Week in review: Key takeaways from Ed Clark and the Advisory Council on Economic Growth
If the Advisory Council on Economic Growth implements all its recommendations, Canadian households will increase their income by $15,000 by 2030. Is this attainable? In this blog post the Institute outlines the major takeaways from Ed Clark’s remarks at the Canadian Club of Toronto last week and the first report released by the federal government’s Advisory Council on Economic Growth.
The goal: Ambitiously attainable?
Both Ed Clark and the Council highlight the importance of driving innovation and productivity by growing existing resources such as talent, capital, and infrastructure. This is presented against the context of technological change and stagnant economic growth in Canada. While Ed Clark focuses on innovation (e.g., basic research, innovation hubs and centres, R&D, and new technologies) as the impetus for growth, the Council focuses on productivity (as measured by Gross Domestic Product or GDP growth). Ed Clark sets a lofty goal for Ontario: become the alternative to Silicon Valley, while the Council seeks to raise the real, pre-tax median household income by $15,000 by 2030. The $15,000 goal may appear ambitious, but it is in line with the concept of the prosperity gap, which the Institute has been touting for more than a decade. However, the Institute does not necessarily think that becoming the alternative to Silicon Valley is the best narrative for promoting an innovation agenda. Cluster literature argues that Silicon Valley is a unique cluster that cannot be replicated. Perhaps what we should be striving for is increasing corporate R&D investment and creating an entrepreneurial culture and then measuring the results.
Infrastructure: Cities are economic engines
Both agree that cities are the economic engines of the country. Ed Clark cites the many companies relocating to the Toronto-Kitchener-Waterloo corridor extending to Ottawa (e.g., Thomson Reuters, QNX, Shopify, and Google) as indicative of the entrepreneurial activity happening in that region. The Institute argues that the majority of Ontario’s strong clusters are located in these cities and that connecting these cities would only enable greater collaboration and the movement of capital and talent.
The Council takes a tactile and expansive view by recommending the development of a federal infrastructure strategy that leverages institutional capital (e.g., from banks, pension funds, and insurance companies) and the creation of a Canadian Infrastructure Development Bank (CIDB). The CIDB would consolidate the federal government’s infrastructure projects and programs into one entity. This would allow the CIDB to develop “full service delivery capability” to create productivity-enhancing assets. The Council’s recommendation is robust and takes into consideration the revenue-generation potential of projects and the alignment with the government’s strategy.
Business environment: Remove growth permitting barriers
Businesses face significant barriers to scale up or even enter the country. Ed Clark and the Council identify many key challenges, from Foreign Direct Investment (FDI) restrictions that limit greenfield projects (when a company opens a new plant in another country) to bloated procurement procedures that make it nearly impossible for smaller companies to access new customers and scale up. Their proposed solution includes loosening requirements and removing onerous barriers that limit growth. Similar to the infrastructure recommendation, the Council recommends creating an FDI strategy while Ed Clark proposes a national intellectual property strategy to protect and support growing companies. The Council seeks the creation of an FDI agency to work with the provinces and municipalities. The Institute has argued for increased inward FDI through greenfield investment and removing onerous barriers and regulations that impede business growth.
Talent: Major changes needed to immigration procedures
While Ed Clark emphasizes creating the right mix of educational and research institutes to drive economic growth and create a skilled workforce, the Council targets immigration and makes bold but necessary recommendations. It proposes that an additional 150,000 economic immigrants be added to Ontario’s workforce by 2021. There are multiple pathways that must be fixed in order for this to occur, including making it easier for international students to study and stay in Canada after their coursework is completed. In addition, processing times for Global Talent work permit applications, which allow for highly skilled professionals to work temporarily in the country, must be decreased from five to nine months to just two weeks. Perhaps most importantly, national accreditation standards in Canada must be addressed such that immigrants can work the field in which they were originally trained.
Creating an innovative environment for businesses and workers to thrive can result in increased productivity, which in turn can create not only a more prosperous, but also fair, society. Both Ed Clark and the Council are aligned on the role of government as a supplier of innovative environments for businesses and workers. Yet it remains to be seen whether governments at all levels rise to the challenge.
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