"60 additional intern jobs" is not an Innovation Strategy

News report: Ericsson to reskill Canadian workforce for its next-gen networks with federal funding

Was it only yesterday that I was lamenting the Federal government’s approach to rearchitecting Canada’s economy (see prior post “It's a "Cluster," alright” April 17-23)? According the The Logic, taxpayers are going to cut a cheque to ensure that the existing 3,100-person strong team at Ericsson offices in Liberal-friendly Ottawa and Montreal keep doing what they’re doing.

Well, not exactly. It appears that Ericsson’s current employee base needs to be “re-skilled” if they’re going to “advance [foreign-owned] R&D towards next-generation 5G and 6G networks.” According to the Prime Minister, “these technologies are essential to our economy. They’re essential to areas like health care and education.”

Not to be blunt, but 5G technology already exists, and if Mr. Trudeau is truly interested in improving the IT backbone of Canada’s healthcare system, he could have required that the 2016 increase in Federal health funding be tied to secure transmission of patient health records, rather than the current 1980s fax machine protocol and all of the associated inefficiency and privacy breaches.

If that’s not enough to get your blood boiling, the Liberals were in such a rush to book this photo-op (the House of Commons is back in session) that the PMO hadn’t yet finalized how much money the taxpayer is going to kick-in, according to Ericsson CEO Börje Ekholm:

“We’re still negotiating. I’m at the table, right?”

Can you imagine the financial disadvantage this puts Innovation Minister Champagne’s public servants at, trying to “negotiate” what proportion of Ericsson’s $470 million “project value” (ie. normal training expense) we should pay to re-skill a subset of the manufacturer’s 3,100 Canadian workforce? If you’re wondering what the odds are of Ericsson leaving Canada if Jim Flaherty was still Minister of Finance and these types of cheques weren’t cut, Mr. Ekholm admits that “the talent in Canada is the key for Ericsson in the long term.” And that Canada’s “open, immigrant-friendly society and education systems” are “more important” than taxpayer subsidies (via The Logic).

Ericsson’s roots in Canada are deep, and even Minister Champagne acknowledged that “you don’t attract Ericsson here in Canada with money.” Wellington Financial LPs will recall that the acquisition of Ottawa-based Belair Networks, one of our Fund III portfolio companies, back in 2012 (see prior post “Belair / Ericsson deal a wake-up call for every Institutional Sales Desk” Feb 22-12). What was good news for Canadian VCs and Ericsson shareholders was undoubtedly bad news for those who believe Canada’s economic standing can’t improve if we don’t retain Canadian-developed intellectual property for our long term benefit. Once a Porter, always a Porter.

This cheque-for-jobs industrial development strategy reminds me of the 2008 announcement that former Liberal Premier McGuinty made in the politically-friendly Windsor region, whereby he promised up to $30 million of taxpayer dollars towards a “green” version of Ford’s V-8 engine. At least, in that case, the engine plant was dormant and 350-500 workers were on the streets.

You’ll have noticed that Ontario’s Liberal government connected our 2008 cheque to the “green” economy, and nothing much has changed, despite the passage of time. As Mr. Ekholm pitched yesterday: “Communications jobs are also green jobs.” He had obviously been well-briefed.

Ben Bergen summed things up well yesterday, on behalf of the CCI:

This is exactly the wrong mindset for achieving meaningful growth in the innovation economy. Intellectual property ownership and the ability to commercialize R&D are far more economically impactful than a relatively small number of jobs which will go to highly in-demand professionals who already have no trouble finding high-paying work.

In the late 90s, Harold Wolkin shared with me a Bay Street saying that goes something like “if they’re passing around a plate of cookies, you take one.” The question isn’t whether foreign telecom gear manufacturers should be accepting government subsidies. It’s something much more fundamental: why does the Trudeau government believe that subsidizing the refurbishment of a run-of-river hydro turbine or funding “60 additional intern jobs” at an existing branch plant will reverse the OECD’s prediction that Canada will “record the lowest level of growth in per-person economic growth as measured by growth” over the coming decades?

As the Prime Minister reviewed his briefing note on his way to the event yesterday, the PCO should have highlighted that countries such as “the Czech Republic, Estonia, Israel, Italy, Korea, New Zealand, Slovenia and Turkey…are expected to leapfrog Canada by 2060 with higher per-person levels of GDP.” When I worked in the PMO, we’d have asked what was it about “60 additional intern jobs” that was worth the PM’s time, and how — given the huge challenges facing our country’s economy — any of this could possibly move the needle.

MRM

(this post, like all blogs is an Opinion Piece)

(image: Porter, New York 1951 by Irving Penn)