Where to find assets that never drop in value

The problem is that Stephen Harper sees academics as useless bits of the electorate

Where to find assets that don't run out

The news from the financial pages is that value is disappearing. House prices, stock portfolios, RRSPs, the cost of oil and with it the value of billions of dollars of investment in the oil patch, it’s all going away. Trillions, all told. World leaders are transfixed, preoccupied. All that wealth will return, it always does, but in the meantime it all seems so ephemeral. Here today, gone tomorrow.

But there is another kind of value that does not wash away so easily. The Association of Universities and Colleges of Canada has just released “Momentum,” the second in an occasional series of updates on the state of university research in Canada. “Slowing Momentum” might have been a more accurate title. From 1996 to 2001, total spending on pure and applied research in Canada grew by 8.8 per cent a year, an extraordinary clip. Since 2003 it has grown at only 2.1 per cent a year, a quarter as fast.

Ah, but look what happened in between. Total R & D spending stood still, in constant dollars, from 2001 to 2003. That’s because the dollar value of research spending in the private sector didn’t grow during those two years. And even in Canada, with an unusually robust university-based research effort, more research gets done by private companies than on campus.

Why did private-sector research stall during those years? Because the dot-com bubble burst in 2001. A lot of the growth in Canadian research in the late 1990s was in information and communications technology. Mostly it was just Nortel growing like Topsy. When the Internet sector collapsed it was a scary couple of years in parts of the country where infotech is money, like Ottawa.

Except here’s the thing. Even when the Internet bubble popped, the total amount of spending on private-sector research in Canada didn’t go down. It marked time for a couple of years and then picked up again, at a less giddy pace. So over the whole period from 1992 to 2007, the value of research spending in Canada grew 93 per cent, to $29 billion.

This was a very different bust from today’s, because the raw material was different. Human capital doesn’t go away. All those smart, entrepreneurial, research-minded knowledge-economy workers who got let go by Nortel moved down the street into other knowledge-economy jobs. Some landed jobs at Research In Motion. Others launched start-ups. Some went into green technology. Others returned to university labs. Whatever. Brains keep thinking. You can’t stop it.

Because the amount of research in Canada has almost doubled in 15 years, Canada is a different place than it used to be. It’s more inventive, it’s more open to new ideas, it’s more willing to be persuaded by contrary evidence, it’s more entrepreneurial. Ideally it should keep improving on all of those characteristics, because then we’ll have more of the kind of value that doesn’t simply vanish when the economy hits a rough spot. So stronger research is key because it makes new ideas, attracts the best minds from abroad, keeps our best minds at home. Strong universities are key because they do the basic research. The private sector finds applications later. And strong universities provide the raw material for a knowledge economy: smart graduates.

A few weeks ago I ran into the president of one of Canada’s largest universities. He said he doesn’t know a university president who’s been able to have a conversation with Stephen Harper. Sure, the Prime Minister is sometimes spotted on campuses making announcements. His government has slowed the growth of investment in university research, but it hasn’t cut back on spending levels. Harper isn’t the enemy of Canadian universities.

But it’s about 15 years since he saw a university campus as a place to get ideas from. Meanwhile, Canada has changed, and no part of Canada has changed more than its campuses. So the Prime Minister is operating on outdated information.

It makes sense that he would, because he sees academics, not as illegitimate parts of Canadian society, but as voters who will never be on his side. In Waiting for the Wave, a history of the Reform movement, University of Calgary political scientist (!) Tom Flanagan describes Harper’s vision of an electoral strategy as it stood in 1989.

“The older model of a conservative party based largely on the middle and upper classes is no longer viable,” Flanagan wrote, paraphrasing Harper, “because so much of the urban middle class (for example, teachers, nurses, social workers, public-sector administrators) is now part of the ‘new class,’ or ‘knowledge class,’ as it is sometimes called, and is thus a political class dependent on tax-supported government programs. Political coalitions now divide less along class lines than on the question of public-sector dependence.”

It’s obvious that Harper still thinks the same way. He’s allergic to the kind of people who breed on campuses. The problem is that he will need more of them if he is going to be successful at governing.

Canada’s economy isn’t productive enough to handle the cost of an aging population. The gap can only be closed if new products and ideas make Canadian workers more productive. It’s pointless to concentrate, as Harper did in his first mandate, on redistributing wealth—from Ottawa to the provinces, from governments to consumers, from Liberal ridings to Conservative ridings. It’s pointless to bet all Canada’s chips on the resource sector, if events outside Canada’s control set the price of the resource. Canada needs more of the value that doesn’t go away in hard times. It’s time for Stephen Harper to visit some universities—not to lecture but to learn.