For all the talk of the importance of the knowledge economy and Prime Minister Justin Trudeau’s trumpeting of the Liberal government’s innovation agenda, Canada falls woefully short in investment in research and development (R&D).
Canadian gross domestic expenditure on R&D from all sources relative to GDP has been declining over the last 15 years compared with other G7 and east Asian nations, according to a new blue-ribbon panel led by David Naylor, former president of the University of Toronto.
According to the World Economic Forum’s "Competitiveness Report," investment in R&D by the Canadian business sector fares poorly in comparison to other wealthy countries. In 2016-17, the WEF reported that "Canada’s largest disparities with OECD countries are in business sophistication and innovation."
Limited private-sector R&D in Canada makes the government role especially important. Despite the claims about the inherent innovation of the private sector, it is the public sector that is often responsible for the largest gains in R&D. Much of this funding was channelled through research departments in universities.
Economist Mariana Mazzucato claims that "nearly every major innovation since the Second World War has required a big push from the public sector, for an obvious reason: the public sector can afford to take risks that the private sector can’t." Government funding was directly responsible for the exploration of space, atomic energy, the Internet, the Global Positioning System (GPS), lasers, computers, magnetic resonance imaging (MRI), communications satellites, jet aircraft, genetic medicine, biotechnology and most of the pharmaceuticals with the greatest therapeutic effect. The same public funding educates the next generation of researchers.
The enormous economic returns from much research, especially basic research, are spread widely throughout society and are not captured solely by the inventor.
The inability of firms to capture all of the returns from research means that they will not invest in enough R&D.
In the past, university-based researchers gave their innovations freely to the public that funded their research. Jonas Salk, who invented the polio vaccine, stated his sole focus had been to develop a safe and effective vaccine as rapidly as possible, with no interest in personal profit. When asked who owned the vaccine’s patent, Salk said, "There is no patent. Could you patent the sun?"
However, Canadian federal funding as a per cent of total R&D investment is also below the OECD average. This is also true of federal funding as a per cent of R&D research conducted at universities.
As universities have been forced to develop their own revenue streams, they have turned away from basic research and toward commercializing their technological innovations. It has also meant that research funds are increasingly solicited from the corporate sector.
Both of these trends have important implications for the direction of R&D away from longer term more basic research to that which is narrower and immediately profitable. This shift from public to private financing has led many to conclude that we are witnessing the privatization of the public research university. According to Irwin Feller of Penn State University, this trend shifts academic researchers away from their social role supplying the collective goods of scientific and technological knowledge.
The general funding shortfall has been exacerbated by deliberate government policy. In 2013, the Harper government put in place a new direction for science and technology policy in Canada. This has been characterized by a decline of funding for basic research and a targeting of new priority-driven funding to projects that appear to offer the promise of immediate commercial value. The response of the failure of our for-profit sector to invest at rates necessary to maintain Canadian competitiveness led the Canadian federal government to impose corporate priorities on university research.
The prestigious journal Nature summarized the Conservative government’s record in the following way: "Governments come and go, but scientific expertise and experience cannot be chopped and changed as the mood suits and still be expected to function. Nor can applied research thrive when basic research is struggling." As a result, not only is government funding for research and development inadequate, it is also channelled away from independent, basic research and towards more commercial projects.
John Polanyi, Canadian Nobel laureate, noted that when governments or industry try to direct scientific inquiry, rather than allowing the scientific community to do so through its rigorous peer-review system that protects the integrity of the work, our scientific horizons shrink and our future is diminished. Canada needs to rapidly implement the Naylor report’s single most important recommendation, which is for the federal government to rapidly increase its investment in independent investigator-led research.
Robert Chernomas and Ian Hudson teach economics at the University of Manitoba and are authors of two 2016 books, Economics of the 21st Century: A Critical Perspective and The Profit Doctrine: Economists of the Neoliberal Era.