The federal budget epitomizes the government’s complete lack of self-awareness about its failure to understand why innovation in Canada has lagged for years. The chapter on innovation and the economy begins by observing “Canada has everything we need to thrive,” with high levels of education, world-class research, abundant energy, and free-trade access to the entire G7 and the EU. Yet it acknowledges sub-par productivity and innovation are the “Achilles heel of the Canadian economy.”
So why can’t Canada translate its ample supply of the supposed raw inputs of innovation into more output? Start with the fact that, according to the latest research from Nobel Laureate Edmund Phelps, the main determinant of innovation is societal attitudes and values, not some laundry list of government policies. After all, the Soviet Union also had high levels of human capital and abundant energy but failed miserably at innovation.
Instead of cultivating risk-taking and entrepreneurship, the budget continues the grape-shot approach of scattering money across a wide variety of programs and industries: $15 billion over five years for the Canada Growth Fund, $1.0 billion over five years for the Canadian Innovation and Investment Agency, $750 million over six years for Innovation Clusters (the discredited centrepiece of the government’s previous innovation policy), $1 billion for a new Strategic Innovation Fund, and $1.2 billion more for regional development slush funds.