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Jeffrey Simpson

Needed urgently: more creativity from the business class Add to ...

"Canada has a serious productivity problem. The statistical evidence is unambiguous and of long standing."

Heard that before, or versions thereof? Probably not, unless you're a policy wonk. Productivity is a word editors dislike, television disdains, politicians fear, and from which the general public recoils.

It's the great Canadian bore, right up there with Senate reform, equalization and the latest iteration of Quebec secession, tedious for readers, too complicated for television, abstract as a concept, and scary for citizens who think productivity improvements will mean working more for less, or working not at all.

But there it is, again: another learned group telling us that we've got a productivity problem. This time, it's the Council of Canadian Academies (from which the opening quote is taken), warning and cajoling the country, or trying to, about this Achilles heel of our future.

Without productivity improvements, future economic prospects will be, well, middling, especially not exclusively because as the population ages a smaller share of the population will be working to support the larger share in retirement.

Then there's the competition with China, India and Brazil, and the uncomfortable fact that we have hitched our star to the United States, whose own productivity is slumping. That our productivity consistently lags that of the U.S. is now especially ominous, given that country's massive economic problems.

In Ottawa today, a clutch of university presidents, corporate types and civil servants will put their heads together to ponder the role of research and innovation in Canada's economy. The presidents will want more money for their institutions - they are paid to make this pitch, and it is a good one - but the Council of Canadian Academies report points the finger of blame squarely at Canadian business.

Business in Canada, generally speaking, has a poor research and development record. International reports have documented the Canadian private sector's inadequate record. The decline and fall of Nortel was devastating for the country's innovation, since that company used to be the country's R&D leader, far more important for R&D than those car companies whose agonies have been so much with us in recent months.

One of the worst R&D performers is the Calgary-based oil and gas sector, as a major report revealed about 18 months ago. Like many other sectors, oil and gas is an "upstream" industry - pumpers and scourers and diggers - a "commodity supplier and technology adopter." Example: use natural gas to provide the energy to extract "dirty oil" from the oil sands rather than for more downstream petrochemical development.

"Canada's productivity problem is actually a business innovation problem," states the council's report, a long and very carefully done document. Doing more university and private-sector R&D is certainly part of the productivity challenge, but only part.

Canadian businesses just don't innovate enough. Too many don't have an internal culture of innovation. The domestic market is small and fragmented; not enough firms think internationally. International, for many, means the U.S., period, a rather dangerous myopia since that country is going to be economically crippled for a long time.

The report doesn't say so directly, but foreign ownership is a drag. Yes, a few Canadian branch plants get "world-product" mandates from head offices for certain products, but most don't. It's a scandal - and the blame is on the Canadian business class, too many members of which dream of getting rich by selling out to foreigners - that most mining companies are foreign-owned, the brewing business is gone, high-technology firms such as Cognos and Newbridge were swallowed up, and so on.

Governments have hugely supported the multinational pharmaceuticals sector, which has in turn greatly increased R&D here, but the council says "the public investment nevertheless failed to produce the economic results desired or expected." Tax policies to spur R&D are generous by international standards, but the results have been disappointing in creating economic activity.

"Canadian business as a whole has been profitable," the council says, "despite its mediocre innovation record." But that performance won't be good enough in the future, because "circumstances are changing radically," as new players reshape the world economy. If Canada sits on its record, the future will be one of long, relative decline.

Small countries such as Sweden, Finland, Denmark and South Korea focus on these issues with an intensity that reflects the urgency they deserve. In Canada, we write reports.

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