When writing last week about superclusters, I neglected to go through the actual “economic impact statements” that were being touted by the clusters themselves. It seems that the Industry Science and Economic Development Canada (ISED), has to some degree accepted the statements.  And I think this is important because some of what is being suggested is pretty close to a national scandal.

So, let’s take a quick look at what, allegedly, we’re getting for our $950 million in Supercluster investments.

Now, the figures for both jobs and GDP are described as being “over ten years”.  My understanding of this phrase is that it means net new activity in 2028 versus today, e.g. the Protein supercluster will raise employment by 4,500 over today’s level.  It does not appear to mean total new person-years of work between now and 2028, e.g the Protein supercluster is actually going to create an average of 450 jobs per year for ten years.  It is not stated that the GDP impact is in real (i.e. inflation-adjusted) dollars but I’m just going to go ahead and pray assume ISED required that adjustment and therefore take it for granted that this is real GDP growth.

What can we make of this?  Well, first of all, there are some pretty weird variations in the ratio of generated-economic-activity to new jobs.  Apparently, on the west coast (where labour is expensive) a new job is going to be created for every additional $370,000 in GDP growth.   That’s not crazy or unreasonable: economy-wide over the past three years, the relationship between GDP growth and jobs is about $250,000-to-1.  But on the east coast (where labour is less expensive), the Oceans supercluster apparently has to make the GDP increase by $4.67 million before a new job is created.  Now, one would not expect these ratios to be exactly the same across clusters: different industries have different degrees of capital-intensity and therefore employment outputs will differ too.  But across similar science-tech heavy fields one would nor normally expect gaps of this size.

So I went to check what it is the Oceans Supercluster might be doing to generate such strange numbers, only to find the following in their 4-page brochure.

That last bullet: no business plan or strategy until fall?  And they got funded?  At first I thought this was a document from 2017, before the actual competition, but the first bullet (re: a contribution agreement) suggests the opposite, that it was written after the prize was won.  Makes you wonder what ISED was evaluating, exactly, when it came up with economic impact figures (or indeed made the decision to fund in the first place).

But actually, forget the jobs numbers: it’s the economic growth numbers that are totally bananas.  The idea that one can generate $53.5 billion in GDP growth from s $950 million investment – that’s a 49.6% annual return, in case you’re wondering – is utterly risible.  The government might as well have said it invented cold fusion or a perpetual motion machine.  If this were actually possible, we should all be in the streets demanding that government spend umpteen billions more on superclusters because they are unlimited magic growth generators (I suppose it’s possible that there is some other magic at work in which returns to superclusters fall from 49.6% per annum to zero when you get to $950,000,001, but come on – who’d believe that?)

The funny thing is that the ISED numbers are actually tame compared to what the clusters themselves claimed.  The two western bids actually put forward their own estimates, which turned out to be far crazier: the Protein supercluster was claiming $40 billion in direct investment (which, to be fair, is not the same as GDP growth), 40,000 direct jobs and 120,000 indirect jobs.  Now given that the entire Saskatchewan labour force is only 600,000 people, this amounts to claiming that a mere $200 million government investment can grow the country’s fifth-largest economy by over 25%.  Magic indeed.

So minor points, I guess, to ISED for not believing some of the wilder claims made by whatever consultants put these numbers together for the various consortia.  But the ISED-blessed numbers are still beyond belief.  Makes you wonder about the quality of that “merit-based process” which Minister Bains talked about.  You know, the “rigorous” one, informed by “experts”.

I really hope someone access-to-information requests the daylights out of this thing.  Discovering how this sucker got made should make for fabulous public policy case studies for decades to come.