The World Economic Forum’s Global Competitiveness Report 2011-2012 shows Canada slipping from 10th to 12th place.
The U.S. finished in fifth. Tops in Asia were Singapore (second) and Japan (ninth).
The surprise for many Business in Vancouver readers will be that northern and western Europe had a lock on seven of the top 10 positions: Switzerland (first), Sweden (third), Finland (fourth), Germany (sixth), Netherlands (seventh), Denmark (eighth) and the U.K. (10th). As it struggles with a complex debt crisis, who knew that much of Europe was actually cranking up its competitiveness?
The WEF methodology is comprehensive and focuses on “12 pillars”: 1) institutions, 2) infrastructure, 3) macroeconomic environment, 4) health and primary education, 5) higher education and training, 6) goods market efficiency, 7) labour market efficiency, 8) financial market development, 9) technological readiness, 10) market size, 11) business sophistication and 12) innovation.
Canadians may well wonder about the paradox as Ottawa brags of Canada’s good economic record and financial management and scolds Europe for dithering on its debt, when it actually trails seven European nations in a respected competitiveness assessment.
The erosion of Canada’s competitiveness is not a new observation. An expert panel appointed by the Council of Canadian Academies concluded in 2009 that a shortfall in business innovation was at the root of Canada’s lagging productivity. Canada’s persistent weakness in productivity growth has been due to business strategy choices.
“Too few Canadian businesses and entrepreneurs choose strategies that emphasize innovation,” reported Robert Brown, chairman of the panel of 18 business, labour and academic authorities appointed to analyze the innovation performance of Canadian businesses. The panel’s Innovation and Business Strategy: Why Canada Falls Short report presented a fresh look at innovation as an economic process.
The panel found that Canada’s productivity had been falling further behind that of the U.S. and many other advanced countries for the past 25 years. The report presented statistical evidence, stretching back almost five decades, to show how lagging productivity growth has been due to subpar innovation.
The panel concluded that too many businesses in Canada were technology followers, not leaders.
I believe that rather than honing competitiveness and boosting productivity, it is just much easier for Canada to develop and sell its resources to maintain its living standards.
The country’s prime minister and minister of finance have boasted from podiums around the world of Canada’s superior economic performance since 2008 while ignoring its competitive weakness. Canada simply has a conservative banking system that didn’t collapse in 2008, a less-leveraged housing market that didn’t collapse and a healthy market for resource products that we were able to sell at good prices. With these factors present, we don’t seem to care much about poor competitiveness or productivity. No fear, life is good.
My theory is that the countries that care the most about competitiveness and productivity do so out of fear. Western and northern Europe are fearful about many things, including the loss of manufacturing industries to low-cost developing nations, aging populations, burdened health-care systems, energy supply, and, yes, high public debt levels. So does Japan. They fear that without a competitive edge they will lose their markets, their economies won’t grow and their standard of living will drop. When these things occur, populations get mad at their leaders. Fear is the strongest driver of innovation and productivity improvement.
I’m not sure whether Canada will become fearful enough in my lifetime to seriously do much more about competitiveness, productivity or innovation. I’m afraid that the likelihood of Canada getting back into the top 10 in any global competitive ranking could be pretty slim. The long-term outlook forecasts global economic growth from the BRICS countries in particular, driven by their consumption of energy and other resources that Canada can supply. •
