A Creative Economy in Canada?

By Peter Hackett

Canada is rich because of an abundance of natural resources. For decades, governments have made much of the need to diversify the economy. However, these many innovation agendas have never been crucial. Our resources have sheltered us. The extractive economy is stable, sustained by incremental innovation, smart people, knowledge and advanced technology. We are a supplier of commodities to the world. Our dollar tracks the price of oil quite nicely.

In her 1979 Massey Lectures, Jane Jacobs observed that the extractive economy had shaped the mindset of Canada's institutions: "We must be aware of Canada's customary view of economic life, and its traditional approach to economic development. The Canadian approach emphasizes exploitation and export of resources, to the neglect of industry and services based upon manufacturing.

"The experience of Canada has been that the largest and most quickly obtained fortunes, whether public or private, come from resources … Societies like individuals are shaped by their experiences. Canada's get-rich quick economic experiences have helped mould all the country's major institutions: the national government, the provincial government, the banks and other financial establishments. They have shaped the way venture capital is used, the way subsidies are used, the kinds of development schemes considered most attractive, and the thinking of almost everyone in authority. These are not easy things to change. "

Elsewhere, teenage skateboarders and surfers, risk-takers all, sparked by technological innovation, pushed the boundaries of what is possible and created new industries without government intervention. These same impulses produced Google, Facebook and Research In Motion. They will bring the next unimagined thing. This is the creative economy: unstable, emergent and dynamic.

The creative economy also has a social context. Creative people and entrepreneurs are but one strand of Innovation DNA. The other strand is a society receptive to innovation: a society with innovative institutions. The one strand patterns the other. You need both strands. Growth follows only if you have both strands. And the extractive economy, while lucrative, might starve the creative economy from opportunity and aspiration, ultimately hurting our competitiveness and threatening our place in the world.

Metrics

This is the problem policy makers must face and this is the problem that policies have had little impact upon over the past 30 years. Canada trails the world in production of PhDs, return on venture capital and in the role of publically-traded technology firms. Only our resource sector has a productivity advantage over the US.

How to change?

Canada, rich from natural resources, will likely remain rich for a while. Canada has to live as a rich society if it is to attract and retain the people who will build the creative economy. Living rich comes with responsibilities. Rich societies live rich by making large investments in the education of their people and by taking on issues of global human development.

New thinking is needed. We must challenge old ways and ask questions of the status quo. If policy makers think deeply and go to a root cause analysis, they have the chance to create a growth agenda, building a better tomorrow in Canada, rather than settling for an incremental agenda and building a better yesterday.

Policy agendas may be irrelevant to real change. People, not institutions, are intrinsically innovative. Institutions are not intrinsically innovative; rather the reverse. However, on the eve of an S&T policy review, here are some thoughts on where policy might make a difference:

Set altruistic national goals but understand that solutions are emergent: The Bill and Melinda Gates Foundation has shown the way. The Perimeter Institute, Institute for Quantum Computing (IQC), Sustainable Development Technology Canada and Grand Challenges Canada are excellent Canadian archetypes of a path forward.

Strengthen excellence wherever found: Canada is connected to Intellectual Ventures the world's largest source of invention capital (Nathan Mhyrvold), through PI (Steven Hawking) and paleontology (Phillip Currie). This same excellence connects us to research leaders in China. Never ask why support dinosaur research. Ask how excellent it is.

Make the international dimension central to Canada's S&T policy: There has been a sea change in the structure of S&T in the world. Economies once emerging are now leading suppliers of knowledge and green fields for its application. They are building infrastructure and a policy framework to leapfrog today's leading economies. We must partner now for future national interests.

Double the rate of production of PhDs and get them into business: Highly qualified people in firms are the driving force of a knowledge economy. Canada ranks last out of the 15 advanced economies in the production of PhD's per population. We have to change this.

Reward high performing venture capital: Smart VCs build valuable companies. We need VCs who can generate a substantial ROI in order to build successful technology companies in Canada.

Increase the coupling of firms and research institutions: In a knowledge economy, the firm is a learning institution and its research is as advanced as research carried out elsewhere. Canada's S&T policies must recognize this convergence and be modified to encourage this interplay.

Make the humanities, social sciences and the arts vibrant: The central role of creative people can never be understated. They are central to technology development; imagine taking a tour of the tomb of Saint Iago on your TV in 3D. They are central to business, creating a commercial competence in our technology firms.

Focus on inputs not on outcomes: That's how you get fit. As an example, the business of research funding is arguably the most fragmented and most highly regulated industry in Canada. Inflexible rules coat promising new initiatives in layers of extraneous considerations like an accretion of limpets on the hull of a China Clipper. They do not stop us going anywhere but they do slow us down. And if we are to be a global trader in the creative economy, just as on the Cutty Sark, it pays to move quickly and to arrive before the competition.

Dr Peter Hackett is an executive professor in at the University of Alberta School of Business.