This article originally appeared in the Hill Times.
By Ken Coates, February 3, 2025
Canada is in the doldrums.
Productivity and investment in new technologies have tanked, undermining this country’s productivity.
For several decades now, going back to the all-but-forgotten days of prime ministers Jean Chrétien and Paul Martin, Canada held out scientific and technological innovation as an economic panacea. We invested billions of dollars in tri-council research funding, and added several thousand Canada Research Chairs. The Government of Canada created Global Innovation Clusters with eye-grabbing $750-million grants that somehow managed to distribute the money across the country. We spent billions on the innovation economy in a spate of sustained optimism, faint hope, and economic naiveté.
There are successes and losses, to be sure, but the trend line is, at best, flat in the areas that truly matter. Canada’s economy lags well behind the United States, with per capita income dropping sharply. Many bright scientists and entrepreneurs leave for more attractive commercial and professional environments south of the border; a comparatively small number come in the opposite direction.
Solving the innovation dilemma is extremely difficult. All the developed world economies are competing in the same economic space, many of them more creatively and comprehensively than Canada.
How does Canada reverse its innovation deficit and transform itself into a true and competitive science and technology-based nation? It is important to start by stating the obvious. As a nation, we is not doing well. We have areas of great accomplishment—Waterloo, Calgary, Toronto, Kelowna—and a small number of internationally competitive firms in information technology, mining, oil and gas extraction, artificial intelligence, and the like. But our aggregate is not very impressive, as shown in our economic statistics and comparative performance. There is no masking our growing mediocrity.
Many wise and thoughtful Canadians have written exhaustively about how to build an innovative nation. These commentators consistently point to our overly cautious capital market, the absence of real-angel investors, uncreative and undemanding consumers, a small number of highly qualified personnel, inadequate support for home-grown intellectual poverty, an uncompetitive tax regimen—particularly for high-income professionals and investors—the inability to hold onto our best and brightest, and the inescapable and overwhelming economic dominance of the United States. It is an exhausting list.
The main problems may be more fundamental—and it most certainly does not involve big-spending government policies and program spending. Government initiatives are the tools; they are not the solution. Counting on government actions—particularly those at the internationally small scale on offer here—to jump-start a nation’s economic renewal and technological transformation. This has been tried, systematically and expensively, since the 1990s with only modest success.
Canada’s fundamental deficits are two-fold: loyalty and entrepreneurship. The last 10 years have seen a marked decline in passion for and commitment to this country. A significant percentage of the people who immigrate to Canada re-migrate within a decade, mostly heading back to their home nation or moving to the U.S. There are some 800,000 talented and creative Canadians living permanently in America, not counting the upwards of one million Canadians who spend a month or more each year in the U.S. The same holds for start-up companies. Canada does a reasonably good job of incubating young firms, many of which are drawn by the dynamism south of the border in search of bigger markets and more risk capital.
The routine political attacks on the “rich” set an unappealing environment for individuals seeking to build a successful company and personal wealth. For every Jim Balsillie, Mike Lazaridis or Tom Jenkins—to pick three Ontario high-tech business leaders who fought hard to keep their companies in Canada—there are many others who recognize the benefits of building their businesses and careers in the U.S. (although to be fair, many retain strong ties with Canada). It is not that our nation has no entrepreneurs; it is that we have too few of them. Canadian business schools do a better job of training managers than entrepreneurs, and our political culture favours large-scale corporations and foreign companies over the small and medium-sized enterprises that are the cornerstone of a vibrant innovation economy.
Canada can fund more scientific research and can increase the number of patents. The country creates incubators and research institutes, government funding programs—that generally move much lower than the speed of business—and produces a bewildering pile of federal, provincial, and territorial tax incentives. But until we can ramp up Canadian loyalty, producing real and sustained passion for the nation, and match that with a surge of entrepreneurship, risk-taking and commercial creativity, these add-ons will be like putting jewelry on a cow.
Canada should do better, but it has not done so in the past. The nation is not well poised for 21st-century competitiveness, much as it hurts to say this out loud.
Ken Coates is a professor emeritus for the Johnson Shoyama Graduate School of Public Policy, University of Saskatchewan. He is also a distinguished fellow and director of Indigenous Affairs with the Macdonald Laurier Institute.
