The world has changed, and Ontario must adapt or fall behind.
Emerging economies are driving a new era of intense global competition. The Internet and information revolution have made the world smaller, entrenching globalization and accelerating the pace of change. Developed economies are mired in the aftermath of the worst financial crisis and global recession since the 1930s, and many of the advantages that underpinned their prosperity have vanished. Developed economies across the world must reinvent themselves to compete and win in the new global marketplace. Ontario is no exception – the status quo is not an option.
While economic globalization has undermined traditional strengths, it has also opened up new opportunities. Ontario's Jobs and Prosperity Council was formed to provide advice on what actions are needed for the province to seize these opportunities.
Ontario is well-positioned for success, starting with one of the best-educated, most diverse work forces in the world. Ontario's competitive tax system is a tremendous advantage – the marginal effective tax rate on new business investment has been cut in half, from 33.7 per cent in 2009 to 16.3 per cent in 2013, well below the U.S. average. Toronto is the second-largest financial centre and the fourth-largest health sciences community in North America, and high-tech clusters in Waterloo and Ottawa are important innovation hubs.
In a time of global instability, Ontario offers a stable political and legal environment, and our banks are the soundest in the world.
Ontario – Northern Ontario, in particular – is rich in natural resources. Northern development is one of Ontario's great economic opportunities. With industrial production surging in developing economies, demand for these resources is high, and we need to capitalize on opportunities across the value chain.
These are fundamental advantages that position Ontario for success in the new global economy, but they do not guarantee it. We are being held back by serious productivity, innovation and export challenges.
Ontario continues to lag behind our North American and international peers when it comes to productivity, and our gap with the United States has only widened over the past decade.
Gaps in our physical and business infrastructure are compounding the problem. The Toronto Board of Trade put the annual cost of congestion in the Toronto region at $6-billion in 2006.
While Ontario is in many ways a leader in research and discovery, it has a relatively weak culture of innovation and entrepreneurship, which has led to a poor record when it comes to commercialization. Ontario's key North American competitors produce 33 per cent more U.S. patents than Ontario firms on a per employee basis.
Underdeveloped risk capital markets make it hard for entrepreneurs and young firms to get off the ground and expand. In a comparison of the top 20 North American jurisdictions for venture capital investment in 2010, Ontario ranked 18th on a per capita basis.
Less than 7 per cent of Ontario's small and medium-sized enterprises are engaged in export activity. Those that do export don't export enough; in fact, the average value of such exports ranks below 47 of the 50 U.S. states.
That government's ability to act is constrained by structural fiscal deficits must be addressed. But austerity, although necessary, is not – on its own – sufficient to create prosperity for Ontarians. Government, labour, academia and the private sector need to rethink and realign their roles and actions to build a competitive, globally oriented economy that supports sustainable jobs and a rising standard of living.
Working together, we can turn Ontario's core advantages into an enduring shared prosperity. At a time of global uncertainty, our calling card to the world is impressive: a sound political and legal environment; one of the best-educated, most diverse work forces in the world; a competitive tax system; and an attractive business climate. It's time to tell the world about Advantage Ontario.
Gordon Nixon, CEO of the Royal Bank of Canada, is chair of Ontario's Jobs and Prosperity Council. Kevin Lynch, vice-chair of BMO Financial Group, is vice-chair of the council.