Productivity depends on innovation and innovation depends on leadership - and Canada is woefully lacking in that department, a former high-ranking federal civil servant told University of Northern British Columbia students Friday.
Kevin Lynch, who once was the 20th Clerk of the Privy Council, Secretary to the Cabinet and Head of the Public Service of Canada, painted a sorry picture of Canada's productivity ranking and standing in the world economy.
Canada's productivity, defined as dollars of output per worker, has declined from 94 per cent of the Americans' in the mid-1980s to 72 per cent present day, said Lynch, who holds a doctorate in economics and is now Vice Chair of the BMO Financial Group.
For reasons not totally understood, Canadian workers use 75 per cent of the leading edge machinery and equipment and just 48 per cent of the leading edge information and communications technology of their counterparts south of the border.
The country's private sector's investment in research and development is just one per cent of Canada's gross domestic product, half that of the United States and a quarter of South Korea's
"It's appalling," Lynch said.
To improve productivity in a high-wage economy, Lynch emphasized innovation as the answer.
"Innovation makes you a monopolist," he said. "If you have a new product, nobody else has it, you have an ability to charge a good price."
He pointed to the Apple iPhone as an example.
"One day, the Apple worker is making a hundred Mac computers and the price of the Mac computers is going down and down and down because there is competition from Taiwan and everywhere else," Lynch said.
"Suddenly, Apple innovates and there is an iPhone and the price of the iPhone is set at any level the consumer will bear. So the same hundred products are coming out of that worker on the assembly line but they are now high-value
products.
"A few years on, there's competition for the iPhone but there's an iPad on the line and that's how you're able to remain competitive and yet increase wages and
standards of living."
Coming up with products like that takes leadership, Lynch said.
He was careful to separate that from management, which he described as simply maintaining the status quo. Leadership, in contrast, is about change and creativity.
"There is a tendency to think that the status quo is a riskless choice," Lynch said.
"In times of change, the status quo may be the riskiest choice you make.
"And I worry in Canada, because we're relatively wealthy with our natural resources, that one of our greatest risks is complacency right now."
Among Lynch's answers is to produce more graduates with
doctorate degrees.
Among Organization for Economic Co-operation and Development countries, Canada is ranked first with the number of people with a post-secondary degree - from both colleges and universities - but 12th for bachelor degrees and 23rd in doctorates.
"What we're doing is we're producing a pretty good team but not enough leaders to actually lead the team," Lynch said.
Asked in an interview about the call to more fully process resources before they're exported, Lynch said the better solution is to sell the "service and ability to run pipelines and run mines around the world."
