TD economist Ed Clark gave an enormously important talk last week, which deserves a lot of attention.  You can get the gist of it from two quotes:

“To return to the path to prosperity, Canada needs to stop wasting time worrying about how to get low-wage jobs back from the U.S. or abroad and start thinking about how to use our well-educated population, immigration policies and public health care to our advantage”.

“Stop competing with Michigan. Start competing with Massachusetts”.

Brilliant.  Couldn’t agree more.  I am fed up with our governments’ weird obsession with showering money and policy attention on blue-collar industries (overwhelmingly male-dominated blue collar industries, I might add).  Time to join the 21st century.

BUT.  Let’s be careful about this.

There will no doubt be some who are eager to use Clark’s words as a “Sputnik moment”.  You know, those times when a perceived scientific or economic threat makes politicians more susceptible to spending money on pretty much anything that looks scientific or knowledge-oriented.  Higher education loves Sputnik moments.

The thing is, no one actually knows how to do this well; that is, nobody really knows what kind of spending or programming actually leads to growth.  One of the problems of being on the technological frontier is that everything is uncertain, and so there’s likely to be a lot of false starts and a lot of waste when looking for the next big thing(s).  But universities (and to a lesser extent colleges) seem like a safe bet, so Sputnik moments are like catnip for them.  All they have to say is “give us bucks because knowledge economy” and politicians will shell out (It’ll be dressed up a bit, but that’s the level of sophistication).

The problem with this argument is that it’s maybe only a quarter of the story.  If pouring money into universities guaranteed economic growth, places like Malaysia, Chile, and Sweden would be world-beaters.  There’s a lot more to high-tech economic growth than education.

To the extent that local research is going to translate into local economic growth, you need managers and entrepreneurs who are skilled at taking research from an idea to proof of concept, and from there to market.  You need pools of investment capital that understand developing technological fields and are prepared to invest patiently in them.  And then of course you need a workforce to actually churn out product.  In the absence of this kind of social and financial infrastructure, funding so-called “basic” research is a lot like pushing on string as far as generating economic growth is concerned.

Then there’s the issue of graduates and the skills they deliver to the economy.  If you want to generate more economic growth matter, you need to make sure that institutions are giving students the kinds of skills that will actually raise private sector productivity levels.  That means much greater attention on the part of employers in articulating the skills and competencies they require as productivity rises, and much greater attention on the part of universities and colleges in providing students with such skills and competencies so as to be employable after graduation.

(Before anyone blows a gasket: I am not suggesting that the purpose of higher education is exclusively to generate skilled labour.  What I am suggesting is that if you’re going to use a Sputnik argument for more money, then you’re going to have to demonstrate how that money improves general productivity.  If you don’t like that deal, then don’t use Sputnik arguments.)

All of which is to say: there’s good news on the horizon in terms of getting everybody focused on a high-innovation, high-productivity economic future in Canada.  But the surest way to waste this opportunity would be to call for wanton expansions of current subsidies to higher education.  Change is needed to make public dollars work more effectively.  We should use this opportunity to make those changes.