An Agenda for an Inclusive and Innovative Canada - Part 2
On Monday, I sketched out some foundations on which a vision of an inclusive and innovative Canada should be based. These are 1) building an economy that works for people, 2) unleashing innovation for good, and 3) unlocking the potential of place. You can read about them here:
An Agenda for an Inclusive and Innovative Canada - Part 1
Today, I want to begin drilling down into some policy areas that need more attention.
These aren’t by any means a comprehensive list. Building an inclusive and innovative Canada with better outcomes than today relies on many policies and programs.
The welfare system's role in reducing poverty and opening up opportunities is not insignificant, for example, if we want to improve innovation outcomes. Evidence clearly demonstrates that inequality deeply impacts the ability to participate in innovation and broader economic outcomes.
Folks who call for steps to improve productivity on the one hand but push for cuts to welfare spending on the other are selling a political agenda, not a recipe for a stronger economy.
While keeping the intimate connection between social policy and innovation in mind, in this exercise, I’ll focus primarily on some of the economic and innovation policy areas that I think are necessary.
Today, I’ll examine three domains and why I think they matter for building an inclusive and innovative Canada. Next time, I will turn to four more. My working plan is to use this newsletter over time to flesh out each of these and the three foundations, along with continuing more of the usual quick hits pieces.
Recreate a functioning and accountable state
State capacity matters, and Canada’s state capacity across all levels of government is lacking. This is an issue across three interlinked fronts. First is the ability to do the deep thinking and analysis necessary to understand a rapidly changing world and economy and to design impactful strategies and policies. This capability is like a muscle - if you don’t use it, it atrophies. And Canadian governments, much like many others, have got worse at using this muscle. As Mariana Mazzucato and Rosie Collington have probed, this kind of deep thinking has been outsourced to consultancies - costing the state huge sums of money and even more in lost capacity.
The second front is the ability of governments to deliver what they design, which again is wanting. Whether failed payment software rollouts (and that isn’t even Phoenix), Canada’s steady decline in global digital government rankings, or the numerous challenges facing Canadian healthcare - these services from different levels of government are where citizens feel the lack of capacity most. This isn’t to say this is a universal problem, though. For example, the rapidly designed and delivered pandemic programs show how better is possible.
The final front is around regulation. How far does the state have the capacity to protect society’s interests through regulatory interventions? Can it keep pace with changing business practices or hold its own against regulatory capture by monopoly or oligopoly businesses? Can regulation be adaptable and nimble enough to provide frameworks to enable innovation with trust for emerging technologies?
At a time when the federal public service is bigger than it has been in decades as a portion of the population, it is worth exploring state capacity in far more depth to understand what skills, capabilities, and functions are needed. Clearly, public service needs reform and improvement (also in terms of transparency - something I think is intimately connected to effective government) but I am very wary of calls to cut the size of public service without calibrating it to the capacity we need. We need to do the work on increasing capacity as so much that follows depends on an effective state to implement.
Industrial Strategy & Economic Security
In a week when the incoming US president threatened huge tariffs that could send Canada’s economy into a deep recession, I don’t think I need to go into much detail to set the scene for a more aggressive and dangerous world for Canada.
Many of these challenges are not unexpected or unpredictable. Even under the Biden administration, the US has been increasingly protectionist in rhetoric and policy. Looking at another interlinked economic challenge, the threat from Chinese dominance of battery supply chains and increasing auto competitiveness has been 20 years in the making. It has not appeared from nowhere. Yet on these and so many other fronts, Canadian governments have been reactive and not proactive.
That must change if we want to build an inclusive and innovative Canada. State capacity should be deployed to help design and implement real industrial and economic security strategies. Federal and provincial governments use various industrial policy tools, but it is hard to argue that they add up to more than the sum of their parts. A cohesive industrial strategy is necessary, rooted in a data-informed understanding of where Canadian industry is right now and where we want it to go in light of the security threats we face and existing opportunities.
There will be major trade-offs in this. As I’ve argued, Canada can’t expect to be a dominant player in every part of the value chain for every innovative technology. However, we can own key parts if we make more strategic investments guided by a genuine strategy.
We also need to avoid succumbing to a tunnel vision of what adds value to the economy. Even if we are focused on increasing our innovation outcomes - it isn’t just innovation policy that comes into play. We also need to think actively about the care economy and where that fits into a broader industrial strategy. As this Stats Can paper from last year explores, the care economy is the “next frontier of public policy” and holds potential as a “new economic growth engine” given our rapidly aging population. Care matters for childhood outcomes and the quality of life of people needing extra assistance. Yet it is also an area with huge inequities - with responsibilities unevenly distributed, with the majority done by women, often migrant and racialized women, and often unpaid.
No attempt to build a fairer, more inclusive society and more prosperous economy can succeed without including the care economy - by improving the conditions for those working in it and improving outcomes for those depending on it. Education and healthcare account for 13.7% of the Canadian economy, and adequate care provision is essential. We need to think more about where the care economy fits into a wider industrial strategy. There has been some fascinating work happening in the US on this topic, such as this paper from the Roosevelt Institute. Those interested in economic outcomes and industrial strategy should be looking to do the same in Canada.
Build, build, build - tangibles matter even in an intangible economy
There has been lots of interesting work on the shift towards intangibles and what that means for Canada. They’re not Canadian-specific, but Stian Westlake’s and Jonathan Haskel’s two books, Capitalism without Capital and Restarting the Future, are both must-reads. Much of the focus on building state capacity needs to be geared towards understanding the intangible economy. Westlake and Haskel argue, “without institutional renewal an economy can go from growth to stagnation. As the expression goes, sometimes what got you here won't get you there.”
While this is all true, we can’t forget that tangible factors still matter. Whether it is housing, transit, digital infrastructure such as data centres, or the massive energy needs that need to be met - we need to build a hell of a lot more stuff a hell of a lot faster. Again, the state needs to play a bigger role in this. The state used to be more active in many areas but pulled back as deficit reduction and neoliberal economic policies took primacy. You only need to see the history of federal social housing construction to see that story play out and its long-term consequences.
Similarly, recent decades have seen major infrastructure projects outsourced as public-private partnerships. A report from last year highlighted Canada as one of the leading users of PPPs globally and the mixed record that PPPs have had. Again, the recommendations in that report come back to state capacity if we are to build more and do it well - “A key lesson from the Canadian history of PPPs is that any procurement model is only as effective as the people delivering the projects. Ensuring that governments across the country have public sector project leaders trained in the most contemporary project delivery skills and armed with the best data on project procurement performance will increase the likelihood of successful project delivery, regardless of the selected model.”
A major area of focus needs to be how to build more of the infrastructure we need within quicker timeframes, and with better outcomes for the public.
Next time
As this post is already getting rather long, next time, I’ll tackle the final four pillars that I have been thinking about: embracing Canada’s global role, furthering intentional innovation, a climate-ready Canada, and worker- and human-centric tech adoption.