Canadian Competitiveness: Off the Podium

The latest global competitiveness rankings, from the World Economic Forum, show Canada making only the slimmest of gains in the last year, moving one place forward to 14th–still behind the 13th spot our country earned in 2015/16.

It would appear the Trudeau government’s activist role in innovation has yet to move the dial.

One of the key impediments is of the government’s own making. Canada’s macroeconomic environment, thanks to an expanding federal deficit, was an abysmal 47th. Our level of government debt was worse, at 118th.

The private sector also bears its share of the blame. Our score on technological readiness, business sophistication and innovation generally placed 23rd. Our use of talent was a bright spot, coming in at 3rd, as was our score on higher education and training (13th).

None of this should surprise Canadian policy makers.

The country’s fiscal position was hammered in 2015 by the sharp drop in oil prices that damaged terms of trade and led to a fall in real incomes. The incoming Liberal government led by Justin Trudeau, along with a new left-of-centre government in Alberta, looked to stimulate the struggling resource economy with deficit spending.

With the economy recovering to lead the G-7 in 2017, Ottawa has the opportunity to taper its budget plans or ensure spending is trained on fixing structural impediments to competitiveness.

Take resourcefulness. A rise in the higher education ranking, from 19th to 13th, will be welcomed as good news, although not good enough. Same with our jump to 9th in the quality of scientific research institutions, up from 17th, which should continue given spending increases announced recently by the federal and provincial governments.

Canada has several of the world’s top 500 universities, and should be a Top 10 player in post-secondary education. A more effective tiering of education–provinces like to spread their spending like peanut butter–would help.

Perhaps the most encouraging news for Canada is the ranking of our institutions, which is improving, albeit slowly. Public confidence in government and business–on the wane in so many places–appears to be solid in Canada.

The report highlights several of the critical challenges facing Canada:

• Too much financial capital is allocated to housing, diverting investment from more innovative fields.
• Business R&D remains back of the class, despite decades of government incentives and programs. Although Ottawa is exploring bolder policy ideas, such as a new program to co-invest with business in “super-clusters,” there may be a more fundamental challenge in universities and large companies, especially foreign-owned ones.
• The overall tax burden remains a shackle on growth, and is tightening. Governments, especially at the federal level, continue to downplay the barriers to domestic investment they’re building with an overall tax regime that is, according to the WEF rankings, uncompetitive.
• Inefficient government bureaucracy. It’s Canada’s worse score, and not an area that any major government is currently addressing in an assertive way.
• Government procurement of technology is MIA, struggling at 68th position. As governments push business and investors to do more, a look in the mirror might be wise, too.

Over a ten-year period, it’s easier to see where Canada is making progress.

Some of the best gains have been in technological readiness, thanks to the rapid expansion of broadband access and Internet use, as well as technology transfers. More curious, for a country that pioneered telephone technology, is our lack of progress in terms of mobile broadband access. One can assume the country’s relatively high rates–the price of an accessible network across such a vast land–are the primary reason.

Continued improvements in health care and primary education–often cited as the main reasons for those high taxes–are also noteworthy.

Overall, Canadians should not feel too proud about the report. We often criticize ourselves as being a bronze-medal nation that doesn’t aim high enough. These rankings show we may not be even close to the podium.

As Senior Vice-President, Office of the CEO, John advises the executive leadership on emerging trends in Canada’s economy, providing insights grounded in his travels across the country and around the world. His work focuses on technological change and innovation, examining how to successfully navigate the new economy so more people can thrive in the age of disruption. Prior to joining RBC, John spent nearly 25 years at the Globe and Mail, where he served as editor-in-chief, editor of Report on Business, and a foreign correspondent in New Delhi, India. Having interviewed a range of prominent world leaders and figures, including Vladimir Putin, Kofi Annan, and Benazir Bhutto, he possesses a deep understanding of national and international affairs. In the community, John serves as a Senior Fellow at the Munk School of Global Affairs, C.D. ‎Howe Institute and is a member of the advisory council for both the Wilson Center’s Canada Institute and the Canadian International Council. John is the author of four books: Out of Poverty, Timbit Nation, and Mass Disruption: Thirty Years on the Front Lines of a Media Revolution and Planet Canada: How Our Expats Are Shaping the Future.

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