Hew That Wood, Draw That Water

Is Canada really capable of innovating?

Why does Canada stink so much at innovation? Outside of a few noteworthy exceptions, Canadians seem to lack the killer instinct to play in the big leagues, especially when it comes to technological innovation. As the adage goes, because of our lack of innovation and our dependence on resource exploitation, Canada is the world’s most advanced underdeveloped country. Hewers of wood and drawers of water forever, it seems.

This state of affairs is a recurring concern, voiced by government officials in innumerable reports, blared by international innovation rankings and alarmist think tank studies, and decried by academics and leading business people such as BlackBerry founder Mike Lazaridis. Canada faces a seemingly intractable “innovation gap,” despite the best efforts of the “entrepreneurs” on Dragons’ Den to pitch the latest board game, underwear line or specialized foodstuff that is sure to cement Canada’s reputation as an incubator of great new ideas.

Why can’t Canadians do innovation? A cultural thing? Is it the bloody climate?

Or is it just bred in the bone? After all, it was nearly a century ago that Canada’s first great political economist, the University of Toronto’s Harold Innis, started work on his seminal The Fur Trade in Canada, eventually published in 1930. Innis’s work, of course, came to be known for the “staples thesis,” geographic determinism that famously explained Canada’s stunted economic development as an east-west transcontinental nation, one dependent upon the export of raw materials.

For Innis, a First World War veteran, sending furs, fish, timber and wheat to a colonial metropole, be it Paris or London, meant an underdeveloped economy and ultimately a “staples trap.” Innis’s wartime service had left him both nationalistic and pessimistic. In his view, Canadians’ lack of development was a consequence of geography, environment and imperialism, and he saw no great future for Canadians beyond ripping stuff out of the ground.

Although Innis’s contemporary, the Queen’s political scientist and erstwhile government mandarin W.A. Mackintosh challenged Innis by offering a more optimistic assessment of how staples could lead to economic development: the idea that Canada was destined to remain, for lack of a better term, an industrial backwater seemed to stick.

Decades later, in the fulcrum of the 1960s, a new group of Canadian political economists, inspired by Innis, built upon his work and updated it to reflect the 1960s idea of “dependency,” fashionable at that time to describe Latin American underdevelopment. Canada, according to the new Canadian political economists such as Mel Watkins and Kari Levitt, was indeed the world’s most advanced underdeveloped country, whose industrial progress had been truncated because of U.S. economic domination, American ownership in many Canadian firms and, undeniably, U.S. control of whole sectors of the economy. Because of its “silent surrender,” Canada was condemned never to develop its “backwards and forwards linkages,” just as Innis prophesized, and to forever remain an economic satellite of the United States.

Of course, as we all know, the 1960s were also a time of great economic nationalism in Canada, and there were heroic efforts to challenge this dependency, from Walter Gordon’s nationalist 1963 budget to Pierre Trudeau’s 1980s National Energy Policy. But although there was great light to this nationalist movement, it generated little heat. Eventually, few of the remedies called for were enacted; even those that were often fell far short of their advocates’ goals, or were eventually dismantled. By the mid 1980s Canada embraced free trade with the United States, and for economic nationalists the party seemed to be truly over, along with any chance of forging an independent Canadian technological, manufacturing and innovation culture.

Bruce Smardon’s Asleep at the Switch: The Political Economy of Federal Research and Development Policy since 1960 falls comfortably within this pessimistic arc of Canadian political economy and provides one view of why Canadians find themselves seemingly at an innovation dead end. Focusing on government research and development policy, Smardon departs from Innis’s and some of the new Canadians political economists’ approach by taking an unrepentantly structuralist (read: Marxist) view of why Canadians cannot do innovation or, more specifically, why their state-based policies to encourage R&D and innovation are doomed to fail: Canadian politicians’ and planners’ emphasis on state-programmatic solutions to the R&D/innovation problem has consistently missed the boat, since the real problem is the structural, technological dependence upon the United States, and especially on “a set of social relations that concentrated social power in the hands of a select group of capitalist economic and political elites in a way that ensured there would be little meaningful progress in establishing greater domestic technological capacities.” In other words, since Canada with its political/economic class is completely integrated into an American Fordist model, technological and capital dependence on the United States renders government policies to plump R&D—no matter how well meaning—stillborn.

In this way, Asleep at the Switch echoes Innis’s geographic determinism, although it is Canada’s proximity to the United States, not east-west river systems, that is a central factor here. But Canada’s unfortunate real estate is not the only culprit that precludes any real Canadian innovation: Canada’s early adaptation and incorporation of American Fordism set the pattern for technological dependence.

Fordism is central to this thesis, and even though the first part of the book is a long, deeply theorized exegesis of Canadian political economy, the Fordism on display remains an amorphous concept. At one level, Fordism speaks to the idea of industrial economies of scale, the standardized and mechanized manufacture of mass production goods (and mass consumption) based on the moving assembly line and vertical and horizontal integration of industry. Indeed, so overwhelming was the industrial and technological revolution wrought by Henry Ford and his Model T (15 million built between 1908 and 1927) that Fordism became a shorthand for modern industry. In the 1920s, Ford himself and the word “Fordism” were seen as benevolent, heralded as a great technological and industrial leap forward.

On another level, Fordism also came to have a less savoury definition, as a form of deskilled mass labour overseen by rigid bureaucracy, time management and social control of workers through corporate welfare, company unions and sociological departments that oversaw workers’ private lives. By the start of the post-Second World War period, Fordism had morphed into a term that described industrial capitalism more generally, and was extensively used by the neo-Marxist theorists of the French Regulation School to critique the decline of the western economic model in the 1970s.

Obviously, the greatest example of Fordism is the automobile industry. There are two schools of thought when it comes to the impact of the U.S. automobile industry upon Canadian industrialization. One falls within the pessimistic orb of Canadian development: that the takeover and domination of the Canadian sector by U.S. branch plant producers snuffed out the chance for any independent, indigenous auto sector that could have resulted in firms like a Volvo or a Saab (because of its size, northern locale and proximity to car-making heavyweight Germany, Sweden is seen as the best analog to the Canadian case). American Fordism meant the end of an “all-Canadian” auto sector. This is essentially Smardon’s argument.

The counterintuitive view takes the position that Canada’s proximity to the United States was, overall, beneficial: Canadians were “motorized” long before and at a much greater rate than other countries because of the U.S. spillover, and this mass motorization had a democratizing effect. By the 1920s, Canadians were, on a per capita basis, the world’s second greatest consumers of autos and, just as importantly, the second greatest producers of cars. The benefits of Canadians’ American Fordist automobile dependence—jobs, technology transfer, mass automobility and the social change that accompanied it—were seen to outweigh the demise of an independent Canadian auto sector (with the exception of the parts industry).

Befitting its genesis as a York University political science dissertation, Smardon’s book is weighty with terminology and theory as Asleep at the Switch explains how American Fordism sunk its tentacles into Canada, although there is little discussion of the possible benefits of this development. Yet there is some very good material comparing Canada’s Fordist development with other advanced economies such as Japan and in Europe, and the book is unquestionably deeply researched and expansive in the evidence it presents.

The second part of the book is a chronology of the numerous failures and shortcomings of various federal governments since the 1960s on the R&D front, and really acts as a historical overview of Canadian politicians’ inability (and the unwillingness of its continentalist corporate elite) to break from its class/American domination in anything but the most milquetoast manner when it came to R&D and industrial policy. Popgun efforts to assert federal power to develop Canadian technology capacity, Smardon asserts, were misguided, since “social relations” predetermined Canada’s technological dependence and all the statist approaches offered were simply pissing into the wind.

Examples abound in Smardon’s rogue’s gallery of incompetents, dupes and yes-men: Diefenbaker’s infamous cancellation of the Avro Arrow killed much of the indigenous Canadian aviation industry; left-Liberals such as Walter Gordon and Tom Kent simply did not understand that their efforts were useless in the face of entrenched continentalists such as Lester Pearson and Mitchell Sharp; Trudeau was no nationalist, and whatever efforts his government put forth only increased “market-driven” innovation without changing “underlying structural forces”; Brian Mulroney, Jean Chrétien, Paul Martin and Stephen Harper embraced neoliberalism, further condemning Canada to innovation ineptitude.

In the end, Smardon is, by and large, correct in the broad strokes of his analysis. Canada has never been a technological powerhouse, and government efforts to spur R&D, innovation and commercialization have largely failed. But this is not entirely surprising, given the high-cost nature of a massive, low-density country with a small market that has always been on the periphery of world economic systems, be they feudal, capitalist, Fordist or post-Fordist. Nonetheless, key questions remain about Smardon’s analysis.

For one thing, despite all the gloom, there are some obvious exceptions to the notion that Canada is innovation-inept, and the question is whether these exceptions disprove the assertion. There are a great many Canadian technology success stories, both in terms of individual firms and sectors of the economy, from Nortel to the aerospace industry. Some might argue that there are even successful Canadian innovation clusters, such as the Kitchener-Waterloo–to–Ottawa information communications technology (ICT) cluster exemplified by BlackBerry and OpenText (and before that, Nortel, JDS Uniphase and even Corel—just because they eventually failed did not mean they were not innovative or successful), or Southern Ontario’s automotive archipelago, anchored by giant parts maker Magna, which since Nortel’s demise is one of the largest contributors to Canadian R&D.

Many of these examples have benefitted directly from statist programs (and even direct government ownership, in some instances). Asleep at the Switch does not dwell heavily upon these cases, in part because they may not fit within the book’s formulation of failure. Magna barely merits a mention, likely because auto parts are not considered “high tech,” even though they are surely innovative. Indeed, one of the best unheralded Canadian innovations in the past couple of decades was Magna’s “Stow and Go” seats for the Chrysler minivan—not high tech, but certainly innovative, and one that led to thousands of jobs, both directly and indirectly, in Canada.

Another question that Asleep at the Switch prompts is about the assertion of what exactly Smardon means by the social factors locking in and preventing any break from American/Fordist technological dependence. What he is actually pointing to here is the fact that since 1945, save for a burst of economic nationalism from the late 1960s to the early 1980s, most Canadians—not just their elites—were quite comfortable with the continentalist fate of their manufacturing and technological development. As Smardon himself shows, there has been a preponderant industrial policy in Canada: continentalism. From Canada’s wartime arrangements to the St. Lawrence Seaway, to the 1965 Auto Pact, to free trade, Canadians and their policy makers have consistently sought access to a wider U.S./North American market.

During the 1980s, at the height of the fight over Canada’s continentalist future, even hard-core nationalists such as Bob White and the Canadian Auto Workers could bang the drum of nationalism from the safe redoubt of their own sweetheart deal, the continentalist Auto Pact. White and the auto workers were not fighting against continentalism—just to protect their own continental deal from being watered down.

Of course, all good things must come to an end, and if Canada does not move beyond ripping stuff out of the ground or doing something about its unquestionably threatened manufacturing sector, Canadians’ relative and real prosperity will undoubtedly suffer. There is only so much oil in the ground, and the Canadian dollar can only fluctuate so much; R&D does matter, innovation is important and Canadians need to stop taking the easiest path to prosperity.

But the key disappointment here is that Asleep at the Switch does not offer any solutions to this quintessential Canadian quandary: How does a country like Canada overcome the structural obstacles to economic development and innovation, if that indeed is the problem? Is it even possible, save fomenting revolution? The book provides no prescription, no policy direction and no hint of what might challenge the prevailing neoliberal nostrums and the underlying structures that prevent a transformation of Canadian technological dependence. Despite a thoughtful treatise on the problem as Smardon has described it, we’re no closer to a solution.

Nor does Asleep at the Switch address the possibility that—as historical examples have shown us—Canadian innovation successes can happen, and that we are not necessarily doomed to Innis’s staples trap. Perhaps Canadian policy makers were not entirely misguided in their efforts, but were simply doing the best they could within the landscape they faced. Maybe boosting Canadian innovation is about more than just making state programs; maybe it is about making more and better capitalists, entrepreneurs and innovators.

So perhaps it is not a lack of innovation that is bred in the bone, but an unrelenting pessimism.