business income earned from developing and applying pure and applied research and other intellectual property [IP], and taxes that income at a lower rate than the general corporate tax. It would reward firms for developing, owning and exploiting IP in their domestic activities. That means it rewards people who put their bright ideas to work.
R&D and manufacturing facilities, when located near each other, boost each other's capacity. We learn from nearby colleagues, and that creates ideas on how to up our game. That synergy, in turn, boosts jobs and taxable business activity in the community. The innovation box is a tax policy choice that belongs at the federal level. And any province, any region, any business interested in innovation and jobs, in looking upward and outward, can get behind the innovation box. Even better, the idea is compatible with all major political parties' economic platforms.
Chances of this happening: 3.5/5
President and CEO, C.D. Howe Institute
Look inward or outward? Whether Canada's next federal government thinks mainly about thickening our borders or engaging the world outside them is not a policy, but will fundamentally shape its policy approach.
Take international trade. An inward-looking government might forgo the Canada-EU deal; an outward-looking one would embrace the more than 500 million potential customers, suppliers and partners. Inward means avoiding the Trans-Pacific Partnership; outward means fuller participation in the world's most dynamic area. Or flows of people. Closed means lower immigration, fewer people working across borders, less talent coming in. Open means a faster-growing work force, more opportunity, and access to skills and ideas.
Inward versus outward orientation guides other choices. Is federal infrastructure about domestic pork-barrelling, or better border crossings, ports and airports? Do we cut our commitments abroad, or build them? Can vested interests stifle competition and innovation, or do we adapt, invent and thrive?Closed and open aren't on the ballot. But the next government's position on that scale will shape many policies critical to future prosperity.
Chances of this happening: 4/5
An associate dean and professor of economics at Carleton University
EI is failing to do its job. It does not provide adequate support to the jobless. Most unemployed workers do not receive EI benefits. Some have not worked enough hours to qualify; others are new immigrants, former "self-employed" contractors, or long-term unemployed.
The EI fund has gone from sacred cow to cash cow; a way to pay for everything from training and social programs to the latest government "announcables." Yet EI premiums are a regressive way of funding such programs. They hit low-wage workers hard, as they are paid from the first dollar earned.
EI subsidizes seasonal employment: In 2012, the forestry and fishing industries received $2.60 in benefits for every dollar contributed to EI, while an industry that provided reliable jobs – finance and insurance – received just 40 cents in income benefits for every $1 contributed.
There are alternatives: Experience-rate employment insurance. End the regional subsidies. Or get rid of EI altogether, and replace it with a guaranteed annual income, universal maternity and parental benefits, and training programs financed through progressive income taxation.
Chances of this happening: 1/5