Industrial policy is back — except in Ontario

Industrial policy — government interventions to grow and improve the competitiveness of select industries — is back in fashion, according to a new paper by John M. Curtis and Dan Ciuriak published by the Institute for Research on Public Policy (IRPP).
In fact, industrial policies never really went out of style, except in the Anglo-American democracies. For the past three decades governments in the Anglosphere — regardless of the party in power — have shied away from industrial policies and embraced the notion that state interventions to promote specific economic sectors usually do more harm than good. This is allegedly because governments don’t have the necessary information to “pick winners.” The market, according to this view, is always far superior at allocating resources than any government ever could be.
Under this paradigm, the best thing governments can do to promote investment, industrial development and economic growth is to get the so-called economic fundamentals right and let the market — that supreme and venerable vehicle for the efficient allocation of resources — take care of the rest. In practice, the prescription calls for low taxes on capital and income, balanced budgets, low debt, low and stable inflation and a light regulatory touch. These are the necessary ingredients that will permit the market to work its magic on the economy.
Governments in this country have by and large bought into this mainstream view for over two decades, and have implemented this policy agenda, to varying degrees. Successive governments in Ottawa, for example, have rarely missed an opportunity to brag that Canada has the best economic fundamentals in the G8.
In the context of this conventional wisdom, the industrial policy light has barely flickered in this country.
But now, according to Curtis and Ciuriak, industrial policy is resurging, even in the more skeptical Anglo-American countries. They argue this is due to the global financial crisis/recession, and the slow and uneven economic growth that has followed. Governments are increasingly looking for some way — any way — to get growth back onto a decent trajectory, and in particular to regenerate manufacturing industries that were hit very hard during the recession.
This marks a big shift in attitude. For decades, governments in this country wouldn’t utter the phrase industrial policy for fear of being labelled economically illiterate by the high priests of mainstream economics and their apostles in the business media. Today, however, the competency of the economics profession is in serious question given its role in creating the intellectual foundations for the policies that brought on the global banking crisis of 2008-09 and the worst recession many countries have experienced in 80 years. Not to mention the fact that mainstream economics’ remedies to the crisis have produced scant growth in most countries thus far.
We might now, therefore, be on the cusp of a new economic policy paradigm. As Curtis and Ciuriak claim, it is those countries with robust industrial policies — especially in Asia and other emerging markets — that have seen superior growth performance post-recession. Those are the kind of facts — as opposed to theory — that tend to catch the attention of governments struggling for an economic narrative to put to citizens in a slow-growth and relatively high-unemployment context.
Canada is no exception. The Harper government, on paper the most free market administration in living memory, is adopting a more industrial policy-friendly mindset. There is evidence of this in policies to promote extractive industries, but also with significant new initiatives in the aerospace and defence sectors, both of which are well-known candidates for industrial strategies in almost all advanced countries. The relatively new Federal Economic Development Agency for Ontario is also to a degree an industrial policy instrument.
Curiously, though, the one government in Canada that you would expect to be embracing industrial policy seems lukewarm to it. Ontario has experienced the most alarming economic transformation of any Canadian province in recent years. Its manufacturing sector lost 255,000 jobs over the last decade. The province’s share of Canadian GDP fell from 41 per cent to 37 per cent over that same time period. For three years now, Ontario, traditionally the milch cow of Confederation due to its powerhouse industrial economy, has been officially a “have not” province, receiving billions of dollars in equalization payments from Ottawa annually.
Yet we seem to see more enthusiasm for industrial policy in blue Ottawa than in red Queen’s Park, which still emphasizes deficit reduction as the key to Ontario’s economic prosperity. While the Wynne government is pursing an aggressive transit agenda, it seems less enthusiastic than its predecessor in developing “green” manufacturing to offset some of the decline in the auto industry, and shows little interest in policies aimed at other sectors that offer promising growth opportunities.
Now is probably the time for the Ontario government to embrace the industrial policy paradigm and advance an economic agenda for the province that works in practice but maybe not so well in theory.

Searching for Canada’s Michelle Obama

“Mom, I should eat broccoli because Michelle Obama says I should eat broccoli.”

What music to the ears of parents and policymakers!
A week ago, Canada 2020 hosted the fifth and final panel of the year in our signature speaker series, The Canada We Want in 2020. The topic was ‘confronting the crisis in public health’, specifically how we can come together to combat obesity and related chronic diseases.
One of our panelists was the dynamic and accomplished Melody Barnes, former White House Director of Domestic Policy to President Barack Obama, and chair of the administration’s task force on childhood obesity. Melody was also heavily involved in the First Lady’s Let’s Move! campaign aimed at persuading Americans to embrace healthy living.
Canadians are up against the same public health challenges as our American neighbours. According to recent data published in the Canadian Journal of Public Health, 25% of the Canadian population is estimated to be obese.  Obesity rates here in Ontario are above the national average at almost 29% and, on the current trajectory, an estimated 70% of Ontario’s current kids will enter middle age obese or overweight.
Rates are already higher in other provinces and amongst particular social groups (aboriginal Canadians and those from lower socio-economic groups, especially disadvantaged women). In some Atlantic provinces obesity rates already exceed 35%.
Childhood obesity is a particular problem: research shows that early onset obesity increases the risk factors for a range of chronic diseases – including diabetes, coronary heart disease and atherosclerosis.  Obesity in females during late adolescence is also associated with psychosocial behavioural abnormalities in adulthood.
If we are to change this trajectory, we need to consider evidence-based policy approaches that have successfully improved obesity-related health outcomes. The following are some of the key messages and insights that emerged at our event:

  1. Promote healthy living without demonizing different body types.
    The body-mass index is used to estimate overweight and obesity rates amongst different populations.  However, in our efforts to address the growing obesity epidemic we should not be concerned with the final output (weight) but rather the inputs (sedentary lifestyles, eating food of poor nutritional quality, etc.) that affect our health outcomes. Obesity is simply a proxy measure for increased disposition to myriad chronic diseases that will lead to soaring costs of healthcare delivery and a diminishing quality of life in years to come.
  2. We cannot educate our way out of this crisis.
    Two of our panelists, Melody Barnes and Alex Munter (President and CEO of the Children’s Hospital of Eastern Ontario) repeatedly emphasized this point.  It is imperative to educate individuals about the importance of healthy eating and active lifestyles so that they can make informed choices. However, information alone is not sufficient: Canadians also need better access to nutritious lunches at school cafeterias, grocery stores that stock fresh produce at affordable prices, safer parks and recreation facilities and other health-promoting infrastructure. This is where governments have a particular role to play. With their support, the healthy choice can become the default choice.
  3. Improving health outcomes is not just the responsibility of individuals but also of the collective ‘us’.
    Confronting the crisis in public health requires different (and sometimes opposing) forces including government, industry, NGO partners, health practitioners and individuals to act together. There is no magic bullet, no one miracle program and no single player that can succeed on its own. The programs and initiatives that deliver results have two things in common: they are uniquely tailored to address the specific issues faced by a given community and they are supported by multiple stakeholders.

In Canada, certain corporations stand out for their efforts to address the issue of obesity.  For example, Coca Cola Canada has recently announced that it will make nutritional information more transparent by featuring calorie counts on the front of all packages.  The company’s new marketing guidelines include a self-imposed ban on buying advertising space in media directed at audiences comprising more than 35% children under the age of 12.  In addition, Coca Cola is supporting physical activity and nutritional education programs, such as Breakfast Club of Canada. Loblaw is also making concerted efforts to bring in more nutritional information through its Guiding Stars program and its in-store dieticians.
Hopefully other companies will follow this lead. But it is also likely to take regulation (such as that proposed in Ontario’s recent Healthy Kids Strategy) to make sure that young children are not subject to junk food advertising and, thus, that parents are better able to control the nutritional messages reaching their children. Such regulation has already proven to be very effective in Quebec where the ban that has been in place since 1980 is estimated to have reduced junk food consumption amongst children by 13%.
Certainly, governments have an important role to play, and not just in the direct area of health promotion. As Alex Munter noted, the government of Ontario is addressing two key social determinants of health with its focus on poverty reduction and mental health and addiction. And the federal government is increasingly moving towards being a facilitator of partnerships and an enabler of best practice.
The First Lady of the U.S. has provided a very visible rallying point in that country – people respond to her sheer force of personality. Children look up to her; they want to eat their vegetables for her. That’s not a policy lever, but no one can say it’s not effective.
Here in Canada we do not have such a figure, but, encouragingly, we do have a federal government that is becoming more active in this space and that has demonstrated, in its recently released 2013–2016 Preventing Chronic Disease Strategic Plan, that it has a good understanding of the challenges it must address. It sees itself as an information hub, willing to fund partnerships and to act as a catalyst in the prevention of chronic disease, much of which is attributable to obesity and overweight.
As Alex Munter reminded us, “public policy always lags culture, and the culture on healthy eating is changing fast.” That bodes well for the future, but we should not underestimate the sustained effort that it will take to change the trajectory of ill-health into which we have fallen.
Aqsa Malik is a research associate at Canada 2020, an Ottawa-based think tank on the role of the federal government, and PhD. candidate in Neuroscience at the University of British Columbia. Diana Carney has just stepped down as Canada 2020’s Vice President of Research.
For more information and to watch a video of this panel or read the full background paper, click here.