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Canadians should have known when they elected a Conservative government, especially one led by such a notorious small-government crusader as Stephen Harper, that it would mean an implacable withdrawal of the state from the economy. Nine years on, the results are in.
The Harper government wasted no time after its 2006 election disembowelling the federal state, forcing the provinces and private sector to sink or swim. This wholesale retreat showed up in the 2007 budget, with its record cash transfers to the provinces for health care and a boost to the equalization program, which was such an unexpected bonus for then-Quebec premier Jean Charest that he turned around and awarded Quebec voters a $700-million income-tax cut.
Mr. Harper, the fiscal taskmaster, stuck to his ideological guns during the Great Recession with a $63-billion stimulus program, supplemented by the $9.1-billion that Ottawa contributed to the bailouts of General Motors and Chrysler. The cuts just kept coming as his government nearly tripled non-stimulus-related infrastructure spending to $5-billion from $1.7-billion annually, with an additional $1-billion a year promised for public transit in the April budget.
And what can be said of Mr. Harper's contempt for Canadian scientists? Under his rule, federal expenditures on university research have put Canada near the top of the global rankings for publicly funded research and development. The Conservative Leader clearly believes the state has no place in basic research. Why else would his government give the Canadian Institutes of Health Research $1-billion a year, or provide the Canadian Foundation for Innovation with $1.3-billion to support research infrastructure at postsecondary institutions and hospitals?
Mr. Harper's war on state-funded science includes the $243-million he has promised to fund Canada's participation in the Thirty Meter Telescope project; the extra $45-million awarded this year to the TRIUMF cyclotron particle accelerator; the $105-million committed to enable scientists to collaborate on research through the CANARIE cloud-computing network; and the $15-million promised to the Council of Canadian Academies to conduct "science-based assessments."
The GM and Chrysler bailouts set the tone for the Harper government's hard line on corporate welfare. It has been a dry well ever since. Most recently, this unyielding insensitivity toward the pleas of manufacturers has manifested itself in a $300-million loan to Pratt & Whitney Canada to develop jet engines and a $60-million loan to Toyota to upgrade two auto plants in Ontario.
The Harper Tories have shown their disdain toward the Liberal fetish for picking winners by boosting (after renaming) a smorgasbord of industrial policy slush funds, including the $1-billion Strategic Aerospace and Defence Initiative and the Automotive Innovation Fund. The latter's $250-million annual kitty was increased to $500-million a year for two years in the 2014 budget. The Harper government's clean-tech fund, Sustainable Development Technology Canada, has doled out $740-million so far, with hundreds of millions more still to go out the door.
No wonder the Liberals and New Democrats have been calling for the state to re-engage with business to boost Canadian innovation. After all, the Tories abdicated their responsibility in this area by conducting the most comprehensive review of federal support for private-sector research in decades and implementing the main recommendations of a 2011 expert panel's report on the matter. The Scientific Research and Experimental Development Tax Credit, which cost $3.5-billion annually and had been subject to much abuse, was scaled back by about $500-million – with most of the savings plowed into direct grants to businesses, just as the experts ordered.
It's debatable whether any of this largesse has made Canada's economy more competitive or innovative. No amount of state support can compensate for a lack of vision or guts among businesses. It's not for a lack of trying by Ottawa that innovation policies that seem to work elsewhere aren't replicable here. The state can go only so far to substitute for the private sector's listlessness. To wit, firms in the oil patch are reacting to tough times by cutting R&D, which is exactly the opposite of what they should be doing right now. They should know only innovation can save them.
Now, Liberal Leader Justin Trudeau is vowing to "invest in Canada" by doubling infrastructure spending, while NDP Leader Thomas Mulcair promises to be a "champion" of manufacturing (subsidies).
They have big shoes to fill. Both would be hard-pressed to outdo Mr. Harper, who, if you haven't gleaned by now, has turned out to be as much of a meddler as any Liberal who preceded him.