THE NEXT
COMPETITIVESS DEBATE
Jim de
Wilde
September
2007
Thanks to the initiatives of Roger Martin at
Rotman and Gordon Nixon at RBC, the
issues of howCanada becomes a
globally competitive society have catapulted to the top of the
political agenda this summer. Their Canada Day
article in the GLOBE was a welcome boost to the system, where
the issues of how Canada responds to
the opportunities of a global marketplace have remained
inexcusably obscure in the last two decades. Canadian
politics became smaller, focused on a mixture of
organization-driven ambition on the left. On the
right, conservatism has had
little interest in competitiveness because too many social
conservatives espouse views that result in resisting the
innovation and experimentation required for global
competitiveness.
The simplistic agenda of tax cuts and limited
government had the replaced the entrepreneurial conservatism
and growth economics
that animated the Mulroney
era. The
left is trapped in a vocabulary of regional subsidies and the
political narcissism of excessive spending. The right proposed
occasional tax-cutting measures, but usually in an ideological
way. The
left wanted an expensive, non-innovative healthcare system
rather than an innovative export-oriented health care
sector. The right
actually symbolically cut the GST (a productivity-enhancing
fiscal innovation) instead of embarking on a tax reform
initiative which would have facilitated the development of
competitive strategies in Canada.
The Martin-Nixon piece is extremely timely, essential
as two of the traditional engines of compensatory
competitiveness strategies, Alberta and Quebec
are running out of political gas. The strategic
and financial acumen of Jim Dinning was rejected by the
internal politics of the Alberta Conservative Party as it
retreated from a discussion of how the Alberta Treasury could
become the Canadian version of the Norwegian Treasury or Norsk
Hydro and embarked on a rear-view mirror vision of social
conservatism.
Quebec's competitiveness
agenda, which had provided a strategy under Bourassa and
Landry for two decades, was replaced by a tax-cutting
ideological agenda in Mario Dumont and a confused set of
messages about the management of globalization from Andre
Boisclair and Jean Charest.
There is clearly an opportunity for a national agenda
on how Canada becomes
globally competitive now that hasn't existed in previous
federal-provincial alignment.
Before discussing the specifics of any proposals
(whether Martin-Nixon or the proposals for strategic
tax-reduction for capital gains to increase productive
reinvestment, or past attempts to make venture-capital backed
commercialization of technology as a parallel growth engine to
resource investment that have been made by many including this
writer), we have to ask an obvious question: why has it proven to
be so difficult to put competitiveness on the national
political agenda.
Canada had a Royal
Commission on Competitiveness in the 1980s under the terms
"Economic Union and Development Prospects".
Issues of "economic nationalism" have been a
fundamental of our political discussions since the development
of Silent Surrender by Kari Levitt in the 1970s. Why has the
political strategy for advancing competitiveness proven to be
so elusive?
In short, the answer might be that in Calgary and
Montreal, Edmonton and Québec City, where this discussion has
been at the political centre since the 1970s, with the
development of a strategy for the CDP in Quebec and the
Heritage Fund in Alberta, there has tended to be a view that
the federal government has little to add to a serious
discussion of competitiveness, serving up policies which
dilute their competences. Many people have
looked at the preconditions for having a successful,
growth-oriented technology sector. Canadian capital
markets have lacked the coherence of other smaller
economies.
Canada has
historically lacked the export-oriented vision of Swiss
multinationals, and we lacked the strategic focus which would
facilitate Nokia's penetration of the Chinese market or
Ericsson's expansion.
While the impact of North Sea Oil on
Norway was not as
apparent in the 1970s to North Americans, it was clear even
then that energy could be a ticket to global economic
activities or alternatively a crutch to justify inefficient
subsidization of the sectors in which employment was
concentrated.
Canadian federal policies were predicated not on global
competitiveness, but on regional economic development, a theme
that was actually put into constitutional language in 1982,
something which made us the only country in the world to
mandate economic inefficiency in its constitution. Our tremendous
resource-wealth camouflaged a range of decisions and attitudes
which limited our capacity to sustain innovative strategies
and commercialize and export our intellectual
capital.
In the 1980s a confused debate about Canadian economic
nationalism replaced the competitiveness agenda. Instead of looking at
how we could create world-class enterprises and use
international arrangements like a free trade agreement with
the United States to launch these new
companies and sectors, we viewed the FTA as a means to hold on
to traditional markets, a loss-negating, risk averse
strategy. As was
said by so many people at the time, whether or not one
supported the 1988 FTA, the debate about it was very
disappointing in terms of moving Canada forward at a time when
other countries were talking about new global competitiveness
strategies, either in the east Asian economy or the move
toward European integration.
As we discuss individual proposals to take
competitiveness more seriously, it is essential we remember
the failures of political will which have impeded previous
efforts. During
the free trade debate, I wrote two pieces, one on "Canada:
Global Competitor or Farmteam Economy" trying to focus the
question as to why Canadians were not using their capital
markets to launch acquisitions, why expansion capital was so
difficult to come by, why we lacked the investment banking
base to be able to deal ourselves into major league
games. In
Calgary and Montreal, in Edmonton and Quebec
City, these issues were debated and, in
both instances, when national politics seemed disinterested
in, or even hostile to these objectives, so called
"province-building" exercises accelerated. By the
1993 federal election, Lucien Bouchard was articulating a
dramatic competitiveness strategy for Quebec mixing neo-Thatcherite state
restructuring with a global vision that he felt could not be
effectively promoted from a brokerage-driven federal system in
Ottawa.
The second piece I wrote in 1988 looked at Canadian
companies with export-driven strategies for competitive
advantage. At the
time, that was a radical departure from conventional thinking,
where exports were the spillover from domestic
production. Now,
Roger Martin's Competitiveness Institute has made a point of
documenting those companies whose dominance in their space
makes them global competitors. This
understanding has still not been successfully connected to
public policy in Ottawa
.
Part of the problem is leadership. The 1990 Paul Martin
campaign for the Liberal leadership was largely based on
competitiveness agenda.
The coalition behind Martin understood these challenges
to Canada and was
seeking a pro-economic growth, pro-competitiveness
agenda. This was
a form of shock therapy to a Liberal Party that had grown used
to spending tax revenues from the wealth-producing parts of
the country who didn't vote Liberal. When Martin's
campaign faltered, the coalition he had assembled fragmented
with many key players joining the Bloc Quebecois, the Reform
Party, or simply pursuing non-political strategies for
enhancing Canadian competitiveness. Neither
Harper nor Day took advantage of the opportunity to recast
that pro-growth, pro-global competitiveness political coalition.
Both seemed preoccupied with a language of western interests
which meant a "firewall" in Harper's case. The
firewall line has caused the Prime Minister much
embarrassment, but at its core was a competitiveness
argument: the
responsibilities of provincial governments are to create a
shield against federal policies that impede wealth-creation
and competitive reinvestment strategies. Whether the metaphor
is firewall, insulation, force field, shield, inoculation, the
debate is still a key debate in Quebec
politics, British Columbia politics and, of
course Alberta politics. A national
competitiveness debate requires that the pro-growth,
pro-competitiveness forces that have focused their energies on
Edmonton and Quebec
City engage nationally. Sadly, by the
time Paul Martin retired and the federal Liberals picked a new
leader, economic issues were almost completely absent from the
debate.
If Canadians are to benefit from the discussion
initiated by the Martin-Nixon piece, the political
preconditions for success need to be understood - a left
preoccupied with archaic notions of Canadian "identity"
(defending a healthcare system that is constrained from
innovation, a knee jerk reaction against foreign investment)
and a right preoccupied with a two-decade old anti-government
rhetoric of tax cuts will fail. In an era where renewed
infrastructure is a prerequisite to competitiveness, where
global network building is essential and innovation-based
competitive advantage is a key to sustainable prosperity,
Canadians need a new politics and a new political
framework.
Here are some first steps:
1.
Stop
demonizing those who advocated provinces as effective
instruments of promotion global competitiveness, like Bouchard
or Harper. They
were right.
Advocates of a sluggish status quo at the federal level
were wrong. It is
no coincidence that among the most dynamic arguments for
political renewal in
Canada in 2007 are the
so-called "lucidiste" proposals of former Premier Bouchard and
his associates and those who are trying to plan a "Beyond Oil
Revenues" investment strategy for the
Alberta
economy.
2.
Global
competitiveness requires many things, but it starts with
having a global vision. What are our
strategies for collaborating with Korea, with Singapore, with Dubai? How is
Canada
positioned
in the Dubai-Singapore or Istanbul-Mumbai networks? Why don't
we know how many Chinese have graduated from Canadian
universities and enlist them in fundamental
network-building?
3.
We need a
coalition of wealth-creators, emphasizing the importance of
export-oriented business leadership. The
denigration of successful business leadership in our political
culture is unacceptable. We need to
remember who has been pushing for competitiveness, the
ecosystem of world-class technology around RIM and Open Text
in Waterloo, the Quebec venture capital community in health
sciences, the entrepreneurial finance network around the
Alberta oil patch, the Ballard-created venture capital
community of British Columbia, the new entrepreneurial visions
of Atlantic Canada with their attention to world-class
undergraduate education as opposed to duplicating
research.
4.
While changing
attitudes, assumptions and political culture are the most
important challenges to be met, we do need some new
policies. An
adaptation of aspects of the Irish tax-system with fewer taxes
on individual initiative and more on consumption, capital
gains tax cuts for new investments to encourage serial
entrepreneurship would help. But mostly we need a
change of attitude, a movement away from the protectionist
language which dominated the free trade debate, the aiming-low
strategies which characterize so many investment
deals.
5.
A national
goal for Canada is to become the most scientifically literate
society on the planet, one which educates its citizens to
understand science, which encourages our talent to engage on
the scientific issues of our times and which brings
scientific literacy to the questions of environmental
management, innovation in food production, and an
understanding of the interconnectedness of agricultural,
health and environmental policies which will be the
cornerstone of effective public policies going forth from
here.
A Canadian
government which was based on a coalition of globally-focused,
wealth-creating economic innovators would transform the
country within a decade.
CANADA IN
A KNOWLEDGE BASED GLOBAL ECONOMY
Eight Steps to Sustainable
Prosperity
Jim de
Wilde
January
2007
The economic agenda for
Canada
in an era where Brazilian companies are buying Canadian mining
assets, where
Kazakhstan
is promoting itself as the new
Canada,
where Finnish pulp and paper companies in Latin America are exporting into the Canadian
marketplace, where
China
and
India
are becoming sources of knowledge-based innovation is very
different from the strategy of previous eras. Debates about
foreign investment, regional subsidies, free trade seem like
the residue of a bygone era. But there
has not emerged a political strategy for preparing
Canada
for an era of global growth. We have played with
ideas like globalization, looking at the behaviour of capital
markets, or export opportunities in suddenly significant
markets, but
beneath all that has been discussed, we remain a
resource-producing economy cross-subsidizing many other
activities, with a few competitive players like RIM , OpenText and Ballard
emerging from the competitive races.
The federal government has long been searching for a
strategy.
It protests that there is an innovation agenda and that
we are constantly adapting to the new conditions of global
competition.
But that is not the reality. An innovation
strategy and an approach to the rise of
China,
India,
and Dubai require
a rethinking of the kind of economy we want to build in
Canada
over the next decade. These are the
areas where national public policy is essential for
competitiveness.
While practitioners of public policy frequently forget
that informed market decision-making and entrepreneurial
activity are the keys to economic growth, sound government
policy can facilitate the former and attract the latter.
We live in
a world where the
Dubai stock
exchange can go from an obscure regional entity into a major
driver of the global economy in five years. The
responsibility of competent public policy makers is to ensure
that Canadian entrepreneurs and investors have access to
global trends, global markets and global investment
opportunities or risk becoming a farm team economy. That is
what governments can do to enhance Canadian
competitiveness.
Before this vision can be credible with the Canadian
electorate,
the federal government has to consolidate the
lessons of the 1990s:
first it has to prove that it knows how to do no
harm. Deficits
and other symptoms of a poorly-managed economy are even more
dangerous in a world of global competition where access to
capital defines competitive advantage for new
entrepreneurs.
The skepticism about federal public policies on the
economy are that regionalism will trump competitiveness as a
criterion for decision-making, that "innovation
strategies" will become strategies for subsidizing companies
ill-equipped to create globally competitive companies, and
that public monies will go to institutions ill-equipped to
develop market opportunities (government research labs and
universities). The
federal government needs to show that it understands the
sources of wealth-generation in the Canadian economy. If
Liberals want to replace a Prime Minister and a leadership
team from Calgary
at a time when
Calgary is driving
much of
Canada's global economic presence, it has to be even more
committed to the practice of market-disciplined economic
growth than the government it wants to replace. A first
step for doing this is to show that the federal government and
its agencies are potential partners in investing the
Alberta resource
profits in global expansion. The
federal government can either pursue a growth-oriented
strategy which facilitates
Alberta
institutions becoming like Norsk Hydro to the benefit of all
Canadians, or a strategy based on regional rivalries which
will ensure that
Canada
will continue to underperform internationally. To
succeed, Canadians need more than sound fiscal management;
they need a growth strategy. But there
can be no growth strategy without convincing Canadians that
this is a very different Liberal Party, one which wants to be
more entrepreneurial and market-driven than its predecessor
Conservative government, one which understands the new roles
of public policy in a global economy.
The federal government's role is to assist in preparing
Canadians for the best jobs in the new global economy. Perhaps this
means that we become self-consciously a
Switzerland,
a
Norway
or a
Finland. At the minimum, we
need to build on aspects of the way other small economies -
some resource-rich, others not - have carved out a role for
longterm sustainable prosperity. Like
Switzerland
and Holland, we
need financial institutions that are capable of transforming
investment into value-added activities in the growth regions
of the planet.
Like
Norway,
we need to be able to show how resource riches can be
transformed into longterm equity investing. Like
Finland,
we need to be able to create Nokia-type companies which are
able to provide magnets of excellence for the next generation
of Finnish management and deal a small economy into major
economic transformations, like those going on in
China
and
India. Like
Finland
,
we need to aspire to be ranked first in the Transparency
International list of non-corrupt economies, a key to
attracting growth-oriented longterm investment in the
future.
Canada's
competitive advantages are enormous. As a
resource-producing economy, we have the potential to be as
wealthy as
Norway
in planning our longterm role. We have
strengths in key sectors like environmental engineering,
alternative energy, power utility management, healthcare
administration and other categories which venture capitalists
view as the most important bets for the next decade. We also
have institutional investors like CDP and OTPP which are
capable of expertise in global investing which is competitive
with financial institutions in
Holland or
Switzerland. We lack
strengths in marketing driven companies, with the exception of
some companies like Tim Horton's. Our deficiencies
are issues about which we have long fretted and done
little: our
capital markets lack the investment banking skills to assist
Canadian companies in growing through global expansion. Our
marketing skills as a nation are weak, reflecting the
engineering competences of a resource economy. Our incentive
structures both cultural and in terms of financial incentives
dissuades entrepreneurs from creating new businesses in
Canada.
Eight proposals:
1.
Canada
should be the most economically literate and scientifically
literate society on the planet. That
should be a goal of public policy and political
communications.
The link between competitiveness and
scientific/economic literacy is key to 21st Century
prosperity.
The first thing governments can do is to increase the
level of economic and scientific literacy in their
society.
Political speeches talk constantly about investing in
education and everyone applauds. But we
don't know what that means. If it
means subsidizing more "research" projects on esoteric areas,
that probably isn't a good investment. Nor
is a market-distorting investment that follows the last
"trend" like more investment in biotech. Education means
at least three quite different sets of objectives: (a) skills
broadly diffused through the society ; (b) commercialized
projects like the
breakthrough energy-saving light bulb; (c) this enormous
social capital in a society that comes from being
scientifically and economically literate.
Competitiveness
goes hand-in-glove with scientific and economic literacy.
Public policy can promote scientific and economic
literacy, which means that the tradeoffs that are made in
diffusing new technologies and the billions of market
decisions made every day will contribute to a greater
prosperity rather than counterproductive choices and
unintended consequences. For years,
I have proposed that students read John Allen Paulos'
Innumeracy and Peter Huber's Galileo's
Revenge to show the importance of mathematical,
economic, and scientific illiteracy for public policy
decisions if these decisions are to enhance productivity and
competitiveness.
If
Canada
set as a goal to be the most scientifically literate economy
in the world, the most economically literate economy in the
world and the country ranked first in the Transparency
International index on honesty and reliability in capital
markets, there is little doubt that
Canada
with its natural endowments would maximize its
competitiveness.
However, there is
evidence that we don't perform well on these indices. In part,
this is a result of an educational system which hasn't placed
enough emphasis on economic and scientific literacy in the
past. The
market corrects and motivated teenagers these days are
inclined toward the kind of commercial and scientific skills
which lead to productive decision-making. Political
leadership in the 21st Century has to be ahead of
these trends.
A society which understands economic tradeoffs and
scientific evidence will be more prosperous than a society
which doesn't. Political
leadership has to not only promote educational policies which
do this, because we need creative generalists as well. But in terms of
social decisions, informed markets are a prerequisite to
competitiveness. If
government cannot educate that there is a connection between
competitive resource industries and our capacity to invest in
next-generation research, then public policies in Canada will,
at best, fail, or at worst, be counterproductive.
2.
The development of an economic skills-set for
commercializing technology is critical to the generation of
wealth and the new prosperity. This is a
challenge that is not met by new money. It is met by new
skills in the Canadian venture capital community and the
creation of organizational cultures in Canadian universities
that promote commercialization. There are
extraordinary opportunities open to Canadian universities,
science centres and innovative sources to a strategy of
commercializing innovation. A strategy for
identifying 50 areas in which scientific work could be
aggregated into a model for creating new products in areas
like environmental bioremediation, biopesticides could reap
enormous commercial benefits. But the
current commercialization model focuses on research and then
puts obstacles in the way of commercialization by putting more
of an emphasis on cheap capital than on management
skills.
Public policy could help by creating alliances with
sophisticated venture capital globally and removing the kind
of easy capital which adds limited value. The success of a
commercialization strategy depends on being able to attract
the best entrepreneurial talent to
Canada
(or keep it in
Canada
)
and links it to significant commercial opportunities.
3.
A small economy like
Canada
runs into problems in maintaining the skills-upgrades for
talent in the key 25-40 career period. There are
many ways that skills can be enhanced: universities targeted
to lifelong education that are connected to global best
practices,
programmes designed to ensure that Canadians have
sabbaticals which provide access to practitioners in
health-care administration or police administration or simply
management skills.
This will not happen by accident. Ensuring the
skills-sets of 25-40 year olds are the best in the world: In order to remain
competitive young Canadians have to leave the country to be
able to sustain skills at a level commensurate to their
competition in Europe and the
United
States. A
programme of encouraging Canadians to remain in
Canada
with a commercialization fund available to hundreds of
potential young talent would do more to create jobs than any
single initiative that can be coordinated by public policy
makers.
4.
in a global economy, successful governments, whether municipal
(city of
Vancouver),
regional
(Catalonia), or
national brings to its local entrepreneurs and wealth creators
the possibility of global networks. The Canadian
Government developed Team
Canada
missions as an instrument that was appropriate to an
export-and -investment-oriented growth strategy; in the new
global economy strategic alliances are critical to the success
of national economies. The Canada-Dubai
or Waterloo-Bangalore alliances will be the test of success in
the next generation. A role government can
play is in leading globalization. A map of
Canada
with links around the world, generating the kind of productive
deal networks that are accessible is a radical change of
foreign economic policy. What we need is
not trade missions, but linkages with growth-creators and
value-investors around the world. Our Business
Schools could do this if removed from a narrower academic
framework of operation.
5. The tax
system is a statement of our economic values. It must ensure that
government rewards and supports high-value adding
entrepreneurs.
The most important issues are to ensure that the
incentive systems exist to reward entrepreneurial risk-taking
which will create value-enhancing jobs and opportunities for
growth. It
may be too late and too disruptive to move toward a higher
consumption tax (20% GST) and a radical cut in capital gains
and personal income tax (the Irish model). But
the philosophy underlying the role of the tax system has to
reflect the goals we set as a society for our economic
performance.
It is ultimately an incentive system as well as a
device for generating public revenues.
6. Our balkanized
capital market has always contributed to
underperformance.
This has been somewhat compensated for by
innovative behaviour from large institutional investors, but the creation of a
capital market which is national, capable of innovative
financing, and the most honest and well-regulated in a
post-Sarbox world is a key part of the new national prosperity
initiative. Canadians have
been held back for years by the "balkanized" capital
markets. Some
healthy initiatives have come about because of the skills of
our institutional investors, the new role accorded CPP, the
skill-set of CDP, OTPP. With
the rise of the
Alberta economy,
the need to ensure that Albertan investment in growth is at
the centre of national decision-making is more imperative than
ever. This means
more government-government partnerships in economic
growth. As the
CPP, CDP and Alberta Treasury start to harmonize their
activities around an investment agenda, the governments of
Alberta,
Quebec and
Canada
have to start harmonizing their strategies around the theme of
accessing global opportunities and creating the preconditions
for sustainable prosperity. The structure of our
capital markets remains a significant public policy
priority.
The fact that there is no national securities regulator
has always impeded
Canada's
role as a destination for entrepreneurial capital. The federal
government's inclination to discourage provincial agencies
from pan-Canadian investment strategies has done collateral
damage to the building of competitive sectors. The structure of
our banking system reflects our own ambivalence about how
strongly we promote global competitiveness. A regulated sector
emphasizes competitive practices in consumer banking. As a result, our
financial institutions lack the capacity to be global
competitors and Canadian businesses lack access to expertise
in global investment and investment banking activities. A strategy
for the financial services sector which openly promotes
Canadian competitiveness would significantly enhance the
prospects of the Canadian economy.
7. The federal
government has to support those areas in which there is a
global competitive advantage. Investing
in growth sectors where we have global competitive advantage
like environmental industries is the key to sustainable
prosperity.
Canadians need to create companies which have global
market leadership. In traditional
economic activities, we have to assess all our decisions
against a backdrop of growth dynamics in the global
economy. If
the Canadian sector is non-competitive, it ceases to be a
priority and the economic policy becomes a skills-enhancement
policy to match the needs of a globalizing economy.
Managing globalization means that a smaller percentage
of the population will be involved in directly
wealth-producing activities. As we move toward a
Swiss/Norwegian model, this will work as long as we reinforce
the strengths of our resource sector and ensure that
investments in skills-enhancement are managed with fiscal
discipline.
Public policy should not direct growth strategies, but
nor should it create obstacles. The vision of a
Canada
where we create the equivalent of Nokia in micro turbines or
the equivalent of Bausch in biopesticides is one which builds
on the intellectual capital of
Canada
and creates a distinct competitive advantage in international
economic competition.
This applied to
the public sector as well. There is nothing wrong with a
larger public sector, if that public sector activity is
efficient and oriented toward productive activities. A Canadian police
force, capable of ensuring domestic security in
Haiti
or Kosovo is worth investing in because it develops
specialized public sector competences. A Canadian democratic
civil society building project, capable of ensuring
well-regulated and well-investigated stock markets in
Cairo or
Addis
Ababa is
worth investing in. A public
sector which is intrusive and meddling is something which
Canadians have chosen to reject at every opportunity. Moving forward
requires that we recognize the difference between backing
competitive activities and creating meddlesome
entanglements.
8. A well-regulated
internet is a cornerstone of competitive advantage. Few countries are
better positioned than
Canada
to do this. The rise of
spam and privacy-intruding internet activities may clog the
new information economy. The
internet requires (a) privacy be protected so financial
transactions can take place over the web; (b) the internet be
policed so that the home (where the internet is most powerful)
is protected from unwanted intrusions and the citizen can
assure that all that is received in the home is indeed
invited; (c) that
privacy is controlled by the receiver. The balancing of
internet use and privacy issues will ensure a competitive
advantage to jurisdictions which have invested in a
competitive advantage of regulation of the internet. As a political issue,
this has more traction than ever as parents are concerned with
web-use, business are concerned with the seaweed of spam and
the potential of the web for a variety of innovative
activities are called into doubt in this new phase of the
evolution of the wired economy.
But
above all the new Canadian formula is one which constantly
mobilizes resources for the challenges of the 21st
Century.
There have to be world-class capacities in Canadian
companies and skills development. All decisions have to
be made against a backdrop of what our economy will look like
in twenty years.
Do we want a 20% GST and a slash in capital gains taxes
and corporate taxes? What would that
make the Canadian economy look like? Is that kind of Irish
model importable?
The
most important items on the next Minister of Finance's desk
will be how Canadian capital markets develop the unique
competences and efficiencies required to deal Canadian
companies into growth in the
Dubai to
Singapore
world, the
Bangalore to
Shenzhen world of new value creation, the
Helsinki to
Cambridge world of
technological innovation. Canadians
have long been casual about mobilizing their global resources,
networks of Canadian educated Chinese decision-makers, for
example.
While Silicon Valley maintains
networks through ongoing activities and an extremely active
alumnus network, Canadians lack the mechanisms to do
this. What
is a government for, if not to ensure that UBC-educated MBAs
and McGill-educated engineers who work together in
Shanghai also have
an ongoing relationship with
Canada? The
20something generation is already doing this by instinct and
initiative.
By the time their ideas are the dominant ideas, they
will already have made decisions about being part of the
global economy that will limit their involvement in Canadian
agendas. Over
and over, it is worth repeating, that people will make
rational sacrifices of income to participate in the building
of
Canada. No one should
trade off their own career needs for development and access to
world-class practices in order to stay in
Canada. By simply
being aware of this challenge, Canadian business and finance
can recruit the best in the world to
Canada,
given our competitive advantages. The role
of the federal government is to say that in the new globally
competitive knowledge economy, nothing other than best
practices and world standards will be tolerated. The vision
of a well-regulated internet economy, a well-regulated,
national innovative capital market and the most scientifically
and economically literate society on the planet is
attainable.
LIBERALISM,
RESULTS-ORIENTED STRATEGIES AND EARLY CHILDHOOD
EDUCATION: THE
SEARCH FOR TARGETED POLICIES
October 2006
Liberalism has to rethink its approach
social policy issues. Sound public policy requires that (l)iberals in
North America
become passionate
advocates of "making government work". The "reinventing
government" movement which fueled
Clinton
in the
early 1990s has waned in recent years, leaving conservatism
holding the trump cards: "if government doesn't work, let's reduce it" becomes a compelling
argument. Liberalism needs to return to results-oriented
strategies and move away from the culture of rights-based
policies. Two trends need to be reverse if liberals are to be
associated with sound public policy again.
(i) Liberals
have become more comfortable with right-based arguments than
with the claim that they can improve the world of their
citizens with innovative public policies: One
of the dangers inherent in "rights-based" arguments is that they
suggest that the intention of the policy maker is more
important than the results that are accomplished.. Rights should be
trumps, vetoes, to be deployed carefully. In social policy
discussions, where specific objectives are aimed at, they can
be counterproductive.
(ii) North
American liberalism has tended to confuse policy goals with
policy instruments. Goals are constant. Instruments should be
changing constantly. In the 1990s
much of the talent in North American society gravitated
towards the private sector and market oriented decision-making
. The private
sector encourages people to constantly reassess strategies and
the means of implementing them. In liberal public
policy circles, however, the implementation and the goal too
often became confused. In the
U.S.
,
"busing" and "affirmative action" are frequently cited as
reasons that middle class Americans have abandoned
"liberalism". In
Canada
,
(l)iberals became concerned with establishing rights to x or y
, which sounds good, but fails to deal with how public
policies actually deliver specific results. The ideology of "no
two-tier healthcare" preempted a discussion of how to improve
the quality of Canadian health-care.
When these process-oriented intellectual
trends were translated into public
policy by well-intentioned liberals, they produced inefficiencies that
conservatives could attack. In a world of
multi-casting, shifting social alliances,
brand new social networks, fast-changing market trends
and consumer preferences, liberals appeared intransigent and
obsolete . Now is the time to reinvent
liberalism as being about innovation, inventing improved
public policy, targeting results.
In this world, any public policy which fails to include
the word "targeted" starts with a design flaw, no matter how
noble its objective. Nowhere is this lack of interest in
managerial effectiveness and results-oriented public policy
more evident than in the discussion of early childhood
education and the related but distinct issue of child-care in
Canada
.
In a democratic society:
the use of public policy to promote upward mobility is
both adrenalin and vitamin. Since
Reagan, upward mobility as a social
objective and a criterion to assess the dynamism of a
democratic civic culture has been appropriated by the
heirs of Reaganomics.
The challenge for "liberals" and
"market-oriented social democrats" is to reclaim the cause of
upward mobility and to abandon public policy instruments which
have become important only for reasons of nostalgia.
Promoting upward mobility is the desired
objective of a democratic public policy (as opposed to
preserving a clan advantage or advancing a special interest
group or expanding the scope of long-established
bureaucracies). In the last two decades in
North American politics, proponents of state-assisted social
policy have fallen into two traps:
(i)
the trap of universality or egalitarian
public policies based on rights, assuming that policies can
be designed to meet
the needs of a child living in poverty without access
to a stable community structure and a city family with a
single parent at the same time it is meeting the needs of a
middle class exurban family looking for value-added early
childhood education;
(ii)
the trap of forgetting that upward
mobility is a social good for everyone,
creating in crude economic categories "new consumers", in
socio-economic categories citizens who contribute to civic
life and in community security terms greater social inclusion.
Conservatives and "neo-conservatives"
took advantage of these tendencies. They benefited
from innovations like social entrepreneurship, which can be
targeted to specific goals and creates standards of
accountability and reversibility or mid-course correcting
because it is a market-based policy instrument.
Conservatives came up with customized policy
instruments, like vouchers, which argued for
cost-effectiveness. Most importantly, they
understood that the ultimate objective of state-backed social
policies was to promote upward mobility, to harness the energy
of people not yet in a position n to earn and create
wealth. Market-complementary policy
instruments of the kind associated with the Bill and Melinda
Gates Foundation were often labeled conservative, even though
their advocates and their objectives considered themselves to
be liberal or social democratic in philosophy.
Social policies should be about
facilitating upward mobility, not about penalizing the
successful or creating one-size-fits-all public policies that
are guaranteed to be conspicuously wasteful.
Liberal policy instruments should be
targeted and results-oriented rather than ideological and
nostalgic. Successful
(l)iberal parties will reclaim the
banner of promoting upward mobility and there is no better
place to start that than with the public policy debate on
early childhood education and the appropriate role for public
policy in this arena.
Child-care debate is about a number of ideologies -
about proving that state programs worked. The commentary
by Nobel laureate James J. Heckman in January
10th, 2006 Wall Street Journal
cited below shows the complex nature of modern political
debates:
It is a rare public policy initiative that
promotes fairness and social justice and, at
the same time, promotes productivity in the economy and in
society at large. Investing in disadvantaged young children is
such a policy. The traditional argument for providing enriched
environments for disadvantaged young children is based on
considerations of fairness and social justice. But another
argument can be made that complements and strengthens the
first one. It is based on economic efficiency, and it is more
compelling than the equity argument, in part because the gains
from such investment can be quantified-and they are large...
Important operational details of investment programs
for disadvantaged children remain to be determined. Children
from advantaged environments, by and large, receive
substantial early investment, while children from
disadvantaged environments more often do not. There is little
basis for providing universal programs at zero cost, although
some advocate such a policy. While there is a strong case for
public support for funding interventions in the early
childhood of disadvantaged children, there is no reason for
the interventions to be conducted in public centers. Vouchers
that can be used in privately run programs would promote
competition and efficiency in the provision of early
enrichment programs. They would allow parents to choose the
venues and values offered in the programs that enrich their
child's earliest years.
Why do liberals want always to come up with
one-size-fits-all policies which expand the size of
bureaucracies and may or may not be effective or efficient in
producing the stated objectives? The
dilemma confronting common sensical Canadians trying to come
to grips with their current political choices is one between a
conservative philosophy which is not interested in finding
innovative and effective public policies and a (l)iberal
agenda which uses outdated and
inefficient public policy instruments in the pursuit of noble
objectives.
There should be little debate that compensatory early childhood
education is one of the most productive involvements of public
policy in increasing prosperity and fairness
simultaneously. The most
effective Canadian public policy is one which creates a
national mission in ensuring this kind of "early childhood"
compensatory care. A Kids-in-Need initiative
would efficiently marshal public resources and create the kind
of policy interventions which are likely to provide children
with the assistance required to lead lives that they
choose. As Heckman writes, the
"operational details" or "policy instruments" remains the
subject of a tactical debate, based solely on the answer to
the question "what works best?" and on no ideological
preconception.
(L)iberal public policies
have tended to focus too much on bureaucratic
strategies . This
gives (C)onservative strategists an enormous tactical
advantage because they can focus on targeted results..when
they choose to address these issues. (L)iberals
think it is enough to say "we are trying" whether the issue is
health care, early childhood education or the regulation of
toxic substances.
More strangely, (l)iberals seem to
miss the idealism and social commitment of middle-class
Canadians who want to invest in their own high quality and
customized child care, but who would be willing to endorse
effective public policies which ensured that kids in need were
reached by government programmes.
The bizarre idea that one needs a one-size-fits-all,
"universal" social programme labeled as a "right" for
Canadians to buy in is simply not a fair assessment of the
social policy sophistication of Canadian citizens.
The child-care debate is a good opportunity for
Canadian (l)iberals to show that they can escape this trap and
come up with a results-oriented liberalism, not a set of
policies based on a mantra-like invocation of the "basic
tenets of liberalism". Effective
policies are not written on a piece of paper, but come about
as a result of building coalitions of social entrepreneurs and
community activists, using new technologies such
as the internet to organize the energies of a productive and
caring society. The child-care
debate is a good opportunity for Canadian (l)iberals to design
new policy instruments that can reach those in need of
complementary early-childhood education rather than rely on
old policy instruments that create expensive and inefficient
bureaucracies. There are many experimental
social investment policy instruments which aim to complement
market forces: e.g. investing in educational financing of
students, the so-called "tuition mortgage",
privatizing social assistance and mentoring
functions, producing valuable social
capital through organizing the educational skills of
non-credentialed immigrants. All of these are the
kind of result-oriented, targeted public policies which need
to be identified with an effective liberalism, a government
made ready to act at internet speed. Liberals
should be focusing on Kids-in-Need, not one-size-fits all
programmes. In doing so, we will
contribute to an international debate about social policy
which looks for different instruments to achieve our
aspirations in an internet age where social networking and
instant messaging have provided many more rivers to the sea
than our parents knew existed, let alone knew how to
navigate. It will restore the
vision of upward social mobility and educating new creators of
wealth as the fundamental test of a responsible liberal social
policy.
Back to Top
April 27,
2006
Canada
and Asia Rising
Thinking About New
Strategies for Sustainable Prosperity
Jim de Wilde
April 2006
Good politics and good public policy
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