One of the things that makes the “tech” industry in Canada is that it is basically not a tech industry at all.  If you look at the major publicly-traded companies in Canada which could reasonably be described as “tech”, what you see is mostly a collection of e-commerce platforms plus some enterprise software companies.  We have a few equipment makers (Sierra Wireless, Evertz, Photon) whose annual revenues combined are smaller than York University’s budget.  And there’s Ballard, which is in the hydrogen fuel-cell battery field but hasn’t actually been a hot stock in over 20 years.

Now this conflation of “IT” with “tech” is sort of understandable.  Throughout the “Great Stagnation”, great fortunes have gone into and been made in information technology – Alphabet, Facebook, etc – even though their impact on overall productivity has been damn near zero (hence the stagnation).  In a sense, the western capitalist class seemingly lost the ability to make money by creating new physical products, instead choosing to go either the capital -lite route (that is, information technology), or by inducing the developing world into creating massive over-capacity in old-style manufacturing, thus providing profits through cheaper production. 

But this is not an inevitable or permanent state of affairs.  One of the big factors that allowed the great wave of growth and innovation which lasted (roughly) from the late 1880s to (depending on whose take you are reading) the late 1950s or 1973 is the fact that we were managing to extract energy from the environment with ever-increasing efficiency.  But as Noah Smith wrote recently, the combination of big advances in renewables and battery technology has the potential to change this enormously over the coming decade.

The first order changes are going to be in energy itself.  There is no clear path to oil ever bouncing back.  That’s a big whack of the economies of Alberta, Newfoundland and Saskatchewan mostly done for.  There will certainly be a lot of green energy plays in terms of constructing more wind and solar (and possibly geothermal) energy installations, and this is something that will benefit Canadian construction companies, but it’s not clear how much of the technology that goes into this will be Canadian.  While there are domestic firms which focus on solar tech (e.g. Amp Energy, Morgan Solar), and some ocean-tech firms with some promise in offshore wind, I suspect a lot of business in this area is going to foreign companies simply because there isn’t enough domestic capacity.  Energy storage might be a little bit better: we have some decent companies working in lithium-ion, but again it’s not clear to me that we have the basis of a competitive global industry.  Biogenic energy, Waste-to-energy, there are start-ups – good start-ups – in all of these areas.  But global players?  Not close.

The second order changes are going to be those in manufacturing, enabled by the much cheaper energy that is on they way.  And here again, it’s hard to see where Canada stands to profit.  We might do well in autos, having saved at least a few big plants and started converting those to producing electric vehicles.  Conceivably there are some niche areas in avionics in Montreal and Winnipeg.  But the problem is that this stuff requires a lot of investment capital, and we don’t have many of those big companies to make this transition work.

Anyways, my point here isn’t to be all declinist, and Canada-is-doomed or any of that.  I’m sure others will come along in due course and start tech-panicking about why Canada has no national champions in hydrogen, or whatever.  My point rather is that it is worth thinking through, right now, how Canada can thrive in without national champions.  And I think there are a couple of obvious places to start.

The first is to acknowledge that we are in a world of global value chains and there is good money to be made by companies who find niches as producers of intermediate goods along those chains.  Canada never had a GM, but it does have a Magna, and there’s probably nothing wrong with thinking of our future as a nation of Magnas.  The issue for industrial policy is that to understand right now that this is the aim, and to develop a set of sectoral policies (dear Lord, please, no single national strategy, each sector is different) that might help these industries succeed in global chains and partnerships. 

And the second is to think carefully about how we want to align our post-secondary programs in this area.  It seems to me that we need to be producing research scientists that can be working in areas related to all of these technologies, but more importantly we need to be training people how to use them.  Given that we aren’t going to be at the centre of the revolution in any of these areas (just as we weren’t in IT), the likelihood that the country is going to grow rich directly through R&D seems pretty low.  But the economic gains to new technologies do not just accrue to those who make and sell new technologies, they also go those who deploy them most efficiently.  If government provides the right kinds of incentives for technology purchase and adoption (and this is less difficult in energy than in some areas because so much distribution depends on publicly-owned utilities), and institutions provide a healthy supply of people who can optimize these technology for other firms, then we’ll do fine.

That is, if we start now and come up with sensible policies that involve both levels of government, post-secondary institutes and businesses thinking collaboratively about how to move steadily and deliberately in this direction.  If we start from stupid ideas like “we need a national champion in solar”, or “how about a moonshot in hydrogen”, we are indeed going to have a lot of problems in the next couple of decades.