Where to find assets that never drop in value - Macleans.ca

Where to find assets that never drop in value

The problem is that Stephen Harper sees academics as useless bits of the electorate


Where to find assets that don't run out

The news from the financial pages is that value is disappearing. House prices, stock portfolios, RRSPs, the cost of oil and with it the value of billions of dollars of investment in the oil patch, it’s all going away. Trillions, all told. World leaders are transfixed, preoccupied. All that wealth will return, it always does, but in the meantime it all seems so ephemeral. Here today, gone tomorrow.

But there is another kind of value that does not wash away so easily. The Association of Universities and Colleges of Canada has just released “Momentum,” the second in an occasional series of updates on the state of university research in Canada. “Slowing Momentum” might have been a more accurate title. From 1996 to 2001, total spending on pure and applied research in Canada grew by 8.8 per cent a year, an extraordinary clip. Since 2003 it has grown at only 2.1 per cent a year, a quarter as fast.

Ah, but look what happened in between. Total R & D spending stood still, in constant dollars, from 2001 to 2003. That’s because the dollar value of research spending in the private sector didn’t grow during those two years. And even in Canada, with an unusually robust university-based research effort, more research gets done by private companies than on campus.

Why did private-sector research stall during those years? Because the dot-com bubble burst in 2001. A lot of the growth in Canadian research in the late 1990s was in information and communications technology. Mostly it was just Nortel growing like Topsy. When the Internet sector collapsed it was a scary couple of years in parts of the country where infotech is money, like Ottawa.

Except here’s the thing. Even when the Internet bubble popped, the total amount of spending on private-sector research in Canada didn’t go down. It marked time for a couple of years and then picked up again, at a less giddy pace. So over the whole period from 1992 to 2007, the value of research spending in Canada grew 93 per cent, to $29 billion.

This was a very different bust from today’s, because the raw material was different. Human capital doesn’t go away. All those smart, entrepreneurial, research-minded knowledge-economy workers who got let go by Nortel moved down the street into other knowledge-economy jobs. Some landed jobs at Research In Motion. Others launched start-ups. Some went into green technology. Others returned to university labs. Whatever. Brains keep thinking. You can’t stop it.

Because the amount of research in Canada has almost doubled in 15 years, Canada is a different place than it used to be. It’s more inventive, it’s more open to new ideas, it’s more willing to be persuaded by contrary evidence, it’s more entrepreneurial. Ideally it should keep improving on all of those characteristics, because then we’ll have more of the kind of value that doesn’t simply vanish when the economy hits a rough spot. So stronger research is key because it makes new ideas, attracts the best minds from abroad, keeps our best minds at home. Strong universities are key because they do the basic research. The private sector finds applications later. And strong universities provide the raw material for a knowledge economy: smart graduates.

A few weeks ago I ran into the president of one of Canada’s largest universities. He said he doesn’t know a university president who’s been able to have a conversation with Stephen Harper. Sure, the Prime Minister is sometimes spotted on campuses making announcements. His government has slowed the growth of investment in university research, but it hasn’t cut back on spending levels. Harper isn’t the enemy of Canadian universities.

But it’s about 15 years since he saw a university campus as a place to get ideas from. Meanwhile, Canada has changed, and no part of Canada has changed more than its campuses. So the Prime Minister is operating on outdated information.

It makes sense that he would, because he sees academics, not as illegitimate parts of Canadian society, but as voters who will never be on his side. In Waiting for the Wave, a history of the Reform movement, University of Calgary political scientist (!) Tom Flanagan describes Harper’s vision of an electoral strategy as it stood in 1989.

“The older model of a conservative party based largely on the middle and upper classes is no longer viable,” Flanagan wrote, paraphrasing Harper, “because so much of the urban middle class (for example, teachers, nurses, social workers, public-sector administrators) is now part of the ‘new class,’ or ‘knowledge class,’ as it is sometimes called, and is thus a political class dependent on tax-supported government programs. Political coalitions now divide less along class lines than on the question of public-sector dependence.”

It’s obvious that Harper still thinks the same way. He’s allergic to the kind of people who breed on campuses. The problem is that he will need more of them if he is going to be successful at governing.

Canada’s economy isn’t productive enough to handle the cost of an aging population. The gap can only be closed if new products and ideas make Canadian workers more productive. It’s pointless to concentrate, as Harper did in his first mandate, on redistributing wealth—from Ottawa to the provinces, from governments to consumers, from Liberal ridings to Conservative ridings. It’s pointless to bet all Canada’s chips on the resource sector, if events outside Canada’s control set the price of the resource. Canada needs more of the value that doesn’t go away in hard times. It’s time for Stephen Harper to visit some universities—not to lecture but to learn.


Where to find assets that never drop in value

  1. While there may not be anything that is a silver bullet for all things, if there was, education would be it.

    You want better health care? Educate more people.
    You want fewer people needing health care? Educate more people.
    You want more small businesses? Educate more people.
    You want more people volunteering? Educate more people.
    You want higher charitable donations? Educate more people.
    You want higher tax revenues? Educate more people.
    You want higher productivity? Educate more people.
    You want lower crime? Educate more people.
    You want more researchers? Educate more people.
    You want fewer people unemployed? Educate more people.
    You want those unemployed to be unemployed for shorter periods? Educate more people.

    Statistics Canada has shown all of these in various reports.

    And on top of all this, it’s a virtuous cycle. The single largest determinant as to whether a person will undertake higher education is whether their parents did. Even better, people whose parents both have a post-secondary degree are less likely to seek government funding for their own post-secondary degree. So the more people we help get an education now, the less that will need help in the future.

    The only losers in an educated society seem to be conservatives, as the more educated people become, the more likely they are to hold liberal views (in general).

    Of course, I’m afraid that explains a lot right there.

    • Meh, that’s only because academics are still taught to take G.W.F. Hegel seriously. People will stop being left wing when Hegel and his descendants are finally exposed for the pseudo-intellectual frauds they are. The only reason it still exists is because it flatters fat WASPs that they are at the forefront of intellectual and moral achievement.

      It will also destroy the part of the conservative ideology that isn’t helpful to anyone, as they are pretty much two sides of the same toxic ideological coin.

      What say you guys? Shall we get rid of Hegelian ideology and destroy wingnut – moonbat movements forever? I promise we’ll all be happier. You can get rid of your hated enemies by removing that ideology you have in common.

  2. Interesting piece! I, for one, welcome columns on university funding and research.

    Correct me if I’m wrong, but aren’t almost all our university research centres in opposition-controlled ridings? U of T, McGill, UBC, UdeM, Waterloo, Memorial, Guelph . . . not a full list of course but the only one in a Tory riding that springs to mind is Calgary.

  3. But it’s about 15 years since he saw a university campus as a place to get ideas from.

    It makes sense that he would, because he sees academics, not as illegitimate parts of Canadian society, but as voters who will never be on his side.

    It’s obvious that Harper still thinks the same way. He’s allergic to the kind of people who breed on campuses.

    The above sentences expose the writer to charges of exaggerated mind-reading, unless there are direct quotes from Harper espousing these very ideas. And if there were such quotes, chances are good they would have been provided to bolster the claims.

    You warned us this post would make us sleepy. Its sedative properties must have been pretty light, Paul, because I found the piece a good read. Now let me warn you that I shall engage in the boring tedious habit of going back to that pesky document, the Constitution, which I vaguely recall puts education in the domain of a different level of government. I do not recall a post-secondary exemption that sticks that power to the feds. Of course, that has not stopped prior and existing federal governments from trampling all over that provincial jurisdiction, particularly in postsecondary education, particularly in student funding and in research funding, ostensibly to shield themselves from the direct charge of meddling in provincial jurisdiction.

    To go from “Harper has trampled further, just not enough, over provincial jurisdiction for the good of the knowledge class” to “It necessarily follows that Harper is allergic to smart people because they’re squishy liberal types anyways and who needs them around to mess up electoral chances” seems quite the stretch. No?

  4. On the other hand, MYL, is there not a case to be made that in 1867 it would not have occured to the Fathers that universities fell under “education”? They were all private in those days and thus no business of the government’s; seems to me they would have been thinking of highschool & primary education.

  5. OK, Jack, but before we knock Harper over the head for not accelerating support of those liberal smartypants fast enough, maybe we should amend the Constitution.

    NOW I see how to put everyone to sleep. No one left here but these crickets.

  6. Or just reclassify universities as non-educational institutions. They way we talk about them these days, they’re either technical training grounds or research labs or some other form of economic engine — but not educational institutions.

    Problem solved!

  7. Paul, it’s true that higher productivity is an unambiguously good thing. Sadly, the link between ‘if the government helped promote R&D’ and ‘then we’d have higher productivity’ is pretty tenuous. Some points to consider:

    – Some private R&D is essentially ‘business stealing’: trying to develop a minor (from a social point of view) improvement to obtain enormous private gains. Think of all the R&D that goes into become the next (marginally) best medication for something or other.

    – We’ve been badly burned in the past by boondoggles in which firms made money not by doing anything useful, but by doing whatever it took to benefit from R&D tax breaks.

    – Maybe it’s cheaper to outsource R&D.

    This is much more complicated than it looks. Not all of the reasons for being reluctant to spend public money on R&D can be attributed to Tom Flanagan’s dissection of the body politic, although I’m willing to grant that Flanagan’s analysis may explain Harper’s reluctance.

  8. I feel that Paul has consistently touched on one of the problems of the education system, at least as far as Ontario is concerned. Both our high school and university systems are geared toward producing workers for the ‘knowledge based economy’ that Paul Martin always talked about, but never explained. When university starts turning into a job training ground, you know the system is in trouble (just look at Australian post-secondary education in the ’90s).
    As for the high school system, Ontario wants to go from a 71% graduation rate in 2006 to a 85% graduation rate in 2010; there’s only one way of getting to those numbers in such a short period of time: pass everyone (well, 85% of them anyway).
    I’m a high school teacher who’s recently out of university, and I see an education system that’s doing all the wrong things. I think that, as Paul points out, our leadership has a lot to do with it. We always talk about the value of education, in a similar fashion as T. Thwim has above, but rarely do we actually do anything that suggests we, as a society, really care about education. I don’t think that the universities have helped themselves much in this regard, as they seem less and less about town, and more about gown. They do a horrible job of promoting the importance of their research, whether it be ‘pure’ or ‘applied’. It’s just a sorry situation altogether.
    I know that this isn’t specifically what Paul is talking about in this post, but I think that over the past year or so, many of his posts at the very least hint at some of these ideas. I hope that you keep pointing these things out, Paul, and that people start listening. It doesn’t take long to destroy an education system, but it takes a long time to rebuild one.

  9. Harper is absolutely correct. The trouble with todays universities is, just like Pavlov and his dogs they teach a conditioned reponse. I hav e never met a bunch of people who are simultaneously highly educated with a very, very limited degree of common sense. Todays academics are highly elitist, living in a world of theory. Reality seems to be for the unwashed. A commentator on talk radio in the States today doubted Sarah Palins’ intelligence. What drivel. The speaker, Lisa Wiehl of Fox Nnews is the typical university educated eastern elitist who hasn’t done anything near Palins accomplishments yet feels compelled to criticize the woman who I would rather have for a leader light years ahead of Wiehl. Hypocrisy is another hallmark of her type as, while she questions Palins credentials . not one word about Obams resume which is perhaps the thinnest of any President in history. Yes, Harper is bang-on correct as these elitist theorist are ruining our society.

  10. Yea Paul, a column that combines politics and research! Methinks Mr. Harper is far too calculating to deal with the “university elite” which he likely disdains as much as the “arts elite”. But he should also know that the ivory towers are no longer occupied by disconnected academics. Our research effort is well connected with industry, knows it has to deliver and is accountable to the highest standards – excellence is all that counts because excellence is all that persists/has impact/is a predictor of future worth.

    The problem with research is that its outcome is unpredictable. The harder you try to force predictability (application) the less value the research has. Development is the opposite and the two complement each other. But like matter and anti-matter the two do not mix and tend to extinguish each other when forced together. Let’s hope that we do mortgage our future as a knowledge-based economy and that Alberta, in particular, recognizes that investing in faster extraction of resources such as bitumen is simply going to result in faster depletion of their future prospects.

  11. Whoops, meant to say “do not mortgage our future”.

    Randy, please do not generalize the universities. There are some remarkably down-to-earth, effective and valuable people associated with these institutions. There again, defending Sarah Palin was a brave thing to do. It doesn’t take a lot of common sense to see through her superficiality. That she lacked substance was evident whenever she was allowed to speak more than three unscripted words. As for Obama’s resume, is a thick CV a requisite for President? Seems to me that all you now need is an endorsement of your book by Oprah. GWB’s resume fit onto a beer mat (not counting his failed business ventures). Indeed, if you are fan of voluminous resume’s I assume you are a big fan of Michael Ignatieff. ;-)

  12. Thanks, Paul, for citing that underground classic WAITING FOR THE WAVE. It confirms my view that you are a pundit of rare taste and discrimination. Next year McGill-Queen’s University Press will publish an updated edition of WAITING FOR THE WAVE, which has been out of print since the publisher went out of business (I hope it wasn’t the burden of publishing my book that pushed them over the edge).

  13. What do you mean, “Human capital doesn’t go away”? Remember worrying about the brain drain? If we’re not careful, we will set up a system where the Canadian taxpayer funds the training and development of highly-educated workers, who then migrate to jurisdictions where they have greater opportunities to use their skills.

    And, like education in general, not all research is created equal. Doubling the number of Canadian PhDs in political science would certainly have some positive effects, but from an economic standpoint the effects would not be as beneficial as doubling the PhDs in the hard sciences. When we talk about university education in Canada, careful distinctions must be made to consider what people are actually learning.

  14. Education?
    I think not!
    Look what education has bought us in the last 50 years.
    Contibute the least you can to get the most. ( Get greedy )
    Consume as much as you can, even if you don’t need it. ( trade in that car in every 2 years to keep up with your pears)
    Flush the toilet every time, not just when its brown. ( water down the drain?)
    Be greedy otherwise you wont get 120% of your share.
    Insist that tax dollrs be spent even though only 5% of the people use the service.
    Get on the dole and work under the table.
    Be in the minority and demand majority rights. ( wow-thats 1/2 of Canadians Lol)
    Spend-spend-spend. (More importantly teach your kids to spend-spend -spend early.)
    Has education helped any of the above??
    I think not.

  15. Now is the time to invest in education more than ever. I say this is the general sense because ” traditional school” education may not always yield the types of returns some people expect.

  16. More government is the solution to productivity issues?

    Spoken like a true nanny state leftist.

    In fact, the opposite is true. (true in the objectively verifiable sense rather than the partisan ideological sense).

    I know, I know: heresy around here.

  17. The only losers in an educated society seem to be conservatives, as the more educated people become, the more likely they are to hold liberal views (in general).

    Of course, I’m afraid that explains a lot right there.

    You, sir, hit the proverbial right on the head!