Opinion: Untangling the great policy mess of Canada’s innovation problem – The Globe and Mail

Illustration by Domenic Bahmann

David Naylor is president emeritus of the University of Toronto. He has served on federal panels addressing funding and governance of support for extramural academic research and industrial research and development.

Stephen J. Toope is president of the Canadian Institute for Advanced Research. He has headed the universities of Cambridge and British Columbia, McGill University’s Faculty of Law and the U of T’s Munk School of Global Affairs and Public Policy.

In the first week of September, Canada received unfavourable attention from two international news outlets. One instance was triggered by a government of Canada media event and news release. Visiting the University of Alberta, Employment Minister Randy Boissonnault presided effusively over an announcement of $960-million in “support for researchers and projects at institutions across Canada.” It turned out that this was a public relations exercise – a roll-up and repeat announcement of funds already allocated by federal granting agencies in the normal course of business.

Big announcements of research funding for universities and colleges are observed closely by the British-based Times Higher Education, arguably the world’s most influential ranking agency and information clearinghouse for the sector. Paul Basken, the agency’s North America editor, had previously reported that Ottawa is being pressed to augment research funding by universities, colleges, research hospitals and a grassroots coalition spearheaded by graduate students and postdoctoral trainees. Mr. Basken viewed the live stream of the Alberta event and later described it as a “faux announcement” under a headline referring to “Trudeau’s science funding feint.”

Two days later, Tej Parikh at Britain’s Financial Times weighed in. Before joining FT as an editorialist, Mr. Parikh was chief economist at Britain’s Institute of Directors and lead economist at Fitch Ratings, a competitor with Moody’s and Standard & Poor’s. The headline and subhead of his commentary speak volumes: “Why isn’t Canada an economic giant? The North American nation has vast potential, yet underperforms on the global stage.”

After listing all of Canada’s natural and geographic advantages, Mr. Parikh observed: “By purchasing power parity, its economy is ranked 15th globally by size, behind the likes of Turkey, Italy and Mexico. The OECD has forecast Canadian per capita gross domestic product growth up to 2060 to be the lowest among advanced nations.”

Mr. Parikh also zeroed in on a core weakness that has been highlighted recently by domestic commentators, including The Globe and Mail’s Tony Keller, when he wrote: “Poor productivity is at the heart of the country’s growth challenges. In an hour a Canadian worker produces just over 70 per cent of what an American can – that’s below the euro area and even the U.K. based on 2022 data.”

A long-standing short circuit in policy thinking

These two issues – dodginess around Canada’s shortfalls in funding independent research, and concern about our flagging productivity and national wealth – are closely related. Unfortunately, the nature of that relationship has typically been misconstrued by successive Canadian governments. Some history may be illuminating.

In the 1990s, Canada was in the throes of a painful recovery from a domestic fiscal crisis caused by massive government indebtedness accompanied by high interest rates. Along with many sectors, funding for research and development in the higher-education sector was sharply constrained. The fiscal recovery was accompanied by growing concerns about Canada’s lack of business innovation and overdependence on natural resources. University leaders seized the opportunity to make the case for economic transformation based on augmented research activity, including higher enrolment of graduate students in research-based master’s and doctoral programs.

Accordingly, in the late 1990s and early 2000s, the Chrétien government engaged in a substantive dialogue with universities about their role in catalyzing a more diversified and innovative economy. The result was a series of major investments by the federal government commonly referred to as the Innovation Agenda. These outlays included: establishment of the Canada Foundation for Innovation to support research infrastructure; creation of 2,000 Canada Research Chairs with an average value of $150,000 a year; launch of the Canadian Institutes of Health Research, with a wider mandate and much bigger budget than its predecessor agency; and augmented funding for both the Natural Sciences and Engineering Research Council and Social Sciences and Humanities Research Council.

Illustration by Domenic Bahmann

Canadian research blossomed rapidly. In the argot of that era, we punched well above our weight in multiple disciplines. Enrolment in graduate degree programs, while still well below levels in the United States, also rose. On the other hand, there was little change in Canada’s lagging indices of private-sector productivity, innovation or business investment in R&D.

In hindsight, expectations for the Innovation Agenda reflected naiveté in both universities and government. Serious consideration of why some countries are highly innovative and others are not would quickly have dispelled any assumption that pouring money into independent research was on its own going to transform the Canadian economy, let alone do so in a single electoral cycle. The university presidents could plead willful optimism and institutionally self-interested enthusiasm. It is harder to understand why the Chrétien government as payor did not appreciate that its investment might, in a manner of speaking, enhance the supply side of the business innovation equation, but not address the fundamental question of limited demand for research inputs and recruitment of employees with research-relevant skills.

On those fronts, OECD analyses had already shown Canada to be an outlier in its nearly complete reliance on tax credits as an incentive for business expenditures on R&D. It was obvious that Canada in the 1990s remained heavily reliant on extractive industries where capital-intensive technological shifts were under way, but might not register as R&D spending. And it was also no secret even then that some sectors – such as banking and telecommunications – were both concentrated and regulated in a fashion that did more to foster en bloc incrementalism than competitive innovation.

Growth in the economy peaked in 2000 and then slowed with the bursting of the tech bubble in 2000-01. Nortel Networks stumbled toward bankruptcy, while Research In Motion with its iconic BlackBerry smartphone assumed the mantle of Canada’s technology icon, eventually surpassing Royal Bank of Canada as the country’s most valuable company in the fall of 2007.

Meanwhile, the new Harper government took office in 2006 and began questioning the value of further broad increases in basic research funding. One very senior federal public servant routinely reminded university leaders of the limited payoff from the Innovation Agenda and upbraided them for being entitled if they advocated for any additional funding. The focus instead shifted to new investment in a combination of government-directed research priorities, opportunistic funding of a handful of high-profile projects based on direct pitches to political decision-makers, and what might be seen as selective big bets – a limited number of generous new awards for graduate students and multimillion-dollar research chairs, along with some megaprojects that combined independent science and scholarship with delineation of tangible economic outputs.

During the fiscal crisis of 2008-09, the capital needs of universities and colleges were included in stimulus spending with some welcome refurbishment of research facilities. But otherwise, there was little growth in operating or personnel funding for independent research. Younger researchers were squeezed hardest. However, there was growing concern and frustration throughout Canada’s scientific and scholarly community.

When the Trudeau government took office in the fall of 2015, it appointed Navdeep Bains as Minister of Innovation, Science and Economic Development, reinstating a chief science adviser position that had been eliminated by the previous administration.The Canadian Press

Renewed energy, same short circuits

The new Trudeau government took office in the fall of 2015, sending out strong messages that a golden era of valuing science and research had begun. It appointed a Minister of Science, reinstated a chief science adviser position that had been eliminated by the previous administration, and provided an early injection of funds into the three federal research granting councils (Canadian Institutes of Health Research, Natural Sciences and Engineering Research Council of Canada, and Social Sciences and Humanities Research Council of Canada). In June, 2016, the Minister of Science initiated what became known as the Fundamental Science Review and appointed an expert panel to review federal support for independent research across all disciplines. One of us chaired that panel.

That same month, the government announced its own wide-ranging Innovation Agenda – reviving terminology from the Chrétien-Martin era. The wording of the press release gave hints of the old logic model of instantaneous translation of basic research to boundless prosperity. However, later that year, the Industry Minister acknowledged the challenge: “We firmly believe that basic science and science excellence are absolutely essential for innovation, for finding new solutions. The real issue, though, is how do you take those ideas from the lab and how do you take them to the market?”

On the bright side, in the 2018 budget the federal government responded to the report of the Fundamental Science Review panel with substantial new support for the core open competitions funded by the federal granting councils, along with further investments in personnel, infrastructure and other operating programs. There were gaps, to be sure, with the total outlay about 40 per cent less than recommended. The increases were also spread over five years rather than the recommended four.

Nonetheless, the 2018 budget provided a meaningful multiyear lift for countless researchers at different career stages. Since then, the world has been through a terrible pandemic where research played a crucial role in containing the toll of COVID-19. Paradoxically, even as science shone in many ways, the positive impact of at least two years of funding set out in the 2018 budget was largely lost on the research community as normal competitions were disrupted and many scientists and scholars pivoted to focus on COVID-19.

Despite the vision and considerable strengths of the 2018 budget, it offered few direct solutions to the Industry Minister’s riddle. A single page was given over to “leveraging the full potential of business-academic collaboration” and it focused mostly on tweaking the machinery of the granting councils.

Another oddity was its use of research funding metrics. The budget document in three separate places highlighted Canada’s high international ranking in a measure called higher education expenditure on R&D, or HERD. That measure had been dissected by the Fundamental Science Review panel and shown to be misleading, yet it resurfaces to this day.

HERD isn’t a measure of federal funding for research undertaken by colleges, universities and research hospitals or institutes. Although the federal share bumped above 25 per cent during the COVID-19 pandemic, it has usually been less than one-quarter of the total. Business partners, provinces and international funding agencies together contribute about as much as the government of Canada. The remaining half comes from the institutions themselves – a reflection of the extent to which federal research grants in Canada, unlike grants in the U.S., cover at best only the specific operating costs for the research undertaken, and fail to cover the facilities, personnel and administrative costs of research operations.

The working assumption seemed to be that universities and hospitals could simply fund the shortfall out of their operating grants from provincial governments. Those provincial funds were never intended to subsidize federal research grants at the expense of undergraduate education or patient care – but that is exactly what they have done for decades. To make matters worse, in many research-intensive universities, provincial funds now cover one-third or less of annual operating costs.

The BERD that never takes flight

While the federal government can fudge its level of support for independent research by touting the latest HERD statistics, there is no getting around other metrics that are deeply concerning for Canada’s future economic prospects. As we noted earlier, Canada has a serious productivity problem.

It’s not because of the lack of hours worked; Canadians work longer hours than citizens in many other countries. We need to work smarter, and that depends heavily on business leadership. It means that businesses must invest in new and more efficient equipment and in employee training, and create or adopt innovative processes that enhance the production and delivery of goods and services.

Even those measures may not be enough to maintain a competitive edge in a globalized economy. Instead, businesses wedded to incremental innovation will constantly be leapfrogged by other enterprises with a stronger commitment to R&D. The latter group is where one finds the companies that invent new machinery and products, as well as the processes that others emulate with varying success. Those innovative companies not only rely more heavily on highly skilled personnel; they also create new markets for reimagined goods and services, while other companies fight each other for diminishing returns in yesterday’s crowded markets.

Given the importance of business R&D, one might ask how Canada measures up on that productivity indicator. A recent Statistics Canada report revealed that fewer than 2 per cent of Canadian businesses incorporate R&D into their business strategies. No, that is not a typo: fewer than 2 per cent.

Worse still, Canada’s business expenditure on R&D – or BERD – has been falling in recent years and is now under one per cent of GDP, ranking in the bottom third of OECD countries. Canada’s overall R&D investment rate across all sectors was 1.7 per cent of GDP in 2021 versus an OECD average of 2.7 per cent. Last year, Canada’s overall expenditure on R&D fell again to 1.55 per cent, less than half the outlay of our neighbour to the south.

Considering these woeful numbers, it’s pretty clear that Canada’s challenges lie more with demand for research ideas and for research-savvy personnel than on the supply side, except insofar as funding shortfalls limit output. Other data shred the mythology that universities and colleges are inhospitable places for partnerships with industry.

It’s true that the share of HERD derived from business investment in Canada is notably lower than in South Korea and Germany, two countries that remain models for multisectoral innovation. However, our business share is higher than in many other OECD countries. Put another way, while more could assuredly be done to strengthen collaboration between Canadian businesses and academic researchers, the core issue is the extent to which Canadian businesses use R&D.

That’s true in-house, where Canada ranks in the lower third of OECD countries in proportion of employees who are designated as primary R&D personnel. And it extends to research contracted out to other companies or carried out in partnership with non-profits including universities and colleges, research hospitals and other research institutes.

Enormous efforts have been made to understand why businesses in Canada invest so much less in R&D than their counterparts in the U.S., much of Western Europe, South Korea and Japan. Is it our reliance on the export of natural resources and agricultural products? Is it reduced incentives to innovate for our heavily regulated and profitable oligopolies in sectors such as banking and telecommunications? Is it our decades-old reliance on incentivizing industrial R&D through federal and provincial tax credits?

On that front, Canada’s program of R&D tax credits has been criticized for rewarding not only smart research investments but also creative accounting and gaming. Some other nations use research tax credits selectively to promote specific types of investments and sectors, and many countries offer much more direct funding that helps take out the risk from investments in R&D upfront, as opposed to inducing posthoc wrangling as occurs here.

Whatever the cause of our low BERD, it is clear that countless private enterprises have flourished across Canada in decades past, and our economy generated the growth needed to sustain both high employment and strong social programs. It is also clear that the world has changed, and now multiple indicators suggest that Canada’s economy is losing ground. Our growth in GDP per capita has not kept pace with other advanced industrial economies. Even worse, our per capita GDP may actually be lower than reported because it seems our ineptitude now extends to counting the number of people living in Canada. Canadians work hard but are falling behind.

It is thus entirely understandable that not only the government of Canada but also most of the provincial and territorial administrations are focused on finding solutions to our productivity and innovation dilemma. As one example, Ottawa has committed about $1.5-billion to Canada’s five global innovation clusters.

Thus far, there are mixed opinions about the performance and prospects of the supercluster program, but it remains an important experiment in direct funding to bridge business, civil society and academe in pursuit of enhanced innovation and productivity. A review of Canada’s R&D tax credit program is hanging fire and is long overdue.

Given perennial issues with government-sponsored reviews, there are grounds to be skeptical about the outcome. That said, while no one imagines the program will be wound down, streamlining its processes and scaling back its scope have been anticipated as possible outcomes.

Then there is Canada Innovation Corp., slated to get $2.6-billion over four years. This new agency was announced in the 2022 budget. Alas, now in the fall of 2023, there is still little clarity about exactly how the agency will address the country’s lagging productivity and weak innovation indices.

Illustration by Domenic Bahmann

Déjà vu for the research community

Given our many economic challenges, and the major outlays aimed at addressing Canada’s innovation and productivity dilemmas, it is perhaps understandable that federal officials have been cool to any laments from Canada’s research community. Instead, in conversations reminiscent of those with the previous Harper government, we hear senior federal officials privately grumbling that Canada’s research community should spend less time advocating for more funds and more time trying to sort out what it can do to boost national productivity.

The tone is collegial, and the frustrations are understandable, but the whiff of past scapegoating is unsettling. Indeed, the same logical misfires were evident in the press release for the Alberta reannouncement of old research funding. The release advertised an event that would “highlight the government of Canada’s support for world-class researchers who are making discoveries that will ensure tomorrow’s secure and thriving economy.”

Despite counterarguments made at length in the Fundamental Science Review, and despite long-standing counterfactuals in the public policy of many peer countries, governments in Canada persist in caricaturing independent research as primarily a tool for short-term economic impact.

Perhaps then it is worth pointing out other things that the $960-million might have done for Canadians, if it had really represented a new investment. Some of that research might have improved our understanding of human and non-human nature, addressed social and racial inequities or otherwise set out ideas for improving civil society, improved our understanding of Canadians’ shared history, or led to health-related discoveries that might help people live longer and better lives. Other funds might have supported the work of data scientists and geophysicists analyzing climate change patterns and the implications for forest fire risks next spring, or oceanographic studies to help guide sustainable fishing practices in Canada’s coastal communities.

We could go on and on, but perhaps what matters even more than the topics of the research is the talent nurtured in the process of undertaking a serious scholarly inquiry or rigorous scientific study. Fostering a research mindset is now a core part of many undergraduate university degree programs. In professional master’s degrees, course work predominates, but more and more of these programs require completion of an in-depth research report. Intersection with independent research is most intensive with master’s and doctoral programs that demand completion of theses or dissertations, with publishable work expected at the latter level. What one observes in countries with stronger innovation and productivity outcomes is a consistent pattern: Substantially higher numbers of individuals with substantive training in research methods are employed not just by private industry but also by governments, non-profits and in civil society more broadly.

This point should in no way be construed as an endorsement of empty credentialism; skilled trades remain in short supply, and college graduates have been and will always be important contributors to Canada’s economy. However, a crucial reason for supporting independent research is that it remains the substrate for preparing the next generation of innovators who will be in demand if, as we all hope, the Canadian economy transitions to a different footing, with much greater capacity for turning R&D into benefits for all.

It also happens, however, that graduate students doing research degrees, as well as those who pursue postdoctoral specialization, are among the loudest voices decrying a governmental failure to invest. With that, let’s turn back to the current funding situation for Canada’s independent research community.

Another cycle from boom to slump

The recommendations of the Fundamental Science Review were designed in part to help close the gap that had opened up between Canadian funding and the support available in many peer countries. Unfortunately, not only was the total federal reinvestment below the suggested benchmark but it was slower than recommended in its rollout. It was also chasing a moving target. While Canada was playing catch-up, other jurisdictions that started from a higher level were expanding their investments in research and variously maintaining or widening their lead.

Consider Germany. Starting in 2006, federal and state governments committed to increasing real research budgets by three per cent a year, increases that extended to all the major grant-making bodies and networks of applied research institutes that have been integral to Germany’s economic success. Inflation-adjusted federal R&D funding in Germany grew by 3.9 per cent a year from 2005 to 2020, with research support to higher-education institutions growing at a remarkable 5.8 per cent a year.

Thus far in 2023, Japan has made announcements of several new initiatives to shore up scientific research, open new science departments and create massive endowments to stabilize the funding of top research universities. We estimate that the total investment is about $US80-billion. Recently, the British government pledged to increase spending on science by 35 per cent by 2026 from a base already proportionately much higher than Canada’s. And closer to home, this year the Biden administration in the U.S. committed to a US$280-billion increase to science funding over the next decade.

Let’s play skeptic. Research had a big funding boost starting in 2018. Is there really a burning platform, or is the Canadian research community just envious?

The severity of need varies, but the fabric of the research community is threadbare in all too many places. A crucial priority is increasing support for graduate students and postdocs. These are people in their 20s and 30s who are doing research more or less full-time under the supervision of established scholars and scientists. The benchmark level of support for this future brains’ trust has not changed in 20 years, and the number of awards available is radically insufficient relative to the number of meritorious applicants.

In larger and more costly Canadian cities, many of our best and brightest young minds are struggling to cover life’s necessities, and some are simply giving up. None of this can be definitively resolved without a major collaborative effort involving the federal granting councils, provincial funders and host research institutions from coast to coast. But the government of Canada could kick-start the process and claim some moral authority and convening power if it overhauled and substantially augmented its support for these individuals who have the potential to make a difference over decades to come and in every walk of life.

If this isn’t persuasive, go one step up the ladder to early career researchers working in the natural sciences and engineering disciplines. These individuals are employed by universities and research institutes.

It is important to emphasize, therefore, that the research funds promised in the 2018 budget were overwhelmingly allocated to the direct costs of doing research. They did not provide any “raise” to the incomes of researchers who win the grant competitions. A first-time recipient of a core operating grant from Natural Sciences and Engineering Research Council of Canada in 2023 will receive on average $34,758 a year. These are called Discovery grants. The most immediate discovery to be made is that the amount awarded is insufficient to do much of anything, including paying a doctoral student or postdoctoral trainee a living wage.

Switching to the health realm, let’s look at the overall results of the May, 2023, Canadian Institutes of Health Research competition. The average grant size for early-career researchers was $693,322 – or $156,506 a year, based on the overall duration in the competition of 4.43 years. This looks more encouraging until one considers that the success rate was 19.5 per cent. Put another way, fully 80 per cent of early-career researchers were unsuccessful in getting support for their work from Canada’s national health research agency. Those rejection rates, moreover, ranged from 83.2 per cent to 77.8 per cent across the various domains of work supported by the agency.

Whether young scientists do basic biomedical, clinical, health services or population health research, their chances of success were bleak. We hire top people, often attracting them to or back to Canada, and then we kneecap them through lack of basic funding to get a research program going or sustain one already under way.

In the circumstances, it is not surprising that, earlier this year, another independent federal panel chaired by Frédéric Bouchard of the University of Montreal recommended a 10-per-cent per annum increase in funding for research delivered through granting councils over the next five years. So far, absolutely no action has been taken in response to the Bouchard report.

Illustration by Domenic Bahmann

The relevance traps

The Bouchard panel also warned that Canada’s global contribution to research was dissipating even as unhelpful growth was occurring in expensive one-off programs focused on supposedly economically relevant activities. These programs are marked by complex designs and shaky review processes. In many ways, those warnings echo ones give only six years ago by the Fundamental Science Review.

Ottawa’s renewed drive to roll out priority-driven programs makes perfect sense in some instances, such as the current initiative to galvanize collaboration among researchers, industry and government agencies with a view to building Canada’s biomanufacturing capacity. What is harder to understand is why federal government departments have not collaborated more fully with the granting councils to assess the strength of the research elements of such programming.

More generally, the Department of Industry, Science, and Economic Development has spent billions of dollars through its Strategic Innovation Fund, much of it aimed at fostering R&D and tied to the current government’s reincarnated Innovation Agenda. We don’t doubt that most of these expenditures have been justified on the grounds of economic relevance, but we’ve seen little evidence of meaningful oversight to assess the overall design, conduct and cost-effectiveness of these programs.

Independent research funding allocated by the granting councils does not depend on ad hoc review panels assembled by public officials who often have limited research evaluation expertise, nor is there an override on final decisions given to bureaucrats and politicians. The granting council process hinges on external peer review by experts chosen in consultation with senior researchers in the field, followed by a further expert panel assessment. At both levels, consideration is given to factors such as rigour, novelty, plausibility and feasibility. Only the highest scoring grants get funded. One wonders how many of the costly decisions taken by our federal and provincial governments in support of supposedly economically relevant R&D would themselves survive a rigorous peer-review process.

Meanwhile, countless scientists and scholars are already engaged with real-world problems of great economic and social relevance. They do so not only through top-down government programs designed to foster university-industry or university-community partnerships, but most often through research grants that they develop independently, choosing themselves to work with community or industry partners.

Put simply, there is little to be gained and much to be lost by short-changing independent research and reinvesting primarily in narrow-cast applied research programs to spark innovation in targeted sectors. Other countries, most notably Germany, fund applied institutes and applied research personnel to fill specific economic gaps.

While those entities have modest core funding, they depend materially on contracts with industrial partners. Creating that capacity for Canada was among the recommendations offered in the 2011 review of federal support for industrial R&D; the hope was that structural and functional changes would move part of our venerable National Research Council in that direction.

A dozen years later, and despite commendable efforts to build a much larger portfolio of partnered research, the council has nothing like the industrial relevance and impact of Germany’s Fraunhofer Institutes. Founded in 1949 (versus 1916 for Canada’s NRC), this applied research system operates 76 institutes with an annual research turnover of $4.36-billion, 87 per cent on contract, not base-funded. In fairness to the Canadian council, we suspect the difference has much more to do with limited demand from Canadian businesses as opposed to the willingness and ability of its scientists and engineers to engage with industry.

There is also a fundamental contradiction in attempted mass enlistment of independent researchers to do priority-driven applied research. It upends the idea that basic research is often better construed as “yet to be applied” research. Framed another way, the core advantage of having an independent science sector (defined broadly to include les sciences humaines) is that it helps us see around the next bend in the stream of research ideas and findings, and, on occasion, to take human knowledge in new directions altogether.

That is what Canadian scientists and scholars have done, time and again. But what has also happened with depressing regularity is that the rest of the world takes economic advantage of Canadian ingenuity and Canadians are taken for a ride.

The 2011 industrial R&D review observed that in 1874 two Canadian inventors, Woodward and Evans, patented a nitrogen-filled light bulb with better performance than anything else available, but could not get financing to refine and scale the invention. They were eclipsed by other inventors, not least Thomas Edison who used some of his financial backing to buy out the Canadian patent. Insulin became a variation on the same theme, despite Banting and co-workers idealistically imagining a gift to humanity with a patent and plan focused on non-profit development and distribution.

Decades ago, Canadian universities, the Natural Sciences and Engineering Research Council of Canada, and the Canadian Institute for Advanced Research supported Geoffrey Hinton and other pioneers in artificial intelligence at a time of widespread skepticism about neural networks as an analytical and predictive tool. Canadian minds eventually jump-started the global AI revolution.

We also like to boast that the pan-Canadian Artificial Intelligence Strategy was the first of its kind in the world. That is true, and there is strong evidence of economic benefit to Canada, but we still face some harsh realities. First, the private sector in other more-innovative countries was off and running as soon as the great potential of new models of AI became apparent a little over a decade ago. Our scale of investment was soon dwarfed by other countries. We must add, ruefully, that Canadian businesses continue to lag internationally in adoption of all digital technologies including AI.

There are other even more recent examples. Kick-started by the University of British Columbia’s Pieter Cullis, Canadian researchers developed essential technologies for the delivery of messenger RNA, thereby abetting the swift development of vaccines against COVID-19 – and likely many other vaccines in the future. Similarly, Daniel Drucker’s lab in Toronto has played a pivotal role in revolutionizing our understanding of gut hormones and laid foundations for novel therapies for people with Type 2 diabetes, obesity and cardiovascular disease. Given Canada’s still-limited capacity to move novel biologics through developmental phases, let alone manufacture and market them after regulatory approval, both sets of discoveries were either commercialized elsewhere or licensed early – with resultant diminution of the domestic economic payoffs from those discoveries.

All this comes back to shortcomings in our innovation ecosystem. Canada’s business community has been able to thrive for decades despite a relatively small proportion of private companies with meaningful research budgets or a significant cohort of highly qualified personnel who can assess and integrate research discoveries and new technologies. Now many countries are accelerating past us in productivity indices, in GDP per capita, and BERD.

Past decades do offer some encouraging case studies wherein a few innovative companies helped foster the emergence of local ecosystems, as occurred in the Ottawa and Waterloo, Ont., regions. Today, more Canadian universities and research hospitals than ever are actively incubating early-stage ventures based on discoveries by their faculty and trainees. However, Canada’s entrepreneurial ecosystems vary in size and dynamism. Intellectual property strategies and policies remain a work in progress. More generally, while positive steps have been taken, it is clearly still a heavy lift to scale great Canadian ideas into world-changing products and services, especially if one’s goal is to do so from a base at home.

It’s important to emphasize that the STEM (science, technology, engineering and mathematics/data science) disciplines do not have a monopoly on economic relevance. Degrees in commerce, business, finance and economics all obviously come into play.

But the inquiring minds that Canada needs to become a more productive and innovative country need be drawn from every discipline, and increasingly those individuals must be able to work across disciplines. Digital media requires computer scientists, the literacy of humanities’ graduates, and the creative finesse of college-trained graphic designers. Adoption of emerging technologies such as AI requires engagement by social scientists to delineate the societal and economic effects of adoption, along with lawyers and ethicists to help build effective regulatory frameworks. Likewise, sustainable resource extraction depends on the expertise of a range of scientists and engineers, along with guidance from experts in academe and civil society who are attuned to Indigenous engagement and interests.

What now?

If there were an easy fix for Canada’s productivity and innovation challenges, they would obviously not have persisted this long. And, if Canadian businesses had not found ways to be successful and profitable despite a strikingly low level of R&D spending, this country would not enjoy its current standard of living or strong social programs.

Years could be spent debating why Canada’s economy evolved to its current state. Let us emphasize again that it is impossible to apportion causal weights to factors such as ready access to extraordinary natural resources and cross-subsidies based on taxes and royalties on oil and gas, or proximity to the world’s largest and most innovative economy, or our small domestic market made smaller by interprovincial trade barriers, or weak competition resulting from market conditions but also failed competition policies, and so on endlessly. All that really matters is this: Observers in multiple roles in the public and private sectors of Canadian life have seen trouble coming for at least three decades, and now it’s here.

In looking around and forward for solutions, let’s avoid an unproductive blame game. Just as scapegoating the independent research community for Canada’s weak innovation indices makes little sense, there is equally little logic in inflicting see-saw regulations and subsidies on different Canadian business sectors, or villainizing Canada’s work force.

What we suspect does make sense is the implementation of a sustained, multisectoral, pan-Canadian strategy to enhance competition, productivity and domestic business innovation and R&D. Not an easy task in this fractious federation at any time, and especially challenging in the current period of the performative politicization of just about everything.

The good news is that the sky is not falling. Canada remains a magnet for talented immigrants from around the world. Even Mr. Parikh at the Financial Times acknowledged Canada’s enduring appeal as a civil society, observing: “Rising up the GDP tables is not the be-all and end-all for any nation.” That said, the bad news is that the long-term economic trends are largely negative and delay is not our friend.

What particularly worries us – and from all we hear and read, a substantial number of our fellow Canadians – is a sense that the social fabric is fraying as Canadians contemplate unaffordable housing, a decline in the accessibility of health care services, wobbly execution of major projects commissioned or managed by all levels of government, mounting evidence – in fires and floods – of a global climate crisis hitting home, and political polarization that seems to preclude rational debate and compromise on so many fronts where a broad consensus is needed to move the country forward.

None of this would disappear overnight if Canada’s innovation and productivity indices were to move sharply in a more positive direction, or if our GDP per capita were to rise rapidly rather than fall ever further behind peer countries as the OECD predicts it will. On the other hand, if current economic trends hold, it seems crystal clear that successive generations will face diminished prospects on multiple fronts, and Canada’s standing in the global community cannot help but erode. A growing sense of societal decline is likely to exacerbate many of the other worrying trends we just catalogued.

We have made the case that, in responding to this profound challenge, the Canadian government should ensure that its support for independent research catches up to peer countries with higher per capita GDP growth and BERD. The situation is particularly acute for the research operating grants of early-career researchers across disciplines, and as regards awards for graduate students and postdoctoral trainees who are struggling to make ends meet in many Canadian cities.

This next generation of researchers has particular importance because of the fluency with which they cross disciplinary boundaries and move along the continuum of fundamental and applied work. A further consideration is that this generation is much more diverse, with a far higher proportion of women, than the current cadre of mid-career and senior scientists and scholars. Undercutting this future brains’ trust will not only do a world of damage to the future of Canadian research, it will also sharply reduce the flow of agile and inquiring minds available to move all sectors of our society in productive new directions, and to become the leaders of innovative new Canadian companies.

However, at present, governments – both federally and provincially – are engaging in scattershot responses to advocacy and grievances from different sectors, including the research community, without much clarity on a long-term strategy that will change the country’s economic trajectory. Past reports, such as the 2008 competitiveness panel and the 2011 review of federal support for industrial R&D, made numerous recommendations that were ignored. Repeated calls over many years for the federal government to create a pan-Canadian body that can provide continuing input into how the country can accelerate and better align supply and demand in the innovation ecosystem have fallen on deaf ears.

Put another way, we need to accelerate both independent research with its output of highly-qualified personnel and pipeline of new ideas, discoveries and inventions, and the efficient and productive uptake of R&D and of those same personnel within diverse sectors of the Canadian economy.

One of the tasks for any oversight body must be critical scrutiny of Canada’s current suite of policies, programs, agencies and expenditures related to research, development and innovation. The Fundamental Science Review warned that Canadian governments of all stripes start more boutique programs and agencies than they shutter. In a time of financial stringency, there is a stronger imperative for more rigorous reviews so that scarce resources can be deployed more productively.

The 2023 Bouchard Report framed this need eloquently. It noted that a Council on Science and Innovation was once in the works in response to recommendations in the 2017 Fundamental Science Review, but it never materialized. The 2023 panel observed: “At a time when other countries are launching bold, ambitious and coherent research and innovation strategies to propel themselves to become global science, research and innovation powers, Canada is pushing ahead with various sector-specific strategies, but lacks a cohesive, common vision that would coalesce the science and research community to work toward common strategic objectives.”

The panel accordingly called for creation of an independent advisory body “to provide the government with strategic policy advice on science, research and innovation, and evaluate and publicly report on the support for, and performance of these activities in Canada.”

Unfortunately, over the past 25 years, Canadian governments have had great difficulty marshalling the political courage to decommission projects and agencies that have outlived their usefulness but are very quick to dismantle any advisory bodies that might possibly speak truth to power or take a long-term view. The price of that expediency has been three decades of uneven support for an independent research community that has repeatedly demonstrated its international competitive standing, while untold billions flow steadily into innovation-focused policies and programs that, despite some shining successes, have failed to stem the troubling long decline in Canada’s R&D expenditures, productivity and the GDP per capita as compared with peer countries.

To that end, and to ensure some overdue long-termism that allows different strategies to be tested, scaled if effective, and shelved if ineffective, we respectfully suggest that the type of oversight and advisory body recommended by the Bouchard panel be embodied in legislation. That would be a first, important step in finally beginning to address our systematic failure to connect research to innovation in Canadian businesses. If we can do that, we can hope to reverse an economic trajectory that threatens to undermine the future of young Canadians. They deserve action now.