Governments always want to look like they’re implementing good ideas and accomplishing important things. Take the Innovation Superclusters Initiative (ISI) for example. The federal government plans to throw almost a billion tax dollars at non-profit groups to create jobs and help Canadian companies dominate the world.
As crazy as it sounds, that’s the ostensible reason for $950 million in federal spending over the next five years.
Of course, the ISI website frames the concept with fancier buzzwords: “The [ISI] is a new funding initiative designed to help strengthen Canada’s most promising clusters and accelerate economic growth in highly innovative industries … while positioning Canadian firms for global leadership.”
Ah, so these clusters already exist, but it takes the government to make them “super.” Go on.
“Their close geographic proximity can result in supply-chain benefits, encourage knowledge sharing and collaboration, drive competition and business specialization, and help to attract ‘anchor’ companies from around the world.”
What baffle-speak places sharing, collaboration and competition as contradictory and consecutive goals? And if specialization is such a good thing, will the federal government please abandon its Western Economic Diversification program, now that we should build on clusters, not diversity?
Probably not, but let’s read on.
“The industry-led consortium must be represented by … a not-for-profit organization,” though the next point admits it can be a non-existent one, so long as it’s made in time for the federal money to start flowing. Why not, since this non-profit will catapult a Canadian company to world leadership?
But wait! The next point says a company headquartered anywhere in the world can participate, so long as it’s incorporated and active in Canada. And a later point even opens the door for intellectual property created during this process to leave the country.
At least taxpayers can be consoled, knowing that all their money will be matched by industry. Well, sort of. In reality, 25 percent of “matching” dollars can be in-kind contributions at fair market value, as defined by the organization itself. Usually a market price includes taxes, but it’s doubtful these will be onerous. The cash portion can also include private sector salaries, which includes Canada Pension Plan and Employment Insurance deductions the government was going to get anyway. Amazingly, the matching funds don’t even have to be channeled through the entity funded by the government.
The government money will pay for just about any expenditures these companies face, including portions of salaries, supplies, room rental, materials, capital costs and travel.
More than 50 applications were made for these sweepstakes, and those applications encompassed more than 1,000 businesses and 350 other participants. All had to articulate how they would increase female jobs and leadership, and encourage diverse recipients in the long term. Furthermore, the “Expert Reviewers” judging the proposals were chosen by the government “in consideration of Canada’s diversity.”
Innovation, Science and Economic Development Minister Navdeep Bains finished this politically correct process by picking the nine finalists himself. It should surprise no one that the Liberals have at least a foothold in all the finalist cities: Halifax, Montréal, Toronto, Vancouver, Calgary and Regina. Bains will visit all the finalists for public relations events, except for Regina, which is the home of Public Safety Minister Ralph Goodale.
With five finalists to be chosen from these six cities, one would seem to be doomed to disappointment, but maybe not. It turns out the geographic component of a cluster isn’t strict, either.
The Clean, Low-energy, Effective and Remediated Supercluster, purported to power clean growth in mining, lists Ontario, Quebec and Vancouver as its location.
And the Mobility Systems and Technologies for the 21st Century Supercluster includes the same three locations, plus Atlantic Canada. Imagine the political mileage the Liberals could get by naming this the coast-to-coast “cluster” winner.
For all its pretentious claims, the ISI is only the latest in the ongoing misuse of Canadian tax dollars in order to pick winners and losers in the marketplace.
If the government really wanted to stimulate the economy in the long term, it would abandon its corporate handouts, deficit spending and proposed small business tax changes. The innovation and entrepreneurship of Canadians will grow organically if the government doesn’t kill all incentives through burdensome regulations and taxes.
Instead, the federal government has initiated a program that will at best be benign and at worst be a Supercluster Screw-up.
Lee Harding is a research associate with the think-tank Frontier Centre for Public Policy.