September 16, 2011
Waterloo, Ontario

Archived - Speech by the Honourable Jim Flaherty, Minister of Finance, at the Perimeter Institute’s Innovation Nation Symposium

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Thank you very much for the opportunity to be with you today.

I am very pleased that the Perimeter Institute is in Canada. This is a wonderful accomplishment with respect to which we all should be proud. It’s fabulous that we can have this kind of afternoon together with the leading innovators and researchers we have in this room.

It is a pleasure to be speaking at the Perimeter Institute, particularly to help mark the grand opening of the Stephen Hawking Centre on Sunday. I had the privilege of being here just over a year ago, when you hosted Professor Hawking as your Distinguished Research Chair. To have dinner with him was an incredibly memorable experience for me.

He laid down a strong marker when he said he’d measure your success in the years to come. “I am hoping,” he said, “and expecting great things will happen here.” I was fortunate to look at the annual report. I saw some of the photographs of Professor Hawking with both students and faculty during his six weeks here at your institute.

In doing so I can already report that Stephen Hawking’s expectations—and this is clear in the bright and inquisitive faces in those pictures—are already being realized. Others might shrink from such a challenge issued by the world’s foremost theoretical physicist. Not here at Perimeter. This visionary place, and the people who enable it to thrive, are models to be emulated as we strive to strengthen a quality of life for all Canadians that is second to none.

The Waterloo Region is home to Open Text, Canada’s largest software company, Research in Motion, 700 technology companies and 150 research institutes—all of this in an area of Ontario that was once the button, rubber and distillery capital of Canada.

This region has been a significant part of our nation’s past and will undoubtedly make an extraordinary contribution to our nation’s future. This institution will be a key part of that future. The Perimeter Institute has been the site of a number of important government innovation announcements, such as the launch of the Einstein program and Canada’s Science and Technology Strategy, because this organization is a place of boundless potential.

Its metamorphosis into one of the most important theoretical physics research centres in the world is a reflection of the leadership and the vision of its founder, Mike Lazaridis. Mike understands that encouraging basic science and research is a necessary—but not in itself sufficient—condition for success in a knowledge-based global economy.

Mike and all of you are also living proof of the words of wisdom of one of Canada’s greatest researchers, Frederick Banting: No one ever had an idea in a business suit, the co-founder of insulin once said.

As one of Banting’s biographers wrote of his discovery of insulin with Charles Best, “No single event in the history of medicine had changed the lives of so many people, so suddenly.” In the proud Canadian tradition of Banting and Best, the Perimeter Institute—in a new century and led by a new generation of researchers—is again demonstrating what this nation’s R&D community is capable of.

That is why the Government of Canada has steadfastly supported the work of the Perimeter institute. The entire region is driven by Canadian visionaries engaged in independent research, including experts who ask “What if?” and then turn that curiosity into innovation, paving the way to commercial success. That vision I speak of is summed up by Luis Lehner of the Perimeter Institute. He once matter-of-factly stated the following: “Black holes are the most extreme cases of gravity, signaling a region inside which everything breaks apart. I want to understand what happens there.”

I truly believe that same inquisitive spirit must drive this entire country. We need Waterloo-like intelligence and innovation initiatives from coast to coast to coast. We need them now because enduring global prosperity is—and will be—ultimately determined by the private sector, with help when needed from government.

During a visit here in 2010, Prime Minister Harper put it best: “History shows that our world becomes safer, healthier and more stable through advances made in science and technology.”

How are we performing in Canada? Quite frankly, we have unacceptable levels of support for R&D and innovation in many parts of the Canadian private sector. Every person in this room—and most outside of it today in Canada—knows that the global economy we now compete in is increasingly driven by new ideas and knowledge-based industries.

Despite this global reality, Canada still lags other nations in overall business expenditures on R&D. R&D spending by business in Canada has actually been decreasing in real terms since 2006. Moreover, our innovation spending is concentrated among certain businesses. The top 25 companies in Canada accounted for an estimated 33 per cent of total intramural business R&D performed in 2009. In manufacturing, around 75 per cent of total R&D spending was performed by large firms.

As a result, business expenditures in innovation have actually become a headwind in our national race towards innovation. Between 2006 and 2009, R&D spending increased from government, academic and private non-profit groups, but it was down for Canadian businesses when adjusted for inflation.

Last week, the World Economic Forum’s Global Competitiveness Report cited Canada’s business expenditure on research and development as an area for improvement. The WEF noted that improving the sophistication and innovative potential of the private sector, with greater R&D spending and producing goods and services higher on the value chain, would enhance Canada’s competitiveness and productive potential going into the future.

What makes strengthening private-sector investment in R&D particularly important is that other countries have been models in nurturing cultures of entrepreneurship.

Sweden, a fellow northern country with similar human capital advantages, scores much higher than Canada in terms of business investments in R&D. It consistently ranks as one of the top countries in the OECD. This is despite the fact that Sweden spends much less than we do on government support for R&D as a percentage of GDP.

Finland has built on strong fundamentals to achieve a level of business innovation, investment and performance that is among the strongest in the OECD.

We can also learn a lesson from Israel, where private-sector leadership in creating and adopting advanced technologies has placed the country far ahead of the rest of the world in terms of business investment in research and development.

While there are many reasons to explain a nation’s innovation performance, it is clear that these other countries are outperforming Canada. Their businesses spend more on research and development; their firms collaborate more often with each other; and they do a much better job of turning ideas into patents.

As a trading nation in a more innovative global marketplace, we need to continually search for new ways to cultivate this investment in our country.

We must set the stage better for private enterprise to compete with foreign firms who aren’t standing still.

As a government, we are doing our part to help them. Last year, for example, we set up an expert panel, led by Tom Jenkins of Open Text, to conduct a comprehensive review of all federal support for business-related R&D. The panel, in its final report expected in October, will provide our Government with their expert analysis. Tom’s panel will be making recommendations to improve federal support for private R&D. These will help ensure the support unleashes greater economic possibilities for business.

Canada is often looked upon enviably as a country rich in resources. But all of us here today know we are much, much more than the value of what lies underneath our feet, or in our forests, or in our lakes and rivers. 

Our greatest renewable national resource is our grey matter, and our Government has gone to great lengths to nurture it. It is plain to all that Canada’s private sector cannot rest on its laurels. There is no reason why Canada should continue to lag its OECD partners in private-sector innovation performance. We have the people. We have the resources. We certainly have the ideas.

Despite these facts, we are still at risk of being left behind. By doing so, we gamble with the future of our most precious asset: Canadian youth.

As a student at Princeton in the turbulent 1960s, it was my good fortune to attend a speech delivered by Robert Kennedy. He inspired me then and he inspires me still today. I’ve never forgotten the warning he issued to the leaders of his own time. He coupled it with a challenge he issued for people my own age. He said: “If we fail to dare, if we do not try, the next generation will harvest the fruit of our indifference.”

Science and technology enrich our country’s economic growth and create good, rewarding jobs for Canadians. These investments also enable our country to become more productive and, in the process, raise our standard of living.

Our investments in higher-education R&D have helped keep Canada in the top rank of G-7 countries. The OECD puts Canada in the top five in higher-education R&D as a percentage of GDP. Even before they leave high school, 15-year-old Canadians continue to outperform most countries in reading, math and science. In fact, more Canadian students are enrolling in undergraduate science, engineering and mathematics programs than ever before.

Here at Perimeter, you are already playing a more than positive role of communicating the wonders of science to the wider public and tomorrow’s scientists. I think of Quantum to Cosmos: Ideas for the Future—the largest science festival ever held in Canada—which you hosted in 2009. Called the “Woodstock of science festivals,” its success was best summed up by a 10-year-old participant named Aaron. He said, “I’m thinking I’m going to want to learn some physics when I get older.”

Thanks in part to your outreach efforts and Perimeter’s other activities—along with like-minded Canadians in every part of the country and at other institutions—our country leads the world in the growth rate of PhD degrees in the sciences. Canada comes second only to Sweden in the growth rate of doctorates in engineering.

Along with the number of graduates, the influence they wield in global academic circles also continues to grow. In 2008, for example, Canada—with one half of one per cent of the global population—accounted for more than 3 per cent of scientific publications in the world.

Because I’ve been fairly frank in expressing my views about private-sector R&D investment in Canada, it is fair for some to say, “Okay, Jim, fair criticism—but what has the federal government been doing to help?”

Since we were first elected in January 2006, we set out a key priority to foster and promote innovation in Canada. We’ve backed that commitment since with a track record stronger than any government that came before us. From 2006, when we announced our goal to create the best-educated, most-skilled and most flexible workforce in the world, our Government has invested unprecedented resources in science and technology.

We did so and continue to do so fully recognizing the important role the new investments will play in enhancing our productivity and economic prosperity. We have made significant investments in innovation in every budget and increased federal funding in science and technology every single year. We rank first among the G-7 countries in terms of expenditures on research and development in the higher-education sector as a share of the economy.

In recent years, the Government has emphasized the need to more closely link publicly funded research to business needs and to obtain greater economic and social value from federal funding for research.

The Next Phase of Canada’s Economic Action Plan, spelled out in Budget 2011, contains a number of initiatives designed to meet those objectives and includes a commitment to support this very institute’s leading research, education and public outreach activities. In addition, the budget provided substantial support for the creation of 10 new Canada Excellence Research Chairs.

Our Government has invested in new business-led Networks of Centres of Excellence, to help increase private-sector investments in research in Canada, support the training of skilled researchers and shorten the time needed to transfer ideas from the laboratory to the marketplace.

We continue to support a very important program, the National Research Council’s Industrial Research Assistance Program (IRAP), which works closely with small and medium-sized businesses in Canada to develop, exploit and apply technologies to create new products, services and industrial processes.

In addition, our Government has created an enduring legacy from the global economic crisis, introducing the Knowledge Infrastructure Program as part of our Economic Action Plan. This has funded more than 500 maintenance, repair and construction projects at universities and colleges across Canada.

In the Economic Action Plan, which was introduced in the budget at the end of January 2009, there was very substantial spending on infrastructure on an urgent basis because of the danger of very high unemployment that we were all facing at a time of recession.

It was the university and college sector that got the job done the most quickly; they implemented that infrastructure program the most effectively by a significant margin.

By targeting Economic Action Plan investments towards innovation we recognized, like any forward-looking business would, the true benefits of investments in research both for short-term advantage and long-term gain.

It is fair to ask: Can Ottawa do more? Absolutely.

Will we attempt to do just that over the next four years? Absolutely.

The global economy depends increasingly on knowledge and innovation. We recognize that enduring global prosperity was never created by governments alone, and it never will be. At the same time, new ideas on their own, no matter how brilliant their lustre, will never allow us to compete in the global knowledge economy.

That is why meeting the challenge of innovation for Canada must be a shared responsibility. The world is too big and other nations are moving too quickly for each of us to work in isolation. British statesman Anthony Eden saw this coming decades ago. He said, “Every succeeding scientific discovery makes greater nonsense of old-time conceptions of sovereignty.”

Our future success depends on the ability and willingness of the private sector to innovate and commercialize ideas. Accelerating the transfer of knowledge from research institutions in universities and government to the marketplace will help to build a culture of innovation in business. Addressing these challenges must be a key priority for all of us, and not just for the long-term health of our industries.

It’s important for our nation’s productivity, which helps determine the standard of living for Canadians and their families. When businesses don’t seize the opportunity to become more competitive, more innovative, the expectations of what a country’s economy might achieve become a little bit lower. This becomes even more critical in a country like ours that is undergoing a demographic shift that will result in fewer workers and—in terms of health care and benefits for the elderly—more obligations for the workers who remain.

If we fail to meet that challenge, Canadians will not be the innovators we need to be in a digital economy. At great expense, both economically and socially, we will be reactive rather than proactive. And our businesses will continue to lag in productivity compared to their competitors in other countries.

Let me conclude my remarks with a challenge for all of us, in both the public and private sectors.

Canada has high-quality institutions that perform world-leading research. The commercialization of this research into world-class products and services will help open new markets and create high-quality jobs for Canadians. Working together, we can build on previous investments to further strengthen Canada’s research advantage, contributing to a stronger, more innovative economy and important social benefits for Canadians.

It is going to take a lot of work, goodwill and cooperation between the public and private sectors to succeed. It is up to all of us, particularly the private sector, to bring the people, resources and ideas together to produce the innovations that will drive the Canadian economy in the decades to come.

As I’ve described, our Government has never hesitated in supporting a culture of innovation and striving to make our nation a world leader. Today I call on Canada’s best and brightest—some of those in this room—along with our visionary entrepreneurs, to seize our nation’s growing opportunities, make them a reality, set their sights even higher and never waver in their efforts to create and excel.

Bobby Kennedy, again, put it best. He said, “History is a relentless master. It has no present, only the past rushing into the future. To try to hold fast is to be swept aside.”

Working together we can—and we will—make Canada the Innovation Nation it is fully capable of becoming. Canada will never be swept aside.

Thank you.