AI fund won’t help innovation
Artificial Intelligence has become so ubiquitous, Callaway Golf claims to have used an “AI Supercomputer” to design its new driver. Not to be outdone, LG purports to have introduced AI into your laundry room in an effort to determine the “optimal wash pattern.”
If artificial intelligence is already helping me look my best as I bomb it off the first tee, it’s no wonder Tuesday’s Liberal budget showcased an increased focus on AI.
In recent months, Microsoft has announced $8 billion of investments for AI data centres in Japan and the U.K. Canada was sadly passed over, despite being a recognized centre for AI talent.
When Ottawa first teased the new $2.4-billion AI program in Montreal 10 days ago, Prime Minister Justin Trudeau committed that these funds would “maintain our position as a world leader in technology sectors.” If only that were true.
While $2.4 billion sounds like a serious commitment to “infrastructure for AI researchers and companies,” most of that spending is likely to go to foreign firms that have the computing power Canada lacks. Tuesday’s budget is a reminder that we’re still better at research than commercialization.
The devil is in the details, and the damning reality is that the trumpeted $2.4 billion will be spent over a reported five-year period. To put that $480-million annual AI commitment into a North American context, this key plank in Trudeau’s budget amounts to less than what venture capital funds invested last year into startups based in Alabama or Missouri, for example.
How can Canada be a “world leader in tech” if we’re being outhustled by Alabama, a state known more for its football prowess than R&D?
Across the U.S., entrepreneurs raised $234 billion in 2023 according to Pitchbook data. Here at home, Canadian firms attracted just $6.9 billion of venture dollars. The gap is stark: American entrepreneurs raised 34 times more capital than their Canadian counterparts, despite our southern neighbour having just eight times the population.
You can applaud the Liberals for “doing something on the AI front,” but the rollout of their original cornerstone innovation policy — the 2018 “Supercluster Strategy” — doesn’t give me confidence.
In 2020, the Parliamentary Budget Officer reported that Ottawa had spent just 29 per cent of the Liberal’s promised Supercluster commitment at that point, with the majority of those dollars going to administration costs. Hiring more bureaucrats won’t solve Canada’s much-discussed productivity woes.
Little had improved by 2022, according to an Ernst & Young report. Over one five-month period studied by E&Y, the Supercluster program had doled-out just $44 million in total new project funding. With that bleak track record, it’s hard to be confident the Liberals will make good on their vow that their Supercluster initiative will create an additional “$50 billion of GDP by 2028.”
In an effort to distract voters from the underachieving Superclusters, the 2022 Federal Budget promised a new $3-billion Canadian Innovation Corp (CIC). Few disagreed with “the urgent need to address low business investment in R&D,” but Finance Minister Chrystia Freeland recently delayed CIC’s launch until 2026-27.
If Canadian researchers had this kind of haphazard approach to their work, we wouldn’t have brought the world Java software, sonar, insulin, the cardiac pacemaker or BlackBerry.
Budget 2024 promises “Fairness For Every Generation.” The Liberals should try “honesty,” and admit that their innovation agenda is an empty suit. Self-employment has dropped dramatically over the past five years, while public sector hiring has skyrocketed, despite weak private employment growth — a dynamic that “can only lead to poverty,” according to Shopify CEO Tobi Lutke (via X).
After more than eight years in office — and a litany of well-meaning but failed innovation initiatives — the Liberal government should stop pretending it knows best. Canada needs a business environment where risk-taking is both encouraged and rewarded. With the right backdrop, our innovation entrepreneurs will do the rest.