POKING AT PROBLEMS — Economist CAROLYN WILKINS, senior research scholar at Princeton University, has spent years thinking about productivity, its ails and gains. The former deputy Bank of Canada governor will join economists, business leaders, policy makers and politicians in Toronto Thursday at Canada Growth Summit 2024, a Public Policy Forum event at which POLITICO is a media partner. The stated ambition of the gathering: “Fixing productivity once and for all.” Monday on Parliament Hill, Conservative MP BRAD VIS tried to get the House industry committee to launch a study on Canada’s “alarmingly low productivity.” His motion was defeated. Playbook got in touch with Wilkins ahead of the annual wonkfest to ask how she’s thinking about Canada’s productivity problem — a topic she raised concerns about five years ago. You’ve previously flagged that we’ve entered an era of supply-constrained economics and identified our aging population as a challenge Canada is ill-prepared to face . Do you believe this issue needs to be addressed now? Aging of the population creates growing spending pressures on already strained health and long-term care systems. Meeting this major challenge will put an extra financial burden on the younger generations. And, aging is only one of the many forces facing younger Canadians; climate change, housing affordability, digitalization, and heightened geopolitical risks. The clock is ticking because addressing each of these will require major investments that may take years to complete — development and deployment of new medical infrastructure and technologies, energy-saving technologies in agriculture, building resiliency in critical supply chains, and the list goes on. That’ll take an enormous amount of capital, both domestic and offshore. You just have to look at the investment numbers in areas like worker training, R&D and machinery and equipment to see that we’re not starting from a position of strength. This is an incredibly frustrating situation given our great potential in many areas — agriculture, aerospace, biotech, AI and energy — and overall this situation has resulted in Canada lagging our peers in terms of GDP per capita, productivity, and being a competitive place to do business. TREVOR TOMBE floated an idea that Canada could benefit from an independent watchdog — or a group reminiscent of the disbanded Economic Council of Canada — to scrutinize public policies and improve productivity. Is he onto something? Canadians could benefit from informed and non-partisan views on strategies to reignite dynamism in the Canadian economy. When the Economic Council was created in the early 1960s to look at a wide range of economic issues, there was relatively little outside research and economic policy advice. Today is quite different, with a number of academics, and private institutes doing excellent work — CIRANO, CIGI and CD Howe, just to name a few. I agree with Trevor that independent advice would help, and this advice needs to be informed by research and practical on-the-ground experience. I just saw a chart from Credit Union Central that showed, as a share of GDP, we invest as much in renovations and ownership transfer costs in housing as we do in machinery and equipment and IP. To shift this, we could consider an independent, non-partisan Council that is focused on addressing well-defined, strategic problems for industry. How best to train or upgrade the skills of workers when the pace of change is so rapid, especially if you are a small and medium-sized enterprise? How to increase the low productivity in residential construction, and what regulations could be modified to achieve this? What is needed to address the pain points in the approval processes for major projects (for example, mining critical minerals, energy) and close gaps in physical (roads and ports, for example) and technological infrastructure? Are there countries or jurisdictions you can point to that have enacted creative or elegant policies worth emulating to reverse slumping productivity? Part of Canada’s problem is low investment in R&D and low intellectual property, which make the U.S.’s ARPA (Advanced Research Projects Agency) model worth pursuing — the strength is to have private and public sectors working together to translate research into technologies that industry can adopt. It’s not without challenges, but this model has been applied successfully to sectors as diverse as defense and health. This isn’t a novel idea as a Canadian version of APRA was part of recommendations given by the Business Council of Canada and in the “New North Star” paper commissioned by the Public Policy Forum. Productivity is also about businesses and workers having access to the right equipment, infrastructure and regulatory environment. That includes traditional assets like ports, roads, public transportation, and efficient and predictable processes to get an investment project out the door (it can take up to 15 years for a mining project!). There are some home-grown examples of successful engagement with Indigenous communities on projects, including in the energy sector. Other countries have in place ways to get independent advice on these issues. Australia has a Productivity Commission that just came out with recommendations, including on how to enable workers (some of which the government has said it will pursue). They also have an Infrastructure Agency that advises on long-term infrastructure planning. Germany and Demark have independent advisory groups that advise government on reducing unnecessary regulations and compliance costs. Last thing I’ll say is that we need a long-term economic plan that we can afford, and so we will need to face the necessary tradeoffs to get the job done.
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