Sarah Doyle
Nov. 7, 2020
On Wednesday, Finance Minister Chrystia Freeland set the stage for a fall fiscal and economic update that will include “targeted, carefully thought-out investment on a meaningful scale” in response to COVID-19.
Canada’s governments have already spent hundreds of billions, and they’ll spend billions more in their bid to build back better and deliver on the promise of a future economy that is resilient, inclusive and equitable.
The size of this challenge is undeniably massive. But so is the opportunity to rethink the role of governments in shaping our economy, and the role of businesses in benefiting society.
A keystone of the “build back better” strategy should be collaboration between governments and businesses.
In recent months, we’ve seen the public and private sectors join forces to help small businesses move online, launch the COVID Alert app, accelerate vaccine research, and retool factories to produce personal protective equipment and ventilators. This type of collaboration could be extended to more fully engage businesses in building back better. Specifically, governments could channel private sector innovation into solving our most acute social challenges, incentivize the creation of good jobs and inclusive workplaces, and promote structures for distributing wealth more widely.
Governments invest in establishing the conditions for business success. This includes directly subsidizing business activities, such as R&D, training and (in the current context) paying wages, with a view to enhancing business contributions to job creation and economic growth. But the economic benefits of these investments are not being widely shared. The net worth of Canada’s wealthiest families is orders of magnitude higher than the median. Only some are benefiting from good jobs and pay, and certain groups, including women, young people, and BIPOC, have been disproportionately impacted by job losses prompted by COVID-19.
Now more than ever, governments should be looking for opportunities to maximize the public return on investments in the private sector. To start, they should mobilize businesses and innovators to help solve challenges that matter to people. They could do this by redirecting innovation investments to focus on the development and commercialization of new products and services that respond to big-picture challenges such as COVID-19, food insecurity, dementia, and carbon emissions.
As Dr. Mariana Mazzucato, an economist at University College London, has argued, governments have a role to play in shaping markets to “(tilt) the playing field in the direction of the desired goals.” Adopting challenge or “mission-oriented” innovation policy would link supply-side investments in stimulating innovation with demand-side policies to open markets to innovation — including through procurement and regulatory reform — benefiting Canada’s innovative firms and yielding economic gains, as well as better social and environmental outcomes.
Governments could also require companies that receive public funding above a certain threshold to commit to public reporting on policies, targets and data collection in areas of public interest. For example, to build towards more diverse, equitable and inclusive workplaces, companies could be required to report on the demographics of recruitment, hiring, pay, promotions and board representation, as well as on decent work and employee benefits. In this way, governments could incentivize companies to contribute to a more just labour market, and accelerate a shift toward enhanced transparency and accountability.
Finally, governments could require or incentivize new governance structures and partnerships that better share wealth. This could include wider use of community benefits agreements and requirements for community-based hiring and employee upskilling. To rebuild local economies, governments might also broker partnerships between companies of different sizes, higher education institutions, and unions to advance place- and sector-based strategies that meet the needs of workers and employers. In addition, they could provide incentives for transitioning to models of employee ownership and governance, for example through employee ownership trusts or employee seats on corporate boards. In some cases, governments might consider taking an equity stake in the companies they invest in.
While these ideas are not new, the opportunity for governments to ignite new forms of public-private collaboration – to shape the goals of innovation, as well as how companies grow and compete – has never been greater. Increasingly, business leaders agree that there are bottom-line reasons, as well as public-interest reasons, for businesses to invest in delivering value to employees, consumers, communities and the environment. Canada’s businesses can and should contribute to building an economy that works for everyone.
