Conservatives take their eyes off importance of innovation

Posted on February 3, 2009 in Debates, Education Debates, Governance Debates – Opinion – Conservatives take their eyes off importance of innovation: Blueprint fails vital test of leadership for the country’s future economy
February 03, 2009.   David Crane

The new Conservative budget represents a lost opportunity. That’s because it does too little to generate the jobs of tomorrow, jobs that will come from innovation, science and technology.

There are some initiatives in the budget that will help. But overall it falls far short of what is required for an innovative economy, one that will deliver the jobs, prosperity and productivity we will need in the highly competitive global economy that lies ahead. In other words, it fails the vital test of leadership for our future economy.

Innovation is the driving force for economic and social progress and for improved productivity growth, which underlies improved living standards. But as Andrew Sharpe, Canada’s leading productivity expert, concludes, this budget provides only “modest support for productivity growth in the long run.”

The budget fails our entrepreneurs and innovators – the people starting new companies or trying to reinvigorate existing companies that will deliver future jobs and help build future prosperity. They face a rough road both because of the current economic crisis and because other countries are doing a better job of preparing for the future.

Access to money to finance new high-value businesses remains an urgent need. Venture capital is drying up and so are equity markets, which are another source of new capital for entrepreneurs and innovators. The budget largely ignored this problem.

While welcoming budget measures to encourage the purchase of computers and software, improve broadband access and help fund electronic health records, Bernard Courtois, president of the Information Technology Association of Canada, has warned that “if we don’t figure out a way to get venture capital flowing again in Canada, we could lose a whole generation of promising technology ventures.”

Nor was much done to address the Valley of Death problem – many good ideas and companies die because of a lack of funding to take ideas from conceptualization and proof of principle across the valley to commercial production. The Conservative government had cut back government support.

The budget does respond to growing complaints over the abysmal lack of funding for the much-admired Industrial Research Assistance Program, which provides grants to small and mid-size companies to develop or adapt new technologies. It got an extra $200 million over two years. But this is only a temporary boost. An effective innovation strategy would want to expand the reach of the program on a permanent basis.

Canada’s renewable energy industry also got short shrift in its bid to make serious advances in the development and application of new technology. The green energy campaign led by PowerUP Canada made little headway despite the support of four former prime ministers.

As the Pembina Institute points out, the ecoENERGY for Renewable Power program has essentially run out of money for new projects and the budget contained no new money for this fund. Nor were areas where Canada has shown strength, such as in fuel cells and the hydrogen economy, mentioned.

Instead, the Harper government’s energy/environment strategy is focused on the coal and oil-sands industries. The budget contains generous subsidies for carbon capture and storage projects. These are essential for the future viability of coal-based electric power plants and oil-sands plants, which are heavy emitters of climate-threatening greenhouse gases.

Life sciences research is another area that emerged shortchanged. Genome Canada, which helps fund major research projects in genomics failed to win new funds. While it can meet existing obligations, it has no money for new projects. This threatens Canada’s capacity to build strengths in a critical field of research.

Moreover, BIOTECanada, which represents Canada’s biotechnology industry, points out that other countries such as Britain and France are moving to strengthen their life science companies. “Canada cannot afford to stand still and ignore the competitive environment other nations will be to adopting to help knowledge-based industries,” the group warns.

Higher education got a mixed message. More money to help the Canada Foundation for Innovation fund university research infrastructure and more money for scholarships. But the budget also signalled a significant $150 million future cut in the grants Canadian research councils make to Canada’s university researchers to undertake research projects. This risks a brain drain from Canada to the U.S. where research support is becoming easier.

The Obama administration and the U.S. Congress appear much more focused on using the stimulus package to help make American companies more competitive and technologically advanced.

Much of this funding is targeted toward renewable energy, fuel cells, health, information technologies, the automotive industry and manufacturing, but also to basic research. On top of this is the $25 billion that has already been legislated to help the auto and auto parts industries develop new fuel-efficient technologies.

China is another example of a country using the stimulus to improve innovation and competitiveness. Chinese Premier Wen Jiabao told the World Economic Forum in Davos recently, “we are seizing the opportunity to push ahead comprehensive industrial restructuring and upgrading.” China’s goal, he said, was to use the current slowdown to build more advanced and competitive Chinese businesses ready to grow in world markets once the current slump ends. This includes big investments in science and technology.

Canada cannot afford to hold back when others are investing heavily to create their future economies. If we want decent jobs, prosperity and productivity, we have to become much more focused as well. The budget takes some useful steps. But it is not good enough and shows the limits of the Conservative government and its core thinking on government’s role.

David Crane is a commentator on economic affairs. He be reached by email at

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