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Dominic Barton wants Justin Trudeau to think big about the economy. Will he?

Trudeau’s top economic advisor has said Canada needs “bold and immediate action” to stave off stagnation, but the government has been slow to live up to the challenge


 
Chairman of the Advisory Council Dominic Barton pats Minister of Finance Bill Morneau on the shoulder during a news conference in Ottawa, Thursday, October 20, 2016. (Adrian Wyld/CP)

Chairman of the Advisory Council Dominic Barton pats Minister of Finance Bill Morneau on the shoulder during a news conference in Ottawa, Thursday, October 20, 2016. (Adrian Wyld/CP)

Dominic Barton is all about scale. When the global managing partner of McKinsey & Co. gives a talk, he’s prone to showing audiences photographs of Chinese city skylines mushrooming, over what seem to be impossibly short time spans, from roughly Moncton to beyond Manhattan. Barton, a Canadian whose deep experience in Asia lifted him to the pinnacle of McKinsey’s far-flung consulting empire, has a knack for conveying how if you’re not going big, you just don’t get the 21st-century economy.

So when he was named last year by Finance Minister Bill Morneau to chair the federal government’s blue-chip Advisory Council on Economic Growth, nobody who knew him was surprised that Barton set goals of scaled-up ambition. The problem, he warned, is that Canada’s workforce is rapidly aging, while its companies are stuck in a low productivity gear, putting the country on track to generate only half of the annual growth in the next few decades that Canadians have come to expect over the past 50 years.

He called for “bold and immediate action” to stave off that near-stagnation. His council’s self-defined benchmark for success is unusually precise and an undeniable stretch: devise measures big enough to lift the median household’s income to $105,000 in 2030, way up from about $80,000 today, and well above the mere $90,000 expected if Canada fails to adopt new ways of generating wealth.

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Such is Barton’s understated self-assurance that nobody blinked when he set that lofty target. He’s the six-foot-four, silver-haired, bespoke-clad epitome of worldly, technocratic savvy. He rose to prominence as McKinsey’s senior man first in Seoul and then Shanghai from 2000-2009—front-row seats for staggering economic transformation—before moving to London to assume the top job in, as insiders know it, The Firm.

But Barton’s council—14 high-powered volunteers working for $1 each—has yet to prove it can spark change on a scale commensurate with his reputation. Rather than a single, big report, it is releasing recommendations in installments—the first released last fall, the second last winter, the final due this fall. The first two have already inspired Prime Minister Justin Trudeau’s Liberals to launch, among other things, the new Canada Infrastructure Bank (CIB) and what’s being called the Invest in Canada Hub.

Quick, concrete results like these don’t always materialize when politicians commission deep thinking on economic policy. Barton has advised national leaders from France to South Korea. Among all those governments seeking economic guidance—he tallied up nine in a recent interview with Maclean’s—he says Trudeau’s is “the most implementation-oriented of any of them by an order of magnitude.”

If Barton sees results in Ottawa, though, that question of scale remains. For instance, last fall his council urged the federal government to ante up $40 billion for the CIB, in hopes of luring four times that much in private investment for infrastructure projects like toll bridges and highways, ports and power transmission networks. Morneau earmarked $15 billion in up-front capital—a thin slice of the $180 billion the federal government is pumping into infrastructure overall, mainly the old publicly financed way, through shared-funding deals with provinces and municipalities.

Or consider the Invest in Canada Hub, the government’s answer to the council’s call for a new body to lure foreign investment. The government promises to assemble a “dedicated high-impact sales force to promote Canada” with a budget of about $40 million a year. Is that really enough to be transformative? Consider that Statistics Canada says foreign direct investment in Canada hit $825.7 billion last year.

The council also called for a national agency to try out new approaches to skills training. For that initiative, Morneau’s budget last spring earmarked a little less than $60 million annually for the next four years. That’s real money in the skills sphere. But, then again, Ottawa already spends more than $12 billion a year on post-secondary education, plus billions more on joint labour force training agreements with the provinces.

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Asked about the adequacy of the scale of any these initiatives, Barton’s answers often start with variations on his favoured metaphor of the flywheel—the industrial-age image of a heavy wheel used to build power on a revolving shaft. It’s his shorthand for how something that might appear small can add disproportionate oomph, if cleverly designed, to a much larger machine.

In the case of the CIB, he says the type and size of projects it finances will be more telling than its start-up capital pool. It shouldn’t spread investments around for regional balance, say, or fund worthy-seeming projects that won’t directly boost productivity. Those sorts of considerations are why traditional government public-works spending doesn’t do enough to spur growth. “The key is that the projects they actually fund be of scale,” he says, adding, “Fewer, bigger is better than many.” He imagines ambitious transportation and power transmission projects “that you can see from the moon, maybe.”

Key questions about exactly how the CIB will do business have yet to be answered, including how independent of political pressures it will be. Barton admits “there’s a lot of devil still in the detail.” That might be even more true when it comes to his council’s proposal to found what it calls “FutureSkills Lab”—a new agency to “catalyze and enable much more forward-looking approaches to preparing Canadians for the workforce.”

To make something like that happen, Morneau’s budget last spring set aside $225 million over four years. But the initiative remains in the planning stages. Barton admits behind-the-scenes wrangling over the concept has grown intense. The problem is sorting out how the new agency would fit with long-established arrangements for education and skills funding in Canada. The provinces have lead jurisdiction, with Ottawa buying its say on policy by providing big chunks of money.

Barton says Morneau urged the council not to be “inhibited” by inevitable turf wars among entrenched players. “I do think we’ve got to jolt things, to try and move things,” Barton says. “And that’s where, on this education one, that’s going to get sensitive. But I think we’ve got to put it on the table.”  In fact, far from retreating from the education front, Barton says the council is working now on another set of skills-related recommendations—looking especially at mid-career “re-skilling” of workers who must adapt to technological change—for the third and final report it plans to deliver in November.

He paints a grim picture of what will happen unless something dramatic is done to make sure Canadians’ skills can keep up with advances like artificial intelligence.  “What I’m worried about, and other members of the council as well, is we are way underplaying the implications of automation and technology on the Canadian worker,” he says. “We’re not ready. We need something fundamental.”

Despite having spent most of his career abroad, Barton talks like tackling Canada’s economic worries isn’t just another big-league consulting assignment for him. Born in Uganda to missionary parents in 1962, he grew up largely in British Columbia, and remains Canadian enough to proudly describe the abuse he absorbed one evening last spring at Madison Square Garden, when he wore his Montréal sweater to the Canadiens final, losing game against the New York Rangers in the NHL playoffs.

His interest in Canadian policy debates was rekindled a few years ago, he says, around the time he was invited to participate in a 2010 “thinkers” conference put on by then-Liberal leader Michael Ignatieff in Montréal.

And his Canadian network is extensive. For instance, he has collaborated closely with Mark Wiseman, the former Canada Pension Plan Investment Board head, now a top executive at the global investment giant BlackRock—and a member of Barton’s council. He was a mentor to Naheed Nenshi back when Calgary’s media-star mayor was a McKinsey consultant. In early 2016, he personally introduced Trudeau, then a newly elected prime minister, to the in-crowd at the World Economic Summit in Davos, Switzerland.

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Helming the council, though, might not look like the surest way to convert all that cachet into a lasting imprint in his home country. Blue-chip task forces come and go, their grand notions often politely ignored.

As recently as 2011, a top-level expert panel on research and development, headed by Tom Jenkins, chair of the software company OpenText, delivered Innovation Canada: A Call to Action. The Conservative government of the day followed through on some of the report’s ideas, updating R & D tax incentives and boosting support for early-stage risk capital. But the Jenkins report’s signature recommendation—streamline dozens of federal business innovation programs under one umbrella—wasn’t acted on.

Jenkins doesn’t seem to mind. He says panels like his—and now Barton’s—should be “aspirational.” And he sees Trudeau’s inner circle as serious about leveraging what he calls its “convening power” to import fresh thinking to Ottawa. “They had years in opposition, they watched things,” he says. “They brought in someone like a Dominic Barton, who has seen all the different economic systems and how they’re evolving.”

Former Bank of Canada governor David Dodge, among Ottawa’s most influential mandarins of recent decades, says history shows that outside experts can move the dial. He points to the 1985 Macdonald Commission report, credited with paving the way for the Canada-U.S. free trade, and hugely influential commissions back in the 1960s on taxation and banking. But those landmark reports tended to focus on precise policy challenges, and Dodge says, by comparison, Barton’s economic growth mandate is  “pretty amorphous stuff.”

Still, he sees potential. Dodge says the CIB could be a big deal, especially if it can work around the reluctance of politicians to tell the Canadian voters they’ll have to pay fees to use some new infrastructure, including toll roads and bridges. So far, the Liberals’ approach has been uneven, according to Dodge, who calls their decision not to allow tolls for crossing Montréal’s new Champlain Bridge “unbelievably dumb. ”

Ben Dachis, associate director of research at the business-oriented C. D. Howe Institute in Toronto, also sees the CIB as the key test of the council’s real impact. “We might want to have [an infrastructure] push into big urban areas, at the expense of regional balance,” Dachis says.  He’s watching to see if the CIB’s still-to-be-announced board and management structure will insulate it from political pressure. “There are a number of things they can do to enshrine independence,” he says.

Breaking with traditional ways of doing things by circumventing established institutions is a common theme in the recommendations of Barton’s council. But Andrei Sulzenko, a fellow at University of Calgary’s School of Public Policy, who has worked on and studied expert-advice panels like the Jenkins committee, says any proposal that demands a “machinery of government” change is bound to meet stiff resistance. “It will almost always be ignored,” Sulzenko warns.

Barton is betting that his council’s advice won’t be, and that the resulting innovations will matter more and more over time. A new infrastructure bank, a new skills agency, a new investment hub—all can be seen as posing threats to status quo players and processes.

Expect more of the same when the council delivers its final set of recommendations, including more on skills, in that November report. Barton says they’ve also saved what might be the toughest nut to crack for the last: Why do Canadian companies so often fail to spend as much as firms in other countries do on productivity-boosting investments like R & D, machinery and equipment? It’s a question that has frustrated many past studies. “We’re finding it hard because that’s well-ploughed ground,” Barton admits.

Whatever proposals his council comes up with, they’re not likely to be colouring inside the lines of old policies and programs meant to spur business investment. If working outside established frameworks invites resistance, Barton contends that’s the only way to give new ideas, which might start relatively small, room to grow. It seems to be his answer to that problem of scale. “How do we break the structure in some parts?” he asks. “I think we have to.”

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Dominic Barton wants Justin Trudeau to think big about the economy. Will he?

  1. If Barton is working for a loonie, he isn’t working for us. He is working for the global 0.1%’ers, looking to asset strip Canada (of its airports and other infrastructure) with the assistance of the privatization bank (i.e. using Canadian’s money, not theirs) to create rentier streams for the global 0.1%’ers, i.e. a privatized taxation system of user fees and tolls which accrue to them, not to the federal treasury.

  2. He would better say “can he”? Asking justin to think is really demanding a lot.

  3. I’m very pleased about this……we are at long last going in the right direction.

    Now if we could just move a little faster.

  4. Meanwhile Jr and crew saddle the country with a debt load of epic proportions so that future investments will never be possible. Then tax the crap out of small businesses to discourage investment and hiring. Whatever Barton is envisioning will only be a pipedream as long as liberals are in power.

  5. Look guys…..none of your posts are true….you are just being partisan…and stupid..

    • Emily. I will try to not be partisan and just present some very simple verifiable facts.

      Let’s look at FDI numbers — Foreign Direct Investments from the Santander Trade Portal.
      2014 — 59 billion
      2015 — 41.5 billion
      2016 — 33.7 billion

      So what we are seeing here is that foreign investment is leaving Canada.

      Greenfield projects fell from 448 in 2014 to 306 in 2016.

      In the World Banks “Doing Business in 2017” — Canada fell from 14th to 22nd place. Don’t get me wrong — 22nd is still good — but we were doing far better under Harper.

      Now — you know you the Liberal’s play this right? They will say things like “FDI in science and technology rose from 1% under Harper to 1.3% under Trudeau”. Sound good right? Until you understand that 1% of 59 billion is much better then 1.3% of 33.7 billion.

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