Wednesday Night #1472 with Marc Garneau

The evening opened with introductions of new faces, including Marie-Claude Johnson, a partner at M.R.C.N.R. strategic consultants; Susan Sproule, international development consultant, who has recently returned from Guyana where she was managing an educational training project; accountant Dahlia Zubaida and her husband, Philip Lowee of Megahydro, a private renewable energy company; Paul Shrivastava’s daughter, Claudia, home from her studies in Philosophy and Anthropology in Pittsburgh; and Edmond Bayisabe, a diocesan youth worker from Bujumburu, Burundi.
The SRO group reflected the diversity of our riding and our MP’s interests, which will range in one day from considerations of science policy to serving a meal to 300 people at the Old Brewery Mission.

Innovation – making cool new things that change the world
It often involves new business models and new science.
A measure of our failure to encourage creativity within Canada is the large sums invested by Canadians abroad. Our natural resources, increasingly foreign owned, will ultimately run out, while our educational system and brain power remain underutilized. Innovation, unfortunately, provides more immediate but less lasting results than invention but if the will is there, both the private and public sector have a role to play.
Canada’s abundance of  natural resources and commodities, including agricultural products and water, have provided us with a standard of living to be envied, but is a mixed blessing. While we have been innovative in developing and selling our commodities, we do not appear to distinguish between innovation for the purpose of incremental improvement in a product and thus in profit, and (radical) creativity-driven innovation, the latter being more expensive in the short term but more profitable in the long run.
It’s not that Canada lags in science: our science base is generally considerably better than that of countries that are far ahead of us on innovation. Korea, a post-war zone half a century ago, today is one of the most connected countries on Earth, has roughly the same number of global One Thousand companies as Canada and is a leading producer of consumer electronics. Finland, with the advantage of being a fairly homogenous non-federated- country, successfully reinvented itself from a resource-based economy to a high tech (telephony) one. Israel has the highest concentration of high-tech companies in the world outside Silicon Valley, and the most Nasdaq-listed companies of any country outside North America, and devotes 4.7% of GDP to research in the scientific field – Canada is at a paltry 2%.
The 2009 Canadian Council of Academies’ very significant report Innovation and Business Strategy: Why Canada Falls Short underlines that Canada is a world leader in public investment in research – much of the credit goes to Jean Chrétien’s government. Its two main conclusions: first, that the persistently lagging growth of labour productivity in Canada is primarily due to the weak innovation performance of the business sector; and second, that the weak innovation performance of Canadian business is due to the fact that relatively few Canadian companies adopt innovation-based business strategies.
Large companies don’t do research. They buy small innovative companies in order to acquire the fruits of their research.
The Harper government launched the $200 million Canada Excellence Research Chair program which has successfully recruited 19 of the world’s big-name researchers (and NOT one woman). This initiative, while sending a clear message that Canada values human capital, was carried out without any consultation with the scientific community, e.g. the STIC. Bear in mind that the position of national science advisor to the Prime Minister has been done away with. There is some skepticism about the plan to import the ‘rock-star scientists’ as they have achieved that status through being widely published. It may fairly be asked whether their presence in Canadian universities will result in real inventions which generally take many years to come to fruition (example: the transistor would never have been so successfully commercialized without the huge sums of money that were poured in by the military-industrial complex).
Jeffrey Simpson applauds the CERC “Stephen Harper’s government deserves an “A” for the conception, execution and delivery of the program that lured 19 renowned scientists to Canada from overseas.” Tony Deutsch, on the other hand, is skeptical about the benefits: Placing people with long publication lists into the University of PEI, I am sure, will not make for new creative entrepreneurs, and even less for people whose productivity is stuck below the legal minimum wage.

Roadblocks
1.The lack of access to capital is deplorable. The income trust vehicle did give small companies access to capital at a reasonable cost, permitting them to invest in (particularly shale extraction) technology, and their rates of growth were admirable. Pension funds, once a good pool of capital, are struggling to reorganize as they face huge liabilities as the population ages, the stock market does not give adequate returns to meet their needs, risk must be minimized in order to meet long-term obligations to pensioners. Publicly listed banks and insurance companies are highly regulated, required by the market to maintain a 15% growth in ROE and are measured against world-wide competition. By definition since the financial crisis, they are risk averse.
2. Angel /venture capital is sadly lacking in Canada – V.C. is at a 14-year low – and the few venture capitalists want to take major positions – as much as 60%. Furthermore, there is a cultural issue – Canadians are generally risk averse. Companies are getting their financing from Boston or California, which means that eventually the technology and people will leave Canada.
3. Public funding
There is a natural contradiction between how government sees planning and spending on science and how science sees planning and spending on science. Government with its dedication to accountability does not accept the risk inherent in the science approach to testing a hypothesis. One encouraging development: the emphasis by the Clerk of the Privy Councilon risk management in the public service.
It is so complex to qualify for R&D funding that companies have to hire people just to fill in the forms. The situation with SR&EDs  (Scientific Research and Experimental Development Tax credits) is equally complicated and  frustrating for SMEs, many of whom hire a middle man to act on their behalf  for a percentage of the funds obtained. A more flexible, responsive and less bureaucratic system is essential for the survival of many smaller companies.
4. Attribution of ownership of intellectual property to the scientist/developer, rather than to the funding institution, as has been done so successfully at the University of Waterloo. The government’s attitude is that if it funds the research leading to the IP, then it owns the IP. Meantime, valuable developments from government laboratories which should be transferred to industry are languishing unused in those labs.

Paradoxically in the area of entertainment, both creatively and technologically, Canada ranks third in the world in the area of entertainment software. How did Cirque de soleil achieve its world-class stature? Why the success in all aspects of the entertainment field? Because the government had nothing to do with it? Because of tax structures and/or incentives? Because of something in the air? Or because it played to a natural strength? Whatever the reason, Canada should exploit its natural strengths.

Musings on national strategy
Remove the energy, materials and banking from the TSE and there is almost nothing left. There are only two large manufacturing companies: Magna and Bombardier. The mining sector was once a core Canadian value in terms of knowledge and capacity to invest, until we sold all our mining companies to foreign interests, depleting an entire cluster. Now research is done overseas and operational decisions depend on a head office somewhere else. Our government was not engaged in strategic thinking about how to restructure and maintain the industry. This lack of industrial strategy affects what opportunities are available to the very talented pool of students emerging from the universities.
The pharmaceutical industry offers a grim counterpoint. There are those who would dispute the veracity of the reassuring tagline Pfizer is inspired by a single goal: Your health, suspecting that the only health of interest is that of the bottom line. In the wake of last year’s acquisition of competitor Wyeth, Pfizer has announced the elimination of 6,000 jobs, plant closures and reduced activities. The purchase of Wyeth was in order to protect their top line, realign their capital, maintain their dividend and their stock price. In the opinion of one observer, the whole industry is in need of restructuring because it is run by the wrong people. Don’t count on the pharmaceutical companies for important health research; they don’t have the right business model.
Do we need to amend the Canada Investment Act? If so, how?
Are we basing our strategy (such as it is) on out-of-date concepts? Japan’s Ministry of Trade is convinced that the future economy will not be a society driven by consumption of consumer products and services, thus corporations are being encouraged to stop selling products and start selling services. An intriguing example: Toyota as a supplier of transportation services, including car, mechanical maintenance, etc. in return for a monthly fee. Canada should be thinking of how to become a low-carbon economy, how to gain competitive advantage based on strengths identified here. If not risk takers, then create sectors that require only moderate risks. We are moving in to a different world, how do we innovate in our approach?

The Pulp & Paper and forestry sector
Two announcements within the last 24 hours may indicate a promising field of expertise for Canada. The first is the announcement that Canada’s forestry companies and environmental groups have come to a made-in-Canada agreement that will see logging in 29 million hectares of boreal forest suspended so a plan to preserve the woodland caribou can be developed. Forest industry, green groups strike deal. The second is that after five years of R&D, Cascade Inc has launched “intelligent paper” that fights the spread of bacteria by hand contact.

Science Education
The Mariannopolis Science Camp has been inexplicably canceled despite a 40% increase in enrolment over its first year. The camp was designed to expose kids to ‘age-inappropriate’ science with the help of exceptional volunteers from McGill, Concordia and similar institutions. The goal to inspire the next generation of scientists. It is reprehensible that such an innovative and proven initiative should disappear because of short-sightedness on that part of the host academic institution. Whatever the outcome this year, Nigel Penney is determined to continue his efforts to initiate  young people into the wonders of scientific methods.

The Financial Activities Tax (FAT) proposed by Gordon Brown and subsequently by the IMF has generated considerable commentary in Canada where the feeling is that the Canadian institutions should not be penalized for having weathered the financial crisis so well. “Tax” may be a misnomer; it is more of an insurance premium against future crises, but it is likely that the levies would prove inadequate in such an event. Better regulation for consumer protection is key. [Note of caution: the 1994 Canadian government regulation of Asset-Backed paper cost the consumer $32billion]

The gun registry debate is returning to Parliament with a vote either in June or September. The public debate over the initial setup cost was brief, the support for the legislation high on the part of the urban population and law enforcement officials, but presumably at the insistence of rural Canadians, the acrimonious debate is about to be reopened. If past behavior is an indication, the initiative should garner additional support for the Conservative government in rural Canada while testing the N.D.P. and the leadership of the Leader of the Opposition in Parliament. It would be most unfortunate if the main purpose of the exercise were more to exploit the weaknesses of the opposition than to correct a perceived misreading of national will.

Asbestos
The continuing export sales of asbestos to third world countries is troubling. Canadians won’t buy it. It is being removed from the walls of Parliament, yet the Quebec Liberals, federal Conservatives and the Bloc continue to support its export and to finance the Chrysotile Institute, arguing that the type of asbestos mined today, chrysotile (white asbestos), is different than the type (amphibole) that has wreaked so much havoc. It is used for things like cement, a solid that is less likely to release the deadly fibres into the atmosphere, and provides major improvements to sewer pipes in the developing world. While this may be true under controlled circumstances, the fact is that once the product is exported, Canada has no further control.

*******************************

The Prologue
Marc Garneau will be with us. While he does not quite consider Wednesday Night a Town Hall, he looks forward to his unfortunately too infrequent visits as an opportunity to enjoy an intelligent, non-partisan discussion of issues and concerns to people in his riding – and Quebecers beyond the borders of Westmount-Ville-Marie.

Our purpose is to give Marc positive suggestions of what he – and we together – can do to make the country stronger and more reflective of the image that we and the world want to retain of Canada.  This is not a Liberal policy evening, but an occasion for people to come who do not have the opportunity to meet with him on a regular basis. We should not lack for topics given Marc’s special interest in Research, Science and Technology, Industry and  Innovation, Energy and Environment, Governance. He also has a profound commitment to social issues as evidenced by his first Private Member’s Bill advocating the establishment of a national Children’s Commissioner.

Marc Garneau: A sorry state of affairs: Canada gets failing grade in science and innovation
(Hill Times) Let’s get down to brass tacks; Canada has no science policy. It is drifting and its competitors are overtaking it. What it has is a minister of state who says exactly the same thing every time he is questioned on the subject: Canada is making record investments in science and technology.” This is not only false, it doesn’t answer the question.

Developing Canada’s digital economy
“The world’s economy continues to evolve rapidly and a renewed vision is required,” said Liberal Industry, Research and Technology Critic Marc Garneau. “Knowledge and creativity are the hottest commodities and increasingly powerful drivers of Canada’s economy, and the Internet is their medium.”
While other developed countries are investing heavily to capitalize on the digital economy, Canada is falling behind in terms of its commitment to connectivity and universal access.

Aside from Marc’s specific areas of interest, there will of course be other items on the agenda, including the final resolution of the U.K. elections. Reactions have been highly mixed, from Johann Hari’s indignant This Is Not What the British People Voted for to Matthew Parris The political earthquake in the rose garden: It almost felt as if a divine hand was at work, bringing together two men to blow away years of staleness, cited approvingly by David Brooks in Glimmers of Hope. Meanwhile The Guardian explores What the coalition means for environmental policies including nuclear power, aviation and transport, climate talks, conservation and renewable energy, and David Frum offers an excellent analysis of the key elements of the coalition agreement in Three messages from Britain’s coalition government,
Ensuring our Canadian content, pundits observe the U.K. experiment with considerable interest – and even envy (Chantal Hébert: U.K. shows Canadians creative solutions to minority rule; Can’t we just get along? Canadians view minority governments as distasteful aberrations — we should learn from the British example how to make them work ; Kelly McParland: We want a British coalition too)

The Gulf of Mexico oil spill and the dramatic political fallout has engendered not only environmental concerns, but important questions of unconscionable failure of regulatory oversight (U.S. Said to Allow Drilling Without Needed Permits) and any pretense of good governance (Shadow Elite: Think BP’s The Bad Guy? Think Bigger, Way Bigger) Canada’s plans for oil drilling are much in the news as a consequence of the Deepwater Horizon disaster, with different approaches announced for Nova Scotia and Newfoundland. The politics of offshore drilling. Not everyone is reassured as Janet Bagnall makes clear in We can’t trust Big Oil If BP’s operating plans are as good as they get, then we’re all in trouble. Meanwhile, Canadian legislators grill BP over Arctic drilling and came away less than happy.
Thomas Friedman ties the oil spill and innovation topics neatly together:  No Fooling Mother Nature
After the oil spill in the gulf, an energy/climate/jobs bill is needed more than ever. America has to stop messing around with the environment’s future.

Guy Stanley has set a good example: My top of mind concern is not so much science–where the record is not that bad although beginning to fray—but technology innovation where we have next to zip. Indeed, many countries which we surpass in academic science out-innovate us, i.e. have a far greater ability to turn science into game-changing devices that dominate markets world wide. The government long ago seems to have stopped using the word “innovation” in any specific sense and the Liberals don’t seem to be using it at all-preferring instead the old ‘S&T’ formula which is not the same as innovation. So I wonder if Marc has a comment that will clarify the Liberal position and plans… Margaret Lefebvre, wearing her NRC hat, will have comments on the role of the NRC in “Building an Innovative Canada”  and NRC’s Success Stories, and she looks forward to suggestions as to how to generate innovation. We must also add that the Couchiching Annual Conference – another of Margaret’s great passions – will address Now What? Innovation and Global Competitiveness

Canada’s sound fiscal position and conservative banking system seems to have helped us weather the downturn. What steps need to be taken at this point to strengthen our economy and boost productivity as the effects of stimulus funding fade? How can Canada leverage the changed economic landscape to our advantage? What are our strengths and weaknesses? How do we build a productivity and innovation framework integral to Canada’s long-term growth and success?

Should we run out of steam on these topics, there is the worldwide bank tax or Financial Activities Tax (FAT), proposed by Gordon Brown and likely to be discussed at the G8 and G20. The EU and IMF, among others, say they think such a tax would produce a pool of money that could rescue failing banks and reduce the chances of a major banking collapse in the future. Mr. Harper is definitely opposed on the basis that it would  unfairly penalize well-regulated Canadian financial institutions that survived the global economic meltdown (CBC).
As the global debate over a tax on banks to pay for future bailouts heats up, some are pitching an alternative system with a mouthful of a name — embedded contingent capital. Embedded contingent capital is the term being bandied about by Canadian finance officials as an alternative to a global tax on financial transactions. At its core, it’s a way of converting debt to equity. More on Canada’s bank tax alternative .

Paul Martin agrees, but believes that Canada should take a lead in bringing the G20 to agreement on a regulatory regime.

And DON’T FORGET : Tuesday, May 18 6- 8 p.m.
Book Launch for Sheila Arnopoulos  —  Everyone is invited
Saris on Scooters — How Microcredit is Changing Village India | Saris en scooter – La révolution du microcrédit dans l’Inde des villages
Q&A with Sheila McLeod Arnopoulos
Paragraphe Bookstore, 2220 McGill College Avenue