Economy needs a little Maoist guidance‚ apparently
Before we wade too deep into the industrial strategy buzzland of unlocked policy toolkits to scale up Canada’s innovation ecosystem by providing a blueprint for how the government and private sector may work together to unleash a new globally prosperous Canada filled with inclusive growth, a couple of ideas stand out in the latest proposals from Ottawa’s Advisory Council on Economic Growth.
Most of the 100 pages of slick econo- jargon released Monday by Finance Minister Bill Morneau call on Ottawa to get into the new-old business of orchestrating, planning, financing, purchasing, catalyzing, supporting and encouraging a range of eco- nomic activities, including matching venture funds and fostering a new bank- based investment vehicle.
But there are some positive ideas. A new retirement age is welcome, for example.
The council also elevates NAFTA to Canada’s top trade priority, calling for “further market integration” with the United States and Mexico.
That might seem like an obvious national trade objective, but policy thinkers are often tempted to imply that, with Trump in the presidency, Canada’s prime trade policies should now focus on China and India. The council puts those nations in distant second place. “One of Canada’s greatest economic assets,” said the council, “is our proximity to and long history of trade with the United States.”
The third headline recommendation is a call for Ottawa to remove “obstacles to growth” in the food sector — or, as the council calls it, Canada’s “agfood value chain.” Such obstacles include supply- management boards, small farms in the dairy sector and the fact that 26 per cent of agricultural economic output “flows largely to farmers to smooth volatility and manage risk.”
Specifically, the council recommends that the country “produce up to six billion more marketable litres of milk annually by progressively reducing obstacles such as rigid provincial quotas that curtail investments in productivity.” Good idea, but there goes Canada’s marketing board protection racket — unless the central planners decide to set up a separate quota regime for exports while consumers continue to overpay for milk and cheese.
Nothing in the council’s reports released Monday are very clear or detailed. Appointed by Morneau last year, the council is headed by Dominic Barton, a Mc- Kinsey global partner with a Davosian tendency to lecture on how capitalism can be reinvented by moving government into the business of running business.
The council’s report foll ows t he script. In one strange reference, it says Canada does not have the size or scale to let “1,000 flowers bloom”— words that hark back to the famous call from Chinese Communist dictator Mao Zedong. Mao said he wanted a hundred ideological flowers to bloom in an open national debate “to promote the flourishing of the arts and the progress of science.” Shortly after, Mao changed his mind and sent the flowers off to prison camp.
The advisory council’s message is that Canada is not big enough to allow a flower market in innovation and investment. “The time has come for new ways of working, to set a new course f or Canada’s i nnovation economy, create innovation at scale and set a course for becoming an i nnovation powerhouse.”
To get there, Canada apparently needs a little Maoist guidance. “More selec- tion, focus, co- ordination, curation and scale are required in our innovation ecosystem,” said the council. The government needs to be “catalyzing innovation marketplaces.” These would be centres of technology and industry that are developed and driven by the private sector, but with government support.
The council identifies precedents in the United States, including the Manufacturing USA marketplace and the Obama- created ARPA-Energy agency that funds green and other energyrelated private investments. There is widespread fear in some U. S. circles that Trump’s energy teams are out to kill ARPA-Energy as a government boondoggle.
In Canada, such marketplaces would be “co-funded” by government, receive regulatory support, and would benefit from government procurement.
Government funding would be available, possibly through a “Canadian Matching Fund” plan, to “give high-value-adding investors” an incentive to invest. The matching fund would serve “higher- risk companies” looking for cash injections ranging from $ 5 million to $15 million. At $400 million, the matching fund would be backed by $130 million from government and $ 270 million in private investment.
The council reserves its strongest endorsement for a Business Growth Fund. In boldface type, the only such type in 100 pages, the council says it is “particularly enthusiastic by this idea, which it views as a high- impact program that could be led and financed by the private sector.”
Why the boldface type for a proposal that the private sector could do without the government? From the description, it looks like the plan is to allow Canada’s big banks to put money — about $1 billion — into a fund that would be regulated with lower capital requirements. The model is a similar fund in the United Kingdom, which so far has loaned out half-a-billion pounds to small projects but has earned no income.
Why would it be necessary to set up a new fund to do the job that Canada’s banks and venture capital players are already supposed to be doing? Through more than 100 pages, the best answer to that question might be the claim that the objective is to “re- imagine the role of government ( specifically, as a convenor/catalyst and as an investor).”