Social Policy in Ontario

Ideology in the Valley of Death

Posted on August 25, 2008 in Debates, Governance Debates, Inclusion Debates

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TheStar.com – Opinion – Ideology in the Valley of Death
August 25, 2008. David Crane

At a time when we need to be focused much more on where our future jobs and prosperity will come from, Canada is being held back by the misguided ideology of the Harper government.

Change is all around us, and one result is that jobs and industries we took for granted are now facing powerful new challenges from countries like China and India, or from new technologies developed elsewhere. We saw that in the clothing industry and now we can see a huge shakeup occurring in the auto industry.

There’s little we can do to block these changes. Instead, we have to become much better at developing new activities – new products and services or new ways of doing things – to replace what we lose. We have to become much better at innovation because new jobs and future prosperity will come from new activities.

But identifying and supporting these new activities require significant co-operation between the private and public sectors. And it is here that the Harper government is putting our future at risk.

It believes that the role of government is to focus on what it calls the framework conditions – low inflation, low taxes and competition – and that if the framework conditions are right, then markets will take care of future jobs, technology development and prosperity.

Government policies to deliberately focus on developing new industries or companies are seen to be unwarranted interventions in an efficient free market system and dismissed as government “picking winners and losers,” the implication being that it will invariably pick losers.

Obviously, framework conditions matter. But as innovation guru Michael Porter keeps warning, they are necessary but not sufficient. Proactive government policies matter.

Charles Wessner, who directs the Program on Technology and Innovation at the U.S. National Academy of Sciences, points out that “government often has, and indeed often must, `pick winners and losers’ in order to fulfill its responsibilities, whether in the selection of weapons systems, for example, aircraft production, through environmental regulations, decisions on trade policy, or regulations shaping whole industries, as in telecommunications.”

And although this is often not recognized, Wessner says, “the federal government also has a long history of picking winners – that is, funding winning technologies – that range from the telegraph and radio to atomic energy and the global positioning system, to today’s Internet.”

Moreover, the argument that government should not “pick winners and losers” is based on the false assumption that markets are efficient because they are said to have perfect information. In fact, Wessner says, markets don’t. Instead, government supports for early-stage technologies and companies help markets by proving out technologies, providing valuable information for potential investors.

One important way government can help develop new industries and technologies is by assisting new ideas, often being developed by small companies, make it through the “Valley of Death” – that stage between the development of an idea and its successful commercial application. Between those two stages cash-starved companies and their ideas often die for lack of funding. In the United States it’s estimated that the federal government provides 20 to 25 per cent of all funding for early-stage technology development.

But in Canada the Harper government cancelled a key initiative – Technology Partnerships Canada – and has seriously underfunded another, the Industrial Research and Assistance Program.

Canadian companies have shown they can do it when given the chance – as we can see with RIM’s BlackBerry, CAE’s flight simulators or Bombardier’s Q400 aircraft. All three were assisted by government programs. We have many more potential winners. But if the Harper government’s ideology prevails, then much of that potential will die in the Valley of Death.

David Crane is a commentator on economic issues. He can be reached at crane@interlog.com.

This entry was posted on Monday, August 25th, 2008 at 1:43 pm and is filed under Debates, Governance Debates, Inclusion Debates. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.