Economics - Innovation - Inclusive Growth - Public Purpose
The real questions Canada should be asking in the run up to the election

The real questions Canada should be asking in the run up to the election

Scroll down for a post-election update, added on 20th October 2015


I returned to Canada recently to give a talk to the Waterloo Innovation Summit on 17 September 2015 (you can read my earlier blog on Canada here). It was an interesting time to be in Canada as it gears up for Federal elections, where the three parties have basically divided themselves into those pushing for a surplus (the Conservatives); a balanced budget (New Democratic Party) and deficit spending (the Liberal Party). As I have discussed on previous visits, these are the wrong questions to be asking. Markets are themselves are outcomes of different types of public and private sector investments in new areas. Countries like Italy that have had low deficits but a lack of such investments, end up with high debt/gdp ratios. So, what should we be talking about? Public spending must be seen as part of the co-creation process by which markets are formed. The question should be about what kind of markets Canada wants to lead in, and what kind of actors and interactions are required to get there.


This is key for Canada as it continues to lag behind in key innovation performance indicators and its investment in innovation to date has largely been hands-off and indirect, via tax credits. It could learn lessons from its international peers – including the US – who do this kind of thing better with mission-oriented, direct investments across the innovation chain – not only in basic research. Canada continues to rely too much on tax credits to stimulate R&D, when the real driver of R&D tends to be where the private sector perceives the new exciting opportunities to be. A more courageous public sector could be driving this opportunity creation in the area of renewable energy, also to get Canada out of the trap of the extractive sectors.


As I show in the new North American edition of my book, The Entrepreneurial State: debunking public vs. private sector myths (which includes a new introduction highlighting the lessons of the US experience), long-term, sustainable economic growth needs a bold, entrepreneurial state. I hope the Prime Ministerial candidates pick up a copy.


Jim Balsille has recently written an interesting piece on why getting Canada’s innovation system into gear also requires rethinking IPR regimes, and the monopoly power behind them. And Dan Bresnitz and David Wolfe have also reinforced the point about the misplaced faith in tax credits, and the lack of strategic innovation policy, as being one of Canada’s key challenges for the future if it is to compete globally.


Post-election update, 20th October 2015


The Liberal Party has won the Canandian election on a platform which promised investment, not more budget cuts. The new Prime Minister Justin Trudeau now needs to ask the right questions about how to steer and direct this spending, not only on shovel-ready projects, but with vision. He would do well to listen to Liberal Premier of Ontario, Kathleen Wynne, who recently cited my work in her speech to the Waterloo Innovation Summit on 17 September 2015, saying:


“One of Mariana’s central observations is that, in our post-recession world, the state has been cast as the villain — a hapless, cumbersome meddler that has always done a poor job of mimicking the private sector, so should get out of the way — just focus on those conditions I was talking about and leave the dynamic, innovative decisions to the dynamic, innovative businesses. Mariana’s rigorous analysis shows the opposite to be true — that the state has a leading role to play in creating the vision, taking on the inherent risks, and encouraging the sort of private-sector investment that leads to sustained economic growth.


“As Mariana points out, technological revolutions in biotech and communications — the internet as we know it — wouldn’t have happened if the state was only passively supplying talent or tax cuts. These are important conditions, but government also needs to lead with courage, with resources and with a vision for the future.”


I’ll make sure Trudeau gets a copy of the new North American edition of my book, The Entrepreneurial State: debunking public vs. private sector myths, out next week in the USA!


Tags: Canada, Financing Innovation, Innovation Policy


You can read and hear more about about my take on the economic debate in the run up to Canada’s election, below.



Ontario Premier Kathleen Wynne’s speech to the Waterloo Innovation Summit, citing my work, 17 September 2015


Canada Globe & Mail, The question of Election 2015: Can government create jobs and growth?, Doug Saunders, 11 September 2015


Canada Globe & Mail, Technology, Politics and the Remaking of the Canadian Economy (PDF), Scott Barlow, 21 September 2015


Innovation leaders offer a glimpse of the future, University of Waterloo report on the Waterloo Innovation Summit, 17 September 2015


My blog about my earlier trips to Canada (with links to previous media coverage), 13 February 2015


Morning Post Exchange, Public Sector Investment Key to Innovation Economies, 18 February 2015




Interview with Steve Paikin, The Agenda, TVO, 29 September 2015

A clip from my talk to the Waterloo Innovation Summit, 17 September 2015