Last summer, the BC NDP government retained Mariana Mazzucato, a celebrity academic who is a professor at University College London (UCL), “to advise on the future of the economy as B.C. develops a long-term … plan that will steer the province through the post-pandemic era.”
The government asked Mazzucato to develop ideas for aligning public-sector capabilities, financing mechanisms and citizen engagement with a new innovation strategy aimed at creating a more inclusive and sustainable economy.
This stream of pleasing buzz words doesn’t provide much insight into the substance of the economic plan the NDP government intends to finalize, with input from the professor and her team, in the coming months. A solid plan to boost prosperity and foster innovation that embraces some fresh thinking would be welcome. But if, as the government’s briefing material indicated, the economic plan will “build on B.C.’s long-standing advantages and reflect people’s values,” several fundamental realities will need to inform the strategy.
The first is that B.C. is a sub-national political jurisdiction that has limited control over key policy levers. In Canada, the federal government primarily controls many elements that are central to economic and industrial development, including monetary policy, trade agreements, immigration, competition policy, intellectual property protection and most of the tax system. The province has little influence in most of these policy domains.
Also fundamental is that B.C. is a small export-dependent economy. Any plan for what Mazzucato refers to as “co-creating and co-shaping markets and the economy by government” – whatever that means – should recognize that three-quarters of B.C.’s merchandise exports consist of natural resource products. This share is likely to climb higher when liquefied natural gas (LNG) production comes online in a few years’ time. A commitment to sustainable and inclusive growth must acknowledge the vital role that natural resources play in B.C., above all as a generator of export revenues and as the economic base for many non-urban communities. Resource development is also at the heart of any serious effort to improve the well-being of Indigenous peoples.
A third foundational economic reality for B.C. is that competitiveness matters, even though many politicians prefer to avoid the topic. In her 2019 report to the U.K. government, one of Mazzucato’s key recommendations was to “drive the U.K.’s international competitiveness.”
That insight should be at the core of the forthcoming B.C. economic plan. Without a suite of globally competitive export industries, the province will be unable to achieve broad gains in living standards.
Improving competitiveness means having to confront vexing but important tax and regulatory policy issues. The antiquated provincial sales tax (PST) continues to be a significant drag on business investment. From the perspective of enhancing economy-wide competitiveness, reforming the PST is low hanging fruit. It is the most important thing B.C. policymakers could do if they want to address the problem of chronically weak non-residential investment, particularly in machinery, equipment and advanced technology products. There is also the problem that B.C.’s carbon tax regime, as now structured, is undermining the long-term viability and sustainability of the natural resource and manufacturing sectors. Finally, many areas of government regulatory activity that impinge on both new investment and current business operations cry out for streamlining and would benefit from greater use of digital technologies to increase efficiency and effectiveness.
Supporting the growth in B.C.’s burgeoning technology sector should also figure prominently in the NDP government’s economic plan. Today, the sector directly employs more than 120,000 British Columbians. We see many more technology jobs in the future. With the Vancouver-based Digital SuperCluster, the presence of global giants like Microsoft and Amazon, and rapid growth in the number of local “unicorn” firms, B.C.’s advanced technology industry is shifting to a stronger growth phase. In a world where skilled workers are mobile, jurisdictions will be grappling with how to attract and retain talented workers and ambitious entrepreneurs. Smart policy around personal taxation is an important part of any strategy to build the technology economy.
In her published work, Mazzucato focuses on public sector procurement as a tool to spur innovation. We agree procurement can be a valuable lever for strengthening the local innovation economy, including firms in the digital, clean technology, and life sciences industries. But policymakers cannot overlook value for money considerations when designing and managing procurement systems that depend on taxpayer dollars.
More generally, Mazzucato believes government should seek ways to infuse capitalism with more of a public interest ethos rather than the pursuit of private gain. It is not clear what this means in the context of a small economy where four-fifths of GDP comes from the private sector and most local companies have to be profitable if they hope to survive and grow. •
Jock Finlayson is the Business Council of British Columbia’s senior policy adviser; Ken Peacock is the council’s senior vice-president and chief economist.
