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THE OTTAWA CITIZEN ARGUMENT & OBSERVATION THURSDAY, MARCH 30, 2000 A15

Some key statements made and questions raised by Mr. Mills at the OCRI awards dinner:-

• Most troubling is the continuing reluctance of the federal government to admit that the "brain drain" from Canada is a serious problem.
• Industry Minister John Manley admits there is a problem but so far his boss doesn't agree. In our system we know that unless the prime minister is on side, nothing happens.
• In the global economy that is emerging, the main assets are brains and capital. Both are increasingly mobile and will move to where they can attract the highest return. The main role of governments in future will be to ensure that a political jurisdiction can attract and retain enough of these mobile brains and this mobile capital to drive its economy. Governments that are most effective in attracting and retaining brains and capital will serve all of their citizens best, including those who are less fortunate. Those that fail will fail everyone. All of this is well known. Our governments are well aware of how the world economy is developing. So why won't they act faster? I think the main reason is a lack of leadership. Our governments are increasingly driven by polls.
• But what is a proper government response to the public concern about health care? First is recognition of reality. Our population is aging. The oldest baby boomers are in their 50s and soon this huge population bulge will require a lot of health care. The system is already feeling the strain. The only way Canada can support high-quality service in a public health-care system with an aging population is to become a much wealthier society. There is also a need to permit market forces, the driver of world prosperity, to play some role in the allocation of healthcare resources. The courageous way to respond to the public concern about health care would be to bring forward a set of policies aimed at wealth creation, and explain the need for these to support a public health-care system.
• Our federal political system is in crisis today
• We need leaders who will tell the unpleasant truth. Canada has too many small farms, too many marginal industries in remote areas and too many people being subsidized to lead unproductive lives. Most importantly, we must stop using high tax rates to take away resources from the most productive parts of the economy in order to prop up this old system. We must stop handicapping the industries and companies that will earn Canada's way in a tougher and increasingly competitive world. Governments have an obligation to help those who cannot help themselves, but in a global economy, they must find new and more creative ways to do it. This will likely mean requiring people to move to jobs and putting an end to the extravagant and ineffective efforts to move jobs to people.
• Government policies should use market forces rather than trying to fight them.
• We need a society in which our universities and colleges are exquisitely tuned not only to current labour market needs but to the needs of the future so that Canada will always have a supply of trained people to fill jobs as they develop. We need immigration policies that are driven not by politics but by Canada's labour force needs in the global economy.
• The Ottawa Partnership, known as TOP, is developing the most thorough analysis of the local economy and economic development needs that I have seen.
• The only significant cloud I see on our horizon is the lack of leadership and poor policies of governments. Let's hope that the new Canadian Alliance party can develop into a strong opposition and potential alternative government that will put the fear of defeat into the governing party and force it into developing better and more forward-looking economic policies for Canada. Let's hope that the federal government surplus will be given back to Canadians to spend and invest as they choose.
• The "job drain" is a real threat to Canadian prosperity.
• We should demand nothing but the best policies from our governments.
• Our objective should be nothing less than to make Canada the most desirable place in the world to work and invest. This is not an impossible goal. All we lack is leadership and courage at the political level. For the sake of all future generations of Canadians, we must demand it.

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THE OTTAWA CITIZEN ARGUMENT & OBSERVATION THURSDAY, MARCH 30, 2000 A15

The relationship between government and the private sector laid the foundation for the incredible growth and prosperity we see in Ottawa today.

Without the technology produced by taxpayer-funded research, and the market for technology provided by the federal government, Ottawa would not be the thriving high-technology centre it is. When you add the fact that our universities have also played a significant role in technology research and education, it's easy to conclude that partnership between the public and private sectors is what Ottawa's success is all about.

And if you want to look at the broader issue of partnership, it goes back much farther than that. Recently, I heard a talk by Pierre Camu, former president of the St. Lawrence Seaway, who is working on a book on the Port of Ottawa. Ottawa is a long way from any substantial body of water, but we had a thriving port here in the 19th century because of the rivers and the Rideau Canal.

Mr. Camu's research shows that traffic at the Port of Ottawa peaked in the 1880s and 1890s when more than 4,000 vessels a year passed through the port. The railways eventually killed the port, but while it was operating, it laid a substantial economic base for the community.

The main reason there was a Port of Ottawa here was because of the public sector investment in the building of the Rideau Canal. The completion of the canal by the military made the Ottawa River-Rideau Canal route a viable alternative to the St. Lawrence River for travel to the interior. This led to the growth of Bytown, which became Ottawa, which became the national capital, which ultimately became our own thriving Silicon Valley. So "Powered by Partnerships" is not simply the title of the talk, it's a neat capsule description of the history of our community. Without the initial public investment in the Rideau Canal, we would not be here tonight.

The Ottawa Citizen has shared almost all of this history. We are the oldest continuously operating business in the Ottawa area and this year we are marking our 155th year of publication. Newspapers are creatures of their communities and we have benefited from this partnership between the public and private sectors in Ottawa for longer than anyone else.

Although partnership between the public and private sector can be a great thing, all is not well in the current partnership between government and business. We have done reasonably well in Canada in recent years and we have done particularly well in Ottawa, but we could have done better and the future is less certain than it should be.

Most troubling is the continuing reluctance of the federal government to admit that the "brain drain" from Canada is a serious problem. John Roth of Nortel describes this more accurately as a "job drain," pointing out that this is more than a loss of talented individuals. It also involves the relocation of corporate offices and facilities to the United States because of a more favourable environment, which includes lower taxes. Industry Minister John Manley admits there is a problem but so far his boss doesn't agree. In our system we know that unless the prime minister is on side, nothing happens.

Those of you who have business interests in the United States or travel there frequently have seen the growing disparity in standards of living that has developed between Canadians and their neighbors to the south. While the United States is not a perfect society, its vibrant economy generates opportunities and incomes for the best and brightest that is increasingly difficult for companies based in Canada to match.

In the global economy that is emerging, the main assets are brains and capital. Both are increasingly mobile and will move to where they can attract the highest return. The main role of governments in future will be to ensure that a political jurisdiction can attract and retain enough of these mobile brains and this mobile capital to drive its economy. Governments that are most effective in attracting and retaining brains and capital will serve all of their citizens best, including those who are less fortunate. Those that fail will fail everyone. All of this is well known. Our governments are well aware of how the world economy is developing. So why won't they act faster? I think the main reason is a lack of leadership. Our governments are increasingly driven by polls. They poll constantly and the results drive politics and policies. In theory, this isn't bad. Democratic governments are supposed to do what their citizens want. The problem lies in the interpretation and use made of the results. 'Mere is a cowardly and a courageous way to deal with public opinion. So far, our governments have too often taken the weak path.

For example, current polling almost always shows that health care, and particularly the quality of the public system, is the most important issue to Canadians. Why wouldn't it be? We begin our lives using the health-care system and most of us will be using it at the end. Illness touches all families at one time or another. But what is a proper government response to the public concern about health care?

First is recognition of reality. Our population is aging. The oldest baby boomers are in their 50s and soon this huge population bulge will require a lot of health care. The system is already feeling the strain. The only way Canada can support high-quality service in a public health-care system with an aging population is to become a much wealthier society. There is also a need to permit market forces, the driver of world prosperity, to play some role in the allocation of healthcare resources.

The courageous way to respond to the public concern about health care would be to bring forward a set of policies aimed at wealth creation, and explain the need for these to support a public health-care system. This would require leadership and willingness to take some risks, things that are lacking in much of our politics today. Do we have any politicians willing to explain the link between the lower marginal tax rates that will generate economic activity and our ability to afford public health care? Instead of leadership, too often polling generates what I would call followership, weak policies that superficially follow public opinion and appear safer in the short run, but that do not deal with the heart of a problem.

This is perhaps a symptom of the fact that our federal political system is in crisis today. An effective parliamentary system requires a strong opposition that can replace the governing party if it loses either the confidence of the House or a general election. It is this fear of being replaced that keeps a party focused on providing good government. With the opposition fragmented, the government becomes slack and, sometimes, dishonest.

In our system, a prime minister controls the parliamentary careers of all members of his party, including cabinet ministers. With a majority government, a Canadian prime minister has almost dictatorial powers for his term of office. A strong opposition in Parliament is the only serious check on this power. Without a strong opposition, a dangerous concentration of power develops that is almost certain to degenerate into bad government.

The recent controversy over Human Resources Department grants is a case in point. These types of grants are a very bad example of partnerships between government, business and communities. Any economist will tell you that taking almost $100 from every Canadian taxpayer and doling this out as about a billion dollars' worth of grants across the country does not really create a net number of jobs. The grants superficially create jobs, but just as many jobs would be created by the purchasing power of the money if it were left in the hands of taxpayers. The jobs they do create are likely to be short term because they are not based on consumer choices and they are open to political abuse.

This HRDC program was also particularly badly administered. Yet so far, there has been no acceptance of accountability. No minister has resigned to acknowledge that a large amount of taxpayer money has not been carefully spent, and no bureaucrat has been fired. Ministers stonewall in the House of Commons and bureaucrats continue their careers unaffected. This is an indication that we have a serious crisis of accountability at the federal level. Because of the fragmented opposition, the government does not fear being defeated in the next election and knows the public has no way to penalize it.

The broader issue that goes beyond the poor administration of this HRDC program is the pattern that far too much public-sector aid has followed. Vast sums have been taken from taxpayers to prop up non-competitive companies, too often in areas where there is a political payoff for the government, and to permit people to live where there is little hope of them ever gaining productive employment.

Programs, aimed at equalizing standards of living across the country have been the Canadian way. In less competitive times, when national boundaries could protect industries, this may have been a defensible national strategy. But it is not a reasonable strategy in a global economy. As tariffs and trade barriers come down and goods, services and information move increasingly easily across national boundaries, firms that are not efficient, are poorly located or are not serving real consumer needs will come under increasing pressure.

We need leaders who will tell the unpleasant truth. Canada has too many small farms, too many marginal industries in remote areas and too many people being subsidized to lead unproductive lives. Most importantly, we must stop using high tax rates to take away resources from the most productive parts of the economy in order to prop up this old system. We must stop handicapping the industries and companies that will earn Canada's way in a tougher and increasingly competitive world.

Governments have an obligation to help those who cannot help themselves, but in a global economy, they must find new and more creative ways to do it. This will likely mean requiring people to move to jobs and putting an end to the extravagant and ineffective efforts to move jobs to people.

So much of the older partnership model is broken. What should a new and better one look like? I believe government policies should use market forces rather than trying to fight them. The global market economy is the most important force of our time and it is transforming the world for the better. We can see that here in Ottawa, where the city has been reinvented in a very few years. Governments should be supporting the choices of the market.

Governments are notoriously poor at reading markets, however, and the private sector must help. We need a society in which our universities and colleges are exquisitely tuned not only to current labour market needs but to the needs of the future so that Canada will always have a supply of trained people to fill jobs as they develop. We need immigration policies that are driven not by politics but by Canada's labour force needs in the global economy. We need taxation policies that will encourage entrepreneurs to start businesses here, that will encourage established companies to keep and expand head offices and research facilities here, and that will encourage talented young people to build their lives and careers in Canada.

Another initiative spearheaded by OCRI that you should keep an eye on is SmartCapital, our region's submission to The Smart Communities Program. This three-year program, created and administered by Industry Canada, has a mandate to make Canada a world leader in the development and use of information and communications technologies for economic, social and cultural development.

In Ottawa, we are well on our way to becoming a smart community. Our region is already renowned as the most connected community in Canada. It is the seat of Canada's advanced technology industry and the site of numerous innovative service developers. SmartCapital is committed to leverage these advantages in education, health care, government and business and to expand the development and implementation of online services.

Another major partnering initiative in this region was announced with considerable fanfare only last week. This is the National Capital Institute of Telecommunications, or NCIT, which opened its doors thanks to some $36 million in funding from industry and government over five years.

This is certainly a great time to be in Ottawa. So much is going right. After many years of struggle, municipal reorganization is almost complete. When this transition year is behind us, the years of fragmentation and squabbling between municipalities will be nothing but a bad memory. The new, larger Ottawa will be able to follow a coordinated strategy to reinforce its success. The Ottawa Partnership, known as TOP, is developing the most thorough analysis of the local economy and economic development needs that I have seen. Even the Ottawa Senators seem to be here for good.

And if you follow the Ottawa Citizen High Technology Stock Index that we developed to track how the local high tech industry is performing, it has been outperforming every other market, including the Nasdaq stock market.

The only significant cloud I see on our horizon is the lack of leadership and poor policies of governments. Let's hope that the new Canadian Alliance party can develop into a strong opposition and potential alternative government that will put the fear of defeat into the governing party and force it into developing better and more forward-looking economic policies for Canada. Let's hope that the federal government surplus will be given back to Canadians to spend and invest as they choose. Let's hope that John Manley can convince his boss that the "job drain" is a real threat to Canadian prosperity. Let's hope that the prime minister recognizes that he has served Canada well during his long and varied career in public life, but that it's time to step aside and turn over the reins of power to someone with fresh approaches and new ideas.

We must develop some new ways to be "Powered by Partnerships" in future. As we do so, we should demand nothing but the best policies from our governments. We should demand policies that will not just slow down the "job drain" but will reverse it.

Our objective should be nothing less than to make Canada the most desirable place in the world to work and invest. This is not an impossible goal. All we lack is leadership and courage at the political level. For the sake of all future generations of Canadians, we must demand it.

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