Public policy has a key role in private sector

Posted on January 20, 2008 in Debates, Governance Debates – columnists – Public policy has a key role in private sector
January 20, 2008
David Crane

To succeed in the new global economy, Canada needs its own Canadian-headquartered corporations with the scale and scope to compete in the world marketplace.

How we accomplish this is a major challenge. But to get properly started, there are two notions that we must first ditch.

One is the argument that “companies, not countries, compete.” This is quite wrong-headed but is part of a dogmatic belief that government’s role is simply to get out of the way of the private sector. While it’s true that it is companies that deliver new products and services into the marketplace, public policies have a profound impact on what companies are able to do. Countries do compete.

Countries clearly compete in developing the best educational systems, the most advanced infrastructure, financial systems that fund the emergence of new businesses, underlying research and development capabilities, strategic use of public procurement and in many other areas of importance for innovation and the new jobs that come from innovation.

An important U.S. study, “Funding a Revolution: Government Support for Computing Research,” provides a detailed outline of how U.S. government policies and funding not only led to the Internet but also to many other advances in computers and computer chips, software and systems, and high-speed communications.

These investments, in turn, led to the establishment of many of what today are the leading corporations in the United States, such as Microsoft, Cisco Systems, Google and eBay. It would be hard to find any area of U.S. technological competitiveness that has not benefited from government policies.

This leads to a second myth that we need to ditch, namely the idea that “government can’t pick winners.” There’s no doubt that government can also pick losers. But is the private sector record any better? Think of the vast evaporation of wealth in the dot-com boom at the start of this decade or the horrendous financial crisis in the world today due to financial products that now appear to be worthless.

Many of Canada’s leading corporations today were founded by government – Potash Corp. (the world’s leading fertilizer producer), Cameco (the world’s biggest uranium mining company), CN Rail (one of North America’s top transportation companies), Air Canada (an international airline) and Petro-Canada (one of our biggest oil and gas companies).

Similarly, Canada’s first open pit oil sands plant, Syncrude, only went ahead when the federal, Alberta and Ontario governments all invested equity in the early 1970s. Today it accounts for nearly 15 per cent of Canada’s oil production.

Many other of our leading corporations benefited significantly from targeted government policies. CAE, the world’s leading producer of flight simulators, grew out of our military offsets program. Nortel was able to become an international company because federal regulatory policies gave it the advantages it needed to develop into a world-scale business.

The reason we have big national banks headquartered in Canada is that government policy championed Canadian ownership. This is also the reason we have big globally competitive insurance companies like Manulife and Sun Life.

Magna International, one of the world’s largest auto parts companies, is an outgrowth of the Canada-U.S. auto pact and federal and Ontario programs to promote a Canadian auto parts industry.

Bombardier and SNC-Lavalin have also benefited from public policy. Even Research in Motion has used federal programs to develop its technologies.

As Canada moves ahead in the 21st century it needs to be equally pragmatic and strategic, not dogmatic. The policies that worked in the past may not be the best approaches for our future. But if we want good jobs and some say in our economic destiny through strong Canadian-based companies, then we need to think creatively about public policies that help our entrepreneurs to succeed.

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One Response to “Public policy has a key role in private sector”

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