Tech revolution can reverse decline in prosperity
In 1967, on our 100th birthday, Canada was the third most prosperous country in the world based on income per person. Only the U.S. and Switzerland had higher average incomes.
Most Canadians would be shocked to hear that since then our prosperity has slipped dramatically. Today we are the 15th most prosperous nation in the world, and current projections have us declining further in the coming decades.
This trend has caused many to ask: what kind of country are we leaving to our children? Will the next generation be worse off than the current generation? To reverse this trend, there are steps that can be taken to create an economy that is prepared for the future and embraces the potential that comes with innovation.
We’re on the cusp of a new wave of the fourth industrial revolution with innovations such as artificial intelligence, machine learning, robotics and the internet of things transforming our global economy.
Canadians must prepare to benefit from and embrace opportunities to develop and commercialize these technologies. Other countries, such as the U.S., are already succeeding — Canada can join in.
Many Canadians already develop brilliant business ideas, but often hit a wall when it comes to commercializing them, smothered by regulations and red tape, at every level of government. While the small business tax rates are low, they increase steeply as companies expand resulting in significant barriers and disincentives to growth.
While Ottawa offers R&D subsidies, administration of them is incredibly complicated requiring consulting firms to be involved and substantial commissions be paid. These programs are also administered by the Canada Revenue Agency. Could one think of a bigger mismatch between process and objective than designing an entrepreneurship R&D program to be implemented by a tax authority? The result is too few companies take advantage of these incentives — a wasted opportunity.
Historically, Canada has had a protectionist economy with trade barriers between nations — and even provinces, with many still in place today. These barriers to internal trade include regulatory differences, inconsistent standards and restrictions on the free movement of goods and services. For example, a tradesperson licensed in Ontario cannot work without being relicensed in another province. A consumer in New Brunswick cannot return home from Quebec with a case of beer. These barriers have placed Canadian firms at a disadvantage. Opening up our internal economy would help bring down prices for consumers and costs for entrepreneurs.
In addition to opening itself up to more competition between provinces, Canada also needs to double down on engaging the global economy. The more profound impact of protectionism is on Canada’s ability to develop world class companies. It protects incumbents and slows innovation and competition. This in turn stalls entrepreneurship and delays the economic transformation required for Canadians to cash in on high tech opportunities. Rather, we risk a brain drain of our best and brightest computer science and engineering grads to countries where they can commercialize their ideas.
Canada needs to stop looking in the rearview mirror and shed its protectionist mindset. We can reverse our slide in prosperity by embracing a new vision for our future leaning into the power and potential of technology in the hands of Canadians, investing more in entrepreneurship and breaking down barriers.
Last year, and for the first year in Canada’s history, our population grew by a million people. As we all know, immigration is part of Canada’s DNA. Diversity enriches us economically, culturally and socially. The gains would be so much more if all Canadians could plug into an economy that was forward looking and embraced new opportunities.
DANY ASSAF IS CO-CHAIR OF THE COMPETITION AND FOREIGN INVESTMENT GROUP AT TORYS LLP. WALID HEJAZI IS A PROFESSOR OF INTERNATIONAL BUSINESS AT THE ROTMAN SCHOOL OF MANAGEMENT.
JOE MANGET IS CHAIR AND CHIEF EXECUTIVE OF EHN CANADA. THEY ARE CO-AUTHORS OF THE NEW BOOK “EVERYBODY’S BUSINESS: HOW TO ENSURE CANADIAN PROSPERITY THROUGH THE TWENTY-FIRST CENTURY.”