THE NEXT COMPETITIVESS DEBATE
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:
A Canadian government which was based on a coalition of globally-focused, wealth-creating economic innovators would transform the country within a decade.
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