The Canadian government should hold a global patent on civilized thinking about how to become an innovative economy.
Canada, it has already been said, leads the OECD in the production of white papers on innovation. Stale and fresh Canadian prime ministers launch and receive blueprints on catching up and flourishing globally. Each report insists that the world is becoming a tougher place. And each report calls for the same team of failures to pull up their socks.
A bit harsh?
Sit still and look at Canada’s progress against the US—Canada’s principal trading partner. Every report that favors finding new friends admits in passing that the gap in business productivity between young Canada and the US has actually grown since the Canada-US free trade agreement of 1988.
This relative decline in Canada’s lifeline to future prosperity has not been halted by America’s political gridlock or its burdensome defense and immigration policies. Since the year 2000, US annual productivity growth has averaged 1.9% compared to 0.7% in Canada. And all the while, Canadians have steadily increased government spending on R & D and trade diversification—while learning about partnership models in Scandinavia and watching America “rust.”
So, it’s welcome relief to hear truly disruptive thinking from a hands-on Canadian innovator. Last week, Michael McCain, CEO of Maple Leaf Foods, addressed a factor that is studiously ignored in traditional brainstorming on barriers to business innovation—the soothing protection the Canadian dollar has provided for stand pat Canadian businesses.
“The radical remake of Maple Leaf, one of the country’s largest food manufacturers, underscores the challenge facing Canadian manufacturers that can no longer rely on a weak Canadian dollar to help them compete. Canadian factories are 'starved for capital,' Mr. McCain said, because a low Canadian currency during the past two decades has allowed them to make gains internationally without investing in more efficient technology. Now that the loonie is close to par with the U.S. dollar, he said, Maple Leaf Foods and other food processors are struggling to compete against larger, more productive U.S. companies.”
The Canadian government’s dedication to innovation is one-sided. It wants to nurture progressive business practices. However, it doesn’t want to be seen using a stick.
Innovation, unfortunately, not only needs those who want to take risks. It also needs those who’d rather not change to know that their businesses will fail if they don’t.
The floating Canadian dollar has sheltered too many Canadian businesses from the hard tasks of rationalizing their operations, acquiring new skills, new processes, new suppliers, new markets, and new technologies. They will not be transformed by redesigned federal programs, cheap credit, and smart ideas—unless their very survival is at stake.
If stand pat Canadian businesses no longer felt that they could wait for a lower Canadian dollar to come back and protect them, the innovation gap would close—or it would eliminate firms that are holding Canada back.
Following on McCain’s observation, the Harper government would enhance its wide-ranging expenditures in business innovation if—with the conscious objective of stimulating greater North American internal competition and greater movement of North American human and capital resources—it fixed the Canadian dollar at par with the American dollar.
This could be done unilaterally. Its impact would be most effective, however, if it was accompanied by a declared policy of pursuing currency integration with the US.
Nationalists and analysts who make a living tracking—and admiring—how the Bank of Canada exercises its miniscule monetary flexibility will throw Greece and the Euro in your face.
Let’s have the debate. Let them explain why our two economies and social-economic circumstances are too different—why a sovereign Canadian monetary policy is worth the price of a lower standard of living.
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