How should pro-market types view the Parliamentary Budget Officer’s three-table, 1,200-word “report” on Ottawa’s failure to launch its “Innovation Superclusters Initiative (ISI),” which it announced to great fanfare — i.e., normal fanfare for this hype-addicted government — in 2018? The same way modern scientists regard medieval alchemists’s efforts to turn lead into gold. You admire people’s ambition in striving for the impossible but on balance the less money and time spent on it, the better.
By supporting what it deems five key technologies that just happen to be centred in five key areas of the country, the federal government is trying to: encourage innovation, spur GDP growth, “create” jobs and spread the knowledge economy more evenly across the Canadian land mass. These are all worthy ends — even if some Canadians dislike GDP, others hail the end of work, and almost all of us understand that the charm of much of our land mass is the absence on it of the knowledge or any other kind of economy.
But however worthy these goals are, we don’t actually know how to achieve them, at least not in any detailed, operational way that would enable us to tell a mid-level federal official: “Here. Sit in this office. Take this pile of money and do this and this and this with it.” Millions of people around the world spend every waking hour trying to identify and foster successful innovation. That’s what capitalism (what’s left of it) is all about. Unfortunately, there is no handy template, guidebook or algorithm for finding the likeliest prospects.
ISI does at least seem to have got the sitting in offices part figured out. The PBO report notes that ISI’s spending (not to be confused with ISIS spending) was $30 million in 2019-20 and that $18 million of that was on “operational and administrative” costs. The $30 million was just 29 per cent of what ISI was supposed spend in 2019-20 and only two per cent of its total projected spending through 2022-23.
The Conservative party’s industry critic, James Cumming, said it was “ridiculous” that the Liberals had spent more money on administrative costs than on job-creating projects.” Yes, sure, but hold on a minute. Incompetence in pursuit of the impossible can’t be all bad. Would the Conservatives really prefer that the supercluster money had got out the door as quickly as, say, CERB?
As for “job-creating projects,” ISI itself is a job-creating project. No doubt a good percentage of the $18 million it has spent on operational and administrative costs involves good, white-collar, well-paying, federal government jobs with lots of benefits. But, you say, are these really new jobs or just jobs that replace whatever the $18 million would have been supporting had not the government taxed it away from people or borrowed it in competition with other would-be borrowers who had their own job-creating plans for it (even if job creation was not their priority)?
And you are right. The $18 million that supports ISI’s employees can no longer support what or whomever it had been supporting — which will be true of all the money ISI spends. The billion dollars of its planned budget for the next four years would have gone to other activities, some for job creation, some for research, some probably for trips to Las Vegas — all chosen by the people whose billion dollars it was.
Ottawa’s commandeering of the money and instead spending it on ISI suggests it thinks it can put it to “better” use than its original owners could. In this context, “better” means having greater impact on Canada’s future productive capacity. Of course, if government can’t even accomplish a relatively simple thing like getting the money spent, why would we suppose it possesses the wisdom and prescience to know just what sorts of investments a) won’t get enough private support to proceed and b) will have a big future payoff in innovation, GDP, jobs and, yes, let’s say the word: profits? When things pay off commercially profit is a common result. The PBO criticizes ISI for not having developed metrics for measuring the success of its programs. But if your goal is to encourage the commercial success of innovative enterprises, is there really a better criterion than profit?
ISI’s strategy is for the public and private sectors to undertake collaborative research — because in Liberal Ottawa collaboration is deemed better than competition and because there’s a widespread feeling we should be getting more out of our very expensive universities than historical revisionism and social unrest. We should instead be nurturing connections between university researchers and hungry business people, a recommendation I have been hearing since first becoming interested in industrial policy in the 1970s. But why do we think ISI officials can identify potential connections and synergies that people on the ground can’t?
I don’t doubt ISI will find good projects, maybe even some that would not have taken place without it (though counterfactuals like that are difficult). But I’m guessing the cost-benefit ratio will be about the same as in particle-accelerator gold-rendering.