Prosperous Canada in a Multipolar World: A Canadian Priorities Agenda - Case Study Example

INTRODUCTION The immediate changes in the global economy being relatively and progressively interdependent, various strategic moves have been made towards achieving positive economic growth. The economies of emerging markets have surfaced and transformed to contributing in the global economic and fiscal activities, the international corporate landscape and eventual shaping of the global monetary systems. This has proved it significant for the policy makers to grasp the phenomenon of developing economies placed ahead in this change, not forgetting the least developed economies lingering at the periphery.1 The financial and economic crisis has revealed that worldwide interdependences produce asymmetric effects and present a new set of constraints and prospects for states economic progression and opulence. Against the milieu of swiftly changing status, it is necessary to make sure that public policies constantly evolve and efficiently address market failures. Canada has not been left behind in the evolving of its economic growth. Presently a distinct challenge for public policy in Canada is to make a successful exit from extraordinary measures undertaken in response to the crisis (namely: return to a balanced budget) and guarantee that the required preconditions for long-term sustainable economic growth across Canada are put in place. With these goals in mind, my aspiration is to select a package of five proposals from a rich thirty option policy menu to ensure economic well being of the Canadians. This will be commenced by outlining the current domestic and global context that informs the objectives and choices of Canada. Then conduct a policy analysis of the chosen options and assess the policies individually and as a package against four criteria. The rest of the paper will expound on the exclusion of other proposals from my options and conclude by providing implementation consideration for my package. Context A Multipolar Economic World Order The international economy is at the focal point of an eventual change and Canada has not been left without challenges to be at per with emerging trends in the current economic realm. One of the most noticeable outcomes to the positive makeover is in the rise of a number of vibrant emerging market countries at the international economy.2 Throughout history, paradigms of economic power have been outlined and redrafted in accordance with the rising and falling of countries pre-eminently equipped to activate global growth and grant incentive to the global economy. Multipolarity, which refers to, more than two prevailing growth poles, has at times been a key attribute to the global economy.3 But, at no time in the modern history have developing countries been at the forefront of a multipolar economic system. The system is set to take a new turn, and by 2025, six emerging economies- Brazil, China, India, Indonesia, South Korea, and Russia will collectively account for about 50% of the global growth.4 The global monetary organization is likely to stop being subjugated by a single currency over the same years. Although this shift to a multipolar world is mainly positive, it is also disorderly.5 Productivity gives the measure of how adeptly a country turns inputs like labour and technology into the consumable outputs. The comparison of the Canadian potential for economic growth is highly critical. According to Arcand and Lefebvre (2010), lagging productivity is detrimental to effective, economic growth. Productivity growth is a crucial determinant to any given economic well-being and depends on its investment in human and physical capital. Morgan and Herald state that lagging productivity is a threat to the Canadian prosperity.6 The productivity growth in Canada’s economy was ascertained to be much weaker in 1984-2008, in comparison to 1962-1983.7 The chart below by OECD clearly illustrates that Canada’s productivity in 2007 was beyond the OECD average but lagged behind that of the United States, Germany and France.8 Since the early 1980s, both productivity and growth capital intensity in Canada has been on decline relative to 1960s and 1970s despite a steady improvement in the country’s labour force quality.9 Graph 1: Productivity in the OECD countries Demographics in the 21st century indicate that Canada faces significant aging of its population. This has resulted in the upsurge of immigrant dependent labour. In 2001, one Canadian in eight was aged above 65 years and over and it is projected that by 2026, one Canadian in five will have reached 65 years.10 Aging population affects sectors of the economy due to its complex nature of providing talent and skill necessary for innovation and productive knowledge in the economic growth venture. An aging Canadian population will impact profoundly in the labour market beyond the level of skill effects. Therefore, all Canadian government levels and sectors of the social order will necessitate working in partnership to react to the challenges of an aging Canadian society. This includes measures to enhance immigrant labour and lessen the looming labour deficit, as well as looking into implication to the public policy and society at large. Graph 2: Population Projections 1971 to 2061 in Canada.11 Canada has faced strenuous fiscal pressures with the global economic recessions of 2008-09. Government sectors and the treasury have seen great constraint in their budgets. The current situation at all governments’ levels is that they are working at deficits and relying on debts; this has forced them to cut on their spending to balance their budget which in turn is impacting negatively to the public policies. Fiscal constraints have eroded Canadians’ enthusiasm about their stabilized care sector and at the same time affecting the education and social services. In particular, the fiscal constraints in the education sector have influenced towards the job losses among the teachers. The global recession caused primary sources of municipal revenues to evaporate. A clear example is Toronto, Canada’s largest city faced an estimated $500 million budget deficit in 2010.12 Fiscal constraint in the government sector is a concept that will be prominent in the coming years in Canada, basically as a response to heavy economic stimulus spending in the past. This calls for critical measures towards cutting down of the budgetary deficits and correcting of the fiscal imbalances in the government sector. In this context, my overarching policy objective is geared towards the creation of a multi-track (two-pillar) strategy aimed at securing economic well-being of Canadians and enhance Canada’s prosperity by fostering technological progress and efficiency while diversifying trade which feeds into innovation and competitiveness of Canada, and by investing in human capital. Advanced economies like the US slow down with respect to their economic growth and dynamic emerging economies develop to take their position at the helm of the global economy. In this regard, Canada is bound to develop a strategic approach to this power shift. Mark Carney is in support to this and states, “It is a high moment of enormous prospect for Canada, but navigating the cross-currents in the international economy require boldness and skill.”13 In order to achieve my objective, a number of options from the menu have been considered being guided by the four selection criteria: efficiency, sustainability, equity, and appropriate Role for Government. These criteria will be expounded further at the evaluation stage of the policy package. Policy Analysis The key aim of this exercise is to select a five part policy package that effectively outlines the contribution towards the improvement of future economic and social well-being of Canadians. This section will constitute a two-pillar strategy. First is the pillar having policies aimed at fostering technological progress, innovation and competitiveness and includes: 25. Benchmark against the best and promote competition 27. Re-tool finance for innovation and commercialisation 1. Join the TPP to accelerate diversification The policies listed above aim at putting Canada within a competitive position in the multipolar world. International competition remains one of the fundamental determinants of Canada’s GDP, which can extensively progress the economic comfort of the country.14 While capitalising on its own strengths is essential, benchmarking against the best and presume best practices from all over the world is essential for Canada’s prosperity. For example, Canada can benefit significantly from using the US expertise in re-tooling finances for innovation and commercialisation, borrowing experiences in areas of venture capital and innovative government procurement.15 Canadian business has the potential of leading in the industrial world in winning strategies. Canada has faired well in the international context with its deep and inescapably influence orchestrated by its proximity to the US. This has prompted my interest in policy number 25. By benchmarking on the effective and achievable marketing measures, the Canadian business community will be at per with their American counterparts and effectively realise growth. Benchmarking is a process through which a country can measure its output and progress against its toughest competitors. Innovation and commercialisation will not be without looking into the technology employed by the emerging world. China has emerged as a major exporter of standard technology which is crucial for economic development in this country. Canadian manufacturing sector has a great role in the production of goods that will sustain persistent competition. This calls for the embracing of new technological advancement in the development of human capital that is competent at the international level. The fiscal constraints in the post secondary sector have posed a challenge in coming up with excellent intellectual capital. The dependence on immigrant labour also calls for evaluation of contribution they have towards the development of technology and innovation within the economic context. The creation of new business models and recalibration of old ones will ensure productivity enhancing thinking at all levels of the organisation. Benchmarking ensures companies come up with new value propositions for the global stage. A good example is the recent prior to NAFTA, many Canadian firms survived in a protected domestic market, with tariff protection, a weak currency and easy access to local advantages. With the strengthening of the Canadian dollar, the business people can place their traits at the forefront for great competition that will ensure great economic drives are realised. With increased growth rates appearing to be turning into elevated latent growth trajectory, the domestic political support for the relevant reforms is growing. With effective policy choices, Canada will emerge with its change in patterns of production, employment and trade to become inescapable factors.16 The role of government falls in ensuring a favourable environment in the provision of macroeconomic conditions, improving microeconomic capacity and establishing a supportive and progressive regulatory environment. According to Chris Plecash, Canada is facing commercialisation gap and not innovation.17 Development in the economic sectors entails enhancing financial strategies as tools for growth and development in the fiscal matters. This has drawn interest in policy 27 to ensure economic growth through innovation and commercialisation. With the pace set by the US and the pressure brought about by the upcoming economies like China and India, Canada is bound by the competitive nature to emerge with strategic measures of innovativeness and commercialisation of its policies to enhance international growth in the multipolar economy. There is also need to heighten productivity and innovation performance as with OECD average performance by 2015. As they pursue development opportunities abroad and at the same time being encouraged by enhanced policies at home, emerging-market conglomerates will take part in an increasingly exceptional role in the worldwide business and cross-border investment, while large pools of capital within their boundaries will allow emerging economies to turn out to be key players in financial markets. With promotion of education and training, this will help Canadians get the education and skills necessary to succeed with new budgetary measures. This may call for expansion of the Students Loans and Grants for post secondary, which will enhance research and development in innovation. Knowledge and innovation are core drivers in the 21st century global economy. To be at the helm of knowledge and innovation in the world, Canada ought to attract and develop talented people, enhance the capacity for world leading research and development, improve commercialisation of research and promote education and skill development. The government has a clear role in the implementation to this. The government have to provide support for research and Canada’s public research infrastructure. Further, it ought to increase the impact of its investments by levering contributions from the private sector and other levels of government in the national projects and commercialisation partnerships. The 2011 budget heightens these priorities via actions in support of the new digital Economy Strategy, additional support for leading edge research and investment in education and training skills. The diversification of trade and opening of new markets through the Trans Pacific Partnership is highly essential for Canada’s prosperity in the light of shifting the economic power highlighted prior to this. Membership to the TPP would facilitate a more solid foothold in East Asia for Canadian business. TPP currently involves economies comprising 28% of the global GDP with the potential to expand and include the entire APEC, even China. This is a group representing 54% of the global GDP. With the parties of the body seeking for enlarged liberalisation processes with respect to APEC which are consistent with the set goals of free and open trading and investment. This is bound to enhance the international base for investment with respect to the Canadians. With 90% tariffs waiver to the member states and projected trade tariffs to zero level towards 2015. It is certain that Canada will benefit from the agreements covering all the core pillars of FTA, including trade in goods and services. Further, intellectual property, government procurement and competition policies will be enhanced and ascertained with respect to the national set policies. The government has a greater role in ensuring that this policy is implemented for the effectiveness and realisation of an efficient economic growth leading to financial sustainability and equity. The second pillar of my strategy is aimed at improving Canada’s human capital, another fundamental determinant of the economic growth, and includes the following options: 21. Improve human capital (early and late education) 13. Labour market programming: expand Federal Skilled Worker Program Policy interventions that assist human capital development are beneficial on two main grounds. First is that they contribute considerably towards the improvement of productivity and hence economic growth. Secondly, they address the systematic inequalities that underlie the socio-economic stratification. It is critical to note that investment in human capital thereby provides social returns beyond private returns, requiring an active role of government as suggested by the endogenous growth theory.18 Human capital could be significantly enhanced through education. Early development of human capital could allow Canada to remain competitive within the global arena. It has been argued that early childhood form the best stage in life to implement relevant human, capital development policies, aimed at securing future stability of the country. Riddell suggests that improved school readiness could raise returns to existing investment in education.19 The Canadian government has a great responsibility in enhancing the financing the education sector amid the financial constraints discussed earlier. Consequently, reduction in crime and welfare receipt, in conjunction to less grade retention and special education, may present cost savings in other areas of public spending.20 Whereas interventions at the later stages (high school, college) could enable the successful availability of human capital in future stages in life. The point of interest with regard to my policy package is how to effectively assume the responsibility of funding this initiative. The government body has been very effective in tax collection but failing to give incentives to the subjects of economic growth. Therefore, to enhance capital growth through education, the government needs to consider revising and cutting some of its tax expenditures leading to savings that could be used for servicing the education sector.21 This would see an improved education system with respect to current technology, innovation and commercialization measures. Canada would essentially curb the persistent shortage of effective human capital within the framework of Canadian industries through improving access to post-secondary education. Labour programming is another policy aimed at improving human capital in Canada. Experience and evidence show that economic immigrants are most triumphant when selected for aspects such as education and language that equip them to adapt to a varying economy. Expanding Federal Skilled Worker Program will contribute to the human capital Canada calling for innovative, productive and knowledge-based economy. Canada is one of the several developed countries facing a shortage of a skilled workforce and is involved in competition for internationally trained and educated workers.22 With immigration becoming the primary source of labour force and population growth, it is highly crucial to look into matters that affect the immigrants’ welfare in the labour market in the past decade and also the economic and social barriers affecting them as newcomers. Being a country of option for many immigrants Canada draws newcomers from every corner of the world. Owing to the declining birth rate and aging population, immigration is becoming the leading source of population growth and a critical source of skilled labour for Canada. With an aging population, Canada has seen a dwindling labour proficiency and an increase in immigrant labour. Employment equity calls for the employer’s engagement in proactive employment practices to increase the representation of women, the disabled, the Aboriginal people and the visible minorities. Thus, it calls for employers to institute positive strategic moves and practices for the hiring, training, retention and promotion of members on the designated groups. Therefore, I feel positive in addressing the need to look into the need to enhance immigration policy to ensure skills supplement is enhanced. David Foot argues that Canada ought to rectify the labour force shortages brought about by the aging population through the selection of younger immigrants seeking for better economic opportunities. He also proposes the speeding up of immigration certification process and enhancement of immigrants’ credential recognition. There is crucial need to change the selection criteria for the immigrants as it has relative low cost but the returns are considerable. Having a strong immigration program will enhance on Canada’s past success and create new economic opportunities with respect to the immigrants. This will help Canada meet its population and labour market needs while at the same time improving outcomes for immigrants.23 Therefore, looking into the welfare of the immigrants will promote labour force and enhance human capital. With respect to the FSWP, it will enhance economic immigration in Canada. It will be imperative to term the Federal Skilled Worker Program as the cornerstone towards bringing the larges proportion of economic immigrants and give priority to the processing of the applications made through FSW. Several studies have shown that the federal skilled worker principal applicants fare best among other immigrants.24 Thus, Canada ought to concentrate on the improvement of the FSW program so as to attract potential subjects (persons) to economic success in Canada. There is need to incorporate the learning of foreign language that would lead to competence internationally. In the 1970’s, graduates were required to have at least two years study of foreign languages which now has been forsaken.25 Therefore, the government has the responsibility of ensuring education systems incorporate this to enhance international language competence with respect to human capital promotion. This will create an investment environment that ensures businesses can compete well at the international level and prove attractive for investment. EVALUATING THE PACKAGE As highlighted above, the policy context entails choosing a five-option package for componential improvement of Canada’s ability to navigate successfully in a rapidly changing world economy. The package, which has been divided into two parts, addresses the collective measures towards economic growth by fostering technological progress, innovation and competitiveness, as well as entailing the improvement of human capital. Technology and economic growth are compatible for the effectiveness of sustainability in the financial sector. My package will be evaluated with respect to economic efficiency, equity, fiscal sustainability or cost effectiveness and conclude with the appropriate role for the government. The current global changes being experienced with respect to economic growth, technology advancement and investing in human capital are key to the enhancement of efficiency in the financial sector. I have well illustrated that Canadians firms have a unique opportunity to prosper, as long as they build on core strengths, embrace the current global marketplace strategically, and tackle their weaknesses particularly in productivity and innovation.26 This will enhance competition with benchmarking ensuring that the business community comes up with productive leaders having excellent skills that would ensure businesses can compete on the international market. There is a greater need for the production of opportunities geared towards business growth by investing in the post-secondary education, to enhance talented business leaders towards the realisation of innovation and commercialisation. With regional and international cooperation in the business sector, this will not only see the development of business relations but enhance human capital development and technology advancement. This is in the quest towards effective and sustainable financial development. The venture will see the opening up of foreign labour inclusion to provide for the labour deficit in the labour marketing program. With respect to equity, there is great need among the workers to expand their programs and decline to desist them in upcoming fields; thereby, enhance their capacity for the growth of the industrial sector. In respect to immigrants and internationally trained individuals, there is need for short-term programs specially designed for internationally trained individuals who face barriers in entering in the labour market due to non-recognition of their credentials. These programs would top-up the skills and knowledge of the immigrants and recognise their credentials and consequently enhance the development of Canadians talent. With improved competition strategies, enhanced innovation and commercialisation through embracing technology and productivity measures as well as recognition of skilled labour to the immigrants and Canadians alike, taken into account will see to it that equity is realised. With respect to Fiscal Sustainability and cost effectiveness, this package employs measures that will not entail extra spending of fund for implementation. In the creation of this package, I carefully looked into the financial implications of each policy and predicated my conclusions with respect to inclusion of each policy on the feasibility of the final policy choices. With respect to competitiveness and technology advancement, it calls for the inclusion of current standards of advancement in realisation of economic salvage. In matters pertaining to human capital, the alignment of emigrant certification is a low-cost undertaking. The whole package is far much less costly in respect to the expected economic results and creates conditions for long-term economic growth. This can be achieved via the reorientation towards creation of knowledge and innovation. Finally, the government’s role in the implementation of the whole package is very clear. Promoting and harmonising the relations between national and provincial governments to enhance policy implementation. With respect to fiscal gaps and financial constraints in all government levels, there is greater need for budget cuts on unnecessary spending like unnecessary spending in state functions. The cooperation in business with respect to regional and international treaties, this package has outlined the well formulated and defined options of the government involvement to ensuring viable working and realisation of the same. The restructuring and generation of the revenues to cut on the fiscal constraints falls on the responsibility on the government prerogative. The ensuring of effective immigration certification and process has to be effected by the government at the federal level. OPTIONS NOT INCLUDED IN THE OVERALL PACKAGE The package discussed here doest not exhaust all the policies regarding priorities and choices towards realising a economic viable Canada in a Multipolar World but, my package extensively highlights the best practice frameworks that can lead to the realisation of this. Options pertaining to the aboriginals though not discussed directly, their issues have been touched in respect to productivity and human capital promotion through early and late education prioritisation; these are issues of direct importance to the aboriginal. Further, the failure to discuss poverty and inequality may seem as though it does not touch the Canadians and the immigrants going through difficult economic times, but the labour market programming and technology innovation looks into the effectiveness of improving the lives of all Canadians; whether Canadian or foreign-born. IMPLEMENTATION CONSIDERATION My policy package has been designed with much emphasis towards safeguarding the economic revival and utilising the set environment in the multipolar world. The implementation of this policy package is short term with respect to technological advancement to promote efficient competitiveness in the regional and international realm. Conversely, some like the development of human capital may take some time before full implementation as with respect to education promotion, immigrants’ certification harmonisation and inclusion into the social welfare provision programmes may prompt public debate and legislative discussions. The embracing of immigrants will work positively towards solving the crisis of lagging labour productivity due to the Canadian aging population. Therefore, this will boost the implementation on the policy touching on the welfare of the immigrants for the overall benefit of the Canadians. Amid all these, the policy package will be embraced by the Canadians after understanding the positive impacts resulting from the implementation. Ultimately, this package rises to the challenges faced by Canada in the period of global recession and is cost-effective and progressive towards positive economic growth. Major initiatives are comparatively balanced by the uncontroversial ones, and the latter gain prominence and urgency as part of the agenda proposed of a prosperous Canada in a multipolar world. This will in the long run contribute to the provision of opportunities for well being to the Canadians. Bibliography Arcand, A. and Lefebvre, M. (2010) Canada’s Productivity: The Case of a Well- Educated Workforce Lacking the Much-Needed Physical Capital. The Conference Board of Canada. http://www.conferenceboard.ca/e-Library/abstract.aspx?did=3396 Carney, M. (16 May 2011) “Canada in a Multi-Polar World,” speech delivered to Canadian Club of Ottawa, Ottawa, Ontario, Global Horizons (2011) Multi-polarity: The New Global. Washington: The International Bank for Reconstruction and Development/ The World Bank. Government of Canada, Canada’s Aging Population. (2002) Ontario: Public Works and Government Services Canada. J.A. Finlayson, J. (2010) The Harmonised Sales Tax-Through an Economic Prism: Policy Perspectives, Vol. 17(2) Vancouver: Business Council of British Columbia. Jamus, L. (2011) A New Multi-polar world Economy. Prospects for Development. http://blogs.worldbank.org/prospects/a-new-multipolar-world-economy Leonard, J., Ragan, C. and St-Hilaire, F. (Eds.) (2007) Montreal: Institute for Research on Public Policy Statistics Canada, Immigration in Canada: A Portrait of the Foreign- Born Population, 2006 Census, Ottawa: Minister of Industry, p. 5. Morgan, G. and Herald, C. (2012) Lagging Productivity Threatens our Prosperity. http://www.calgaryherald.com/business/Lagging+productivity+threatens+prosperity/6 6503/story.html Organization for Economic Co-operation and development (OECD), (2007) as cited in K. Press, Canada’s Productivity Gap, Brighter life, March 30, 2010. Read More

Multipolarity, which refers to, more than two prevailing growth poles, has at times been a key attribute to the global economy.3 But, at no time in the modern history have developing countries been at the forefront of a multipolar economic system. The system is set to take a new turn, and by 2025, six emerging economies- Brazil, China, India, Indonesia, South Korea, and Russia will collectively account for about 50% of the global growth.4 The global monetary organization is likely to stop being subjugated by a single currency over the same years.

Although this shift to a multipolar world is mainly positive, it is also disorderly.5 Productivity gives the measure of how adeptly a country turns inputs like labour and technology into the consumable outputs. The comparison of the Canadian potential for economic growth is highly critical. According to Arcand and Lefebvre (2010), lagging productivity is detrimental to effective, economic growth. Productivity growth is a crucial determinant to any given economic well-being and depends on its investment in human and physical capital.

Morgan and Herald state that lagging productivity is a threat to the Canadian prosperity.6 The productivity growth in Canada’s economy was ascertained to be much weaker in 1984-2008, in comparison to 1962-1983.7 The chart below by OECD clearly illustrates that Canada’s productivity in 2007 was beyond the OECD average but lagged behind that of the United States, Germany and France.8 Since the early 1980s, both productivity and growth capital intensity in Canada has been on decline relative to 1960s and 1970s despite a steady improvement in the country’s labour force quality.

9 Graph 1: Productivity in the OECD countries Demographics in the 21st century indicate that Canada faces significant aging of its population. This has resulted in the upsurge of immigrant dependent labour. In 2001, one Canadian in eight was aged above 65 years and over and it is projected that by 2026, one Canadian in five will have reached 65 years.10 Aging population affects sectors of the economy due to its complex nature of providing talent and skill necessary for innovation and productive knowledge in the economic growth venture.

An aging Canadian population will impact profoundly in the labour market beyond the level of skill effects. Therefore, all Canadian government levels and sectors of the social order will necessitate working in partnership to react to the challenges of an aging Canadian society. This includes measures to enhance immigrant labour and lessen the looming labour deficit, as well as looking into implication to the public policy and society at large. Graph 2: Population Projections 1971 to 2061 in Canada.

11 Canada has faced strenuous fiscal pressures with the global economic recessions of 2008-09. Government sectors and the treasury have seen great constraint in their budgets. The current situation at all governments’ levels is that they are working at deficits and relying on debts; this has forced them to cut on their spending to balance their budget which in turn is impacting negatively to the public policies. Fiscal constraints have eroded Canadians’ enthusiasm about their stabilized care sector and at the same time affecting the education and social services.

In particular, the fiscal constraints in the education sector have influenced towards the job losses among the teachers. The global recession caused primary sources of municipal revenues to evaporate. A clear example is Toronto, Canada’s largest city faced an estimated $500 million budget deficit in 2010.12 Fiscal constraint in the government sector is a concept that will be prominent in the coming years in Canada, basically as a response to heavy economic stimulus spending in the past. This calls for critical measures towards cutting down of the budgetary deficits and correcting of the fiscal imbalances in the government sector.

In this context, my overarching policy objective is geared towards the creation of a multi-track (two-pillar) strategy aimed at securing economic well-being of Canadians and enhance Canada’s prosperity by fostering technological progress and efficiency while diversifying trade which feeds into innovation and competitiveness of Canada, and by investing in human capital.

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