Canada has a lot going for it:
By land mass it is the second-largest country in the world, with the longest coastline. Bookended by the vast Pacific and Atlantic oceans it has enormous trading advantages, alongside access to the largely untapped Arctic to its north. It is a net energy exporter; it has the third-largest proven oil reserves and is the fifth-largest producer of natural gas — but it also boasts large deposits of critical minerals vital to the green energy transition. And, of course, it borders the world’s largest economy.
By purchasing power parity, its economy is ranked 15th globally by size, behind the likes of Turkey, Italy and Mexico. The OECD has forecast Canadian per capita gross domestic product growth up to 2060 to be the lowest among advanced nations.
Poor productivity is at the heart of the country’s growth challenges. In an hour a Canadian worker produces just over 70 per cent of what an American can — that’s below the euro area and even the UK based on 2022 data. Many would have expected the resource-rich economy to benefit as globalisation powered forward, but its relative labour productivity has actually slipped since 2000.
The solution is probably a simple one: We need to innovate, invest more in R&D, and create stronger links between research and Canadian businesses. But executing on this has proven difficult:
Enormous efforts have been made to understand why businesses in Canada invest so much less in R&D than their counterparts in the U.S., much of Western Europe, South Korea and Japan. Is it our reliance on the export of natural resources and agricultural products? Is it reduced incentives to innovate for our heavily regulated and profitable oligopolies in sectors such as banking and telecommunications? Is it our decades-old reliance on incentivizing industrial R&D through federal and provincial tax credits?
It's hard to imagine a more important topic affecting all Canadians. So I would encourage you to read this recent opinion piece by David Naylor (president emeritus of the University of Toronto) and Stephen J. Troops (president of the Canadian Institute for Advanced Research).
It's a balanced piece. Neither of them are arguing for "empty credentialism" or for research that remains in academia. What matters is what we do with the work that our smartest minds are doing. And the overarching point is that innovative research needs to find demand within Canadian businesses.
Right now, we're very bad at this. That needs to change.
Chart: Globe and Mail