One of the greatest challenges facing the Liberal party is to design a credible strategy that generates good jobs for Canadians and the national wealth essential for high-quality public services.
This means Liberals need to define a vision for a sustainable, prosperous and equitable Canadian economy, and show how they would achieve it, if they want to be seen as a credible government-in-waiting. They lack that credibility today, so their March policy conference is critical.
Liberals should make a core priority the building of an innovation nation, one that creates opportunity for entrepreneurial people to build and grow knowledge-based businesses with good jobs. This knowledge economy will require new skills, new forms of collaboration, new institutions and much greater co-operation between the public and private sectors – as well as major investments in education, science, technology and other forms of knowledge.
But Liberals have an advantage: they have always been a pragmatic party ready to combine the best of the public and private sectors to achieve results.
An innovation strategy should not only focus on highly educated Canadians who want to start or expand high-tech businesses. It should help aboriginal communities improve their life chances through innovation, enable unemployed workers to obtain innovative skills and tap the energy and talents of immigrants for innovation and entrepreneurship.
It should be a promise of opportunity for all – a nation of innovators, tapping into the potential of everyone.
And it should be focused on addressing the major challenges faced by society, from climate change and clean energy to healthy and nutritious food for all and defences against pandemics.
Innovation is about creating new goods and services to sell to the world, or developing new and better ways to produce and deliver those goods and services. But innovation is also important in the public sector – finding better ways to design and deliver public services.
Innovation matters in a fundamental sense because it is the key driver of productivity, and it is only through rising productivity that societies are able to sustain and improve their standard of living.
Liberals have to get the context right. We are not dealing with a return to the prerecession economy but moving to a world where competition will be much more intense and the need for innovation much greater.
Liberals must pay attention to the rising competition from China, India, Brazil and other emerging economies. But Liberals must also recognize that many of the world's most advanced economies, from the U.S. and Germany to Japan and South Korea, are also investing to make their economies more innovative. Liberals have to show how Canada will succeed in this environment, not get left behind.
We have some distance to go. Canada is lagging badly behind the U.S. in productivity in the business sector. In the five years 2004-08, Canadian productivity rose an average of 0.6 per cent a year, compared to an average of 1.9 per cent – or three times as fast – in the U.S. Unless we change direction, we face an even greater prosperity gap between the U.S. and Canada.
Moreover, adjusted for inflation, research and development spending in Canada has been in decline since 2006, and Canada lags badly compared to many other countries. Canadian R&D spending is about 1.9 per cent of GDP, compared to 3.6 per cent for Sweden, 2.7 per cent for the U.S. and an industrial world average of 2.3 per cent. The U.S. and the European Union are both aiming to raise their R&D share to 3 per cent of GDP.
In building for the next decade, new jobs and improved competitiveness will depend greatly on creating new activities through new businesses. This is why entrepreneurship is so important.
A Liberal innovation strategy should create the conditions to champion entrepreneurship and opportunity. Young companies are not only important for job creation, they spark innovation by introducing new products or services or new ways of doing things.
This means ensuring a vibrant financing system to underwrite risk, including risk-sharing between companies and government to develop new technologies. It means dealing with the Valley of Death, that difficult period between the identification of a new business idea and its commercial realization. Here government has a role to play in sharing the risk in developing and commercializing new ideas.
Venture funding in Canada is weak so there is also a critical role for the public sector. But Canada also needs to do more through direct support in bringing important new technologies to market. The United States and Britain, for example, provide much more direct support to innovative companies.
We need to build Canadian companies with the scale and scope to thrive in global markets. Too many of our promising young companies, because of difficulties in raising capital, are forced to sell to foreign investors only interested in capturing the intellectual property of these companies. We create guppies to feed big foreign fish rather than creating more of our own big fish.
Manufacturing must be a vital part of Canada's future. But manufacturing must become much more knowledge intensive, with greater investment in research and development, as well as training and skills upgrading, design and marketing. This will require public policies, including initiatives to deepen ties between companies and universities and new ways to develop new technologies and markets.
Liberals should embrace smart infrastructure. Our economy could achieve a big surge in innovation if Canada pursued a strategy to deliver truly high-speed fibre or wireless broadband right into the home, opening up new opportunities in health, education, electricity and other high bandwidth services.
Liberals should also create markets for innovation through smart regulation and public procurement, providing a powerful incentive for entrepreneurs to develop innovative solutions to public problems. And Liberals should help city regions become centres of innovation.
Innovation is the key to a better future – to meet private needs and to accomplish public purposes. Their March policy conference is an opportunity for Liberals to position themselves as Canada's champions of innovation. They should seize it.
David Crane is a commentator on economic issues. firstname.lastname@example.org