Canada’s COVID-19 response continues to ignore promising innovative companies
Trudeau’s focus on individuals could prove to be problematic, Kevin Carmichael writes.
Finance Minister Bill Morneau’s fiscal snapshot earlier this month revealed that no country put more foam on the runway to absorb the economic crash caused by the COVID-19 lockdowns than Canada.
As of July 3, discretionary rescue spending, tax deferrals and emergency lending were worth about 45 per cent of gross domestic product, roughly the same as Germany, according to Finance Department estimates. Japan was in the picture, but not especially close. The average of the Group of Seven legacy powers was about 35 per cent of GDP.
It will be interesting to see which economy emerges from the coronavirus crisis stronger, because even though the Justin Trudeau and Angela Merkel governments have spent freely, decision-makers in Ottawa and Berlin have allocated their largesses differently.
The odds presently favour Germany, because Merkel has shown a higher level of commitment to preserving her country’s foundation of innovative companies, setting aside 100 billion euros to invest in and even buy out companies the government deems strategic.
Trudeau’s emphasis has been on individuals, a bias for which he has been widely praised, but one that could prove problematic now that Morneau is testing the limits of what the federal government can reasonably afford to spend on discretionary programs.
It was correct to aggressively aid the most vulnerable, but the pre-crisis disconnect between Trudeau’s government and the business community appears to have hobbled whatever efforts were made to fortify employers.
Morneau’s fiscal snapshot observed that the Canada Emergency Response Benefit, which supplies monthly payments of $2,000 to essentially anyone who shows they lost employment due to the crisis, and other initiatives not only replaced aggregate income, but exceeded it.
That generosity will have supported demand, while, to some extent, creating a disincentive to return to work. Notably, though, many of the programs specifically designed for companies remain undersubscribed.
The International Monetary Fund this week published data that show Canada suffered one of the biggest job losses among the world’s richer countries. In Germany, where the government favoured wage subsidies over direct payments to individuals, employment was little changed.
Trudeau and his ministers “have done a reasonably good job at trying to understand what people need, getting money to people, and maybe not quite as good at understanding what business needs and getting support to business,” said Eugene Lang, a cabinet-level staffer in the Liberal governments of Jean
Chrétien who is now an adjunct professor in the School of Policy Studies at Queen’s University in Kingston, Ont.
In other words, the response to COVID-19 has both played to the Trudeau government’s strengths and simultaneously exposed its greatest blind spot: its inability to intuitively understand modern business.
Morneau once ran and took public the human resources firm that his father started. That’s essentially where the government’s connection to business starts and ends. Chrystia Freeland, the deputy prime minister, wrote about executives as a journalist at the Financial Times and Reuters. Navdeep Bains, the 43-year-old innovation minister, has spent most of his working life in politics, winning his first seat in Parliament when he was 26. Mary Ng, the trade minister, joined federal politics after a career in the Ontario public service.
“The economy is in the most uncertain straits we’ve ever seen in our lifetimes,” Lang said. “Doing what is good for business to try to reflate this economy, and to try to understand what is actually happening to the business community, in all of its complexity, is going to be one of the chief agenda items, or should be, of any government going forward.”
Suzanne Grant, a former entrepreneur who now leads the Canadian Advanced Technology Alliance, an Ottawa-based advocate for science- and technology-oriented startups, has tried for months to get the attention of an actual decision-maker in Ottawa. She said in an interview this week that she might finally be close to getting a meeting with Morneau and Bains, although that has yet to be confirmed.
Grant hopes to use the opportunity to make the case that the companies she represents deserve special attention. Morneau and Bains will have heard that from every lobbyist in Ottawa, but Grant has a stronger claim than most.
Restaurants and retailers come and go even in good times. Tech companies were driving employment growth before the crisis, and they will determine the speed of the recovery as the economy continues to go digital and governments and corporations heavily spend on replacements for carbon-based energy. At least that’s how Germany sees it.
Morneau, though, has struggled to satisfy technology firms, which have been regularly disappointed by having to meet criteria for aid that too often are designed for the way things were done in the old economy, not the new one.
“It’s good, but I don’t think it’s good enough,” Grant said of the government’s efforts to shield smaller technology companies. “I don’t think we are valuing what they can do for our future. The world is shifting and it’s competitive. There’s a race. There’s a new currency, so to speak. It’s technology.”
Morneau has resisted playing favourites. Whereas Germany bailed out Deutsche Lufthansa AG, the federal government has left Air Canada to figure out if it qualifies for any of the general government programs in place.
“We need to get at-scale programs out,” Morneau said on Friday when he announced an overhaul of the wage subsidy, including an extension of the program until mid-december. But the changes appear to do little to address some of the technology industry’s concerns about access.
Morneau made the announcement in front of a Toronto restaurant, which surely was meant as a symbol. And that’s troubling. Restaurants are great, but they aren’t going to power the recovery. Yet they are the only kind of company that the government seems set on saving.