Former industry minister takes parting shot at Canada's risk-averse business community

Kevin Carmichael: With a new budget on the way, those bags of cash that Navdeep Bains originally dangled in front of our captains of industry are about to get bigger

Author of the article:

Kevin Carmichael

It’s up to Navdeep Bains’ former colleagues to write the final chapter of his legacy. Photo by Blair Gable/Reuters/File

Navdeep Bains earlier this spring spoke to me about his tenure as industry minister, which inevitably led to questions about Canada’s eroding competitiveness. He said that he thought he’d done a pretty good job of creating the conditions for a more innovative economy. But the corporate elite? Not so much.

“The ball is back in business’s court,” Bains said. “Frankly, if businesses don’t do this, I think in the long run they will struggle. They have to start changing their behaviour significantly.”

How’s that for a parting shot?

Bains wasn’t the first Canadian policy-maker to get frustrated by Corporate Canada’s aversion to risky bets on research and cutting-edge technology. But it’s been a long time since anyone in Ottawa tried to coax them to keep up with the times by dangling big sacks of cash in their faces. All they had to do was demonstrate some ambition and be willing to complement the federal government’s contribution with an investment of their own.

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With Prime Minister Justin Trudeau’s next budget set for release on April 19, it might be a good time for a quick review of Bains’ tenure.

Finance Minister Chrystia Freeland last fall said she was prepared to spend as much as $100 billion on accelerating Canada’s shift to an economy whose contours are shaped by digital technology and climate change. Those bags of cash that Bains originally dangled in front of our captains of industry are about to get bigger. Bains is gone, but he shouldn’t be forgotten.

It’s difficult to ascertain who deserves credit for what gets done in Trudeau’s Ottawa, a place so tightly controlled by the Prime Minister’s Office that many cabinet ministers are as invisible as the lowly backbenchers. Still, Bains’ tenure marked the return of industrial policy, so he at least oversaw a monumental shift away from the decades-old assumption that the best way to stoke investment was through strategic tax cuts.

The laissez-faire era that started in the 1980s aligned with some decent economic growth, but investment in innovation was mostly disappointing. The countries that were at the forefront of the digital economy were those where government and politicians had few hang-ups about their ability to pick winners and losers.

In the United States, the Barack Obama administration backed some duds, but it also bailed out an ambitious electric-vehicle maker called Tesla Inc. in 2009. Tesla is now worth as much as all the big automobile makers combined, calling into question the notion that governments can’t pick winners.

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Trudeau and his advisers weren’t expecting to win the election in 2015, so their thinking on innovation was incomplete when they took office in November. One of the first things they did was change the name of the department to Innovation, Science and Economic Development, condemning Bains to spend his cabinet career as the minister in charge of a department called “I-said.” He doesn’t seem to have minded.

“The new title spoke to the ambition and it spoke to the new global reality of how countries were embracing industrial policy through the innovation lens,” Bains said. “It has to be a partnership model. It wasn’t exclusively government that was going to drive growth and create jobs. It was my job to create the conditions for growth and job creation.”

At some point over the past Christmas holiday, Bains decided he’d rather spend more time with family than commit to another term as the member of Parliament for the Toronto-area riding of Mississauga-Malton. If he had hung around, he would now be a few months away from supplanting John Manley as the second-longest-serving industry minister in Canada’s history, trailing only the legendary C.D. Howe.

“He was a great cheerleader,” said Mike Wessinger, chief executive of PointClickCare Technologies Inc., a Mississauga-based developer of software that helps long-term care homes manage data. “He would always proactively reach out. It was great that he cared.”

It’s easy to dismiss the importance of cheerleading. Canada’s digitally native companies were struggling to be taken seriously in Ottawa a decade ago. Former prime minister Stephen Harper pitched in with the Obama administration to save General Motors Co. and Chrysler Group LLC in 2009, but he let Nortel Networks Corp. fail. The technology industry needed a champion, and it found one in Bains.

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The question is whether Bains will be remembered for anything more than surviving Trudeau’s propensity for mini-cabinet shuffles. The answer is complicated, partly because it depends on the extent to which Trudeau and Freeland embrace the idea that government must be an active player in the modern economy, not a passive one.

Bains’ legacy is undetermined because he left before the job was finished. He oversaw the creation of the Strategic Innovation Fund and the supercluster program, bold initiatives that might not be bold enough. Quarterly business investment in intellectual property averaged 1.8 per cent of gross domestic product during his tenure, compared with two per cent over the previous five years.

Critics of Trudeau’s industrial policy are on solid ground when they ask: what was the point?

“A `B,’ I guess,” Steven Denney, a postdoctoral fellow at the University of Toronto’s Innovation Policy Lab, said when asked to assign Bains a grade. “You don’t really see any outcomes yet. There’s nothing really to assess.”

Bains’ most successful policy probably cost taxpayers the least. Software companies rave about the Global Skills Strategy, which allowed them to get visas for engineers and other high-skilled talent in weeks rather than months. “There’s a real battle for talent,” said Wessinger, who employs about 600 software engineers, most of them from abroad. “We don’t have enough depth in Canada to keep up with demand.”

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The effectiveness of the big-ticket programs remains unclear. Denney observed that the Strategic Innovation Fund has partnered with international firms more often than Canadian ones, while the five superclusters, which split about $1 billion, have under-delivered on the initial hype.

Bains argued that his programs deserve more time. Industrial policy was still derided when he took over the industry department. It’s now mainstream. For now, that’s his legacy. It’s up to his former colleagues to write the final chapter.

• Email: [email protected] | Twitter: CarmichaelKevin

In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.

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