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It’s About Brains and Leadership – Stupid!

April 3, 2016

Brain

This leadership post is about building the collective brain power of a nation, from which innovation and technology advancement emerge to strengthen its global competitiveness, and in turn its economy and standard of living.

Some pithy quotations go down in the history books as being highly malleable for borrowing. Such is James Carville’s famous comment: “It’s the economy, stupid!” Carville, for many years an endearing political analyst, was Bill Clinton’s campaign manager during his run for office against President George H.W. Bush in 1992, a time when the United States was experiencing a weak economy.

However, in this post it’s about brains and leadership – stupid! (No offence intended to the reader.) Specifically, it’s about the extremely important roles that education, knowledge, technology, know-how and leadership play in today’s brutally competitive global economy. It’s about building the collective brainpower of a nation, and then exploited in a focused manner by its political and business leadership.

Given your correspondent’s long history in the fields of labor markets, innovation and leadership, a certain amount of pent-up frustration has finally let loose to produce a commentary on his home country, Canada, and particularly a Maritime province–New Brunswick–where he lived for almost three decades.

Canadians have a peculiar perspective of how they fit in the world. Canada’s a wonderful country with a lot going for it. However, it also has a lot going against it: a massive geography, yet with only 36 million inhabitants stretched mostly as a ribbon within 200 kilometers of the U.S. border; a weak literacy rate (51% of Canadians 16 to 65 have a level 3 or higher, out of scale of 5); a continued strong dependence on exports to America (over 75% of total exports); to name but just a few “challenges.” (Photo: Canadarm)

Canadarm

Despite Canada’s enormous physical size, surpassed by only Russia, Canadians chuckle when they hear visitors from overseas mention that they have a relative in Calgary, Alberta, and if they could drive to visit them that same day. The problem arises when the visitor is visiting, say, Montreal or Toronto. “Sure, we can visit your uncle, but it will take a couple of days to get there.”

Canada is struggling to maintain its global standing on a variety of indicators. Unfortunately, the country has been sliding on a number of fronts, whether it’s global competitiveness (15th place), business innovation (26th), infrastructure (15th), or end of life palliative care (11th). Yes, the country comes out well on education statistics up to the end of high school (tied in 1st place with Finland), but much weaker on workplace skills training and adult continuous learning. However, education is a legislated provincial responsibility (with ample transfer payments from the federal government), with the result being a hodgepodge of education initiatives and metrics from the ten provinces.

Alberta, for example, is known for having perhaps the country’s best elementary-secondary education system. At the other end of the country, the four Atlantic Provinces continue to wallow in a sinking quagmire of poor educational outcomes. Literacy (level 3 or higher, where 3 is needed to function in society) on the East Coast (some 2.3 million people in the four provinces) is the weakest in Canada, ranging from a low of 43% in Newfoundland to 54% in Prince Edward Island (the only Atlantic Province above the national average).

In contrast, the three Maritime Provinces (Newfound-Labrador excluded) rank at the top with Ontario for high school graduation rates around 85-87%. Provinces such as Quebec and Alberta are around 70%, reflecting the wild swings in youth completing high school (the three territories are even lower). Unemployment in the Atlantic Provinces has historically been the highest among the provinces, blamed largely by neo-liberal economists for an over-reliance on unemployment insurance and welfare (the latter funded through block transfer payments from the federal government).

Alberta

Canada’s provincial premiers have a propensity for navel-gazing and engaging in beggar-thy-neighbor economic policies. Of special concern are near bullet-proof inter-provincial barriers to trade on a wide variety of goods and services. This practice, now ensconced in Canada’s daily economic undertakings, is in direct opposition to the intention of the country’s founding fathers in 1867. Parochialism may have become one of Canada’s identities over the decades; it does NOT work in a globalized economy, driven frantically forward by technology and the rapid rise of emerging economies that are hungry for their economic share of the global pie.

For a long time, Canadians have managed to keep their collective head in the sand as rich provinces such as Alberta and British Columbia (and more recently Saskatchewan) have contributed significantly through equalization payments to boost the level of public services in the other provinces. Perhaps most reviling is that Ontario, the biggest province with 13.6 million people, has waffled between a “have-province” and a “have-not.” At the core of the problem is leadership and Ontario’s paucity of effective leaders in over two decades. Consider that only 11percent of Ontario companies export their products and services. Extract those that export to the U.S. and you’re left with a mere one percent that export abroad.

Canada’s current economic state, and by attachment its social welfare situation, is untenable. Alberta is hurting badly from slashed oil production due to plummeting oil prices, and will continue to hurt for the foreseeable future. Ontario limps along with a spendthrift premier who talks a lot but is not delivering responsible fiscal leadership. And the Atlantic Provinces are increasingly in a desperate situation. Newfoundland-Labrador’s relatively brief love affair with oil extraction has waned due to the global oil scene. New Brunswick, Nova Scotia and Prince Edward Island face bleak futures as their respective finances sink deeper.

Plenty of academics and business people have waded into the “have-not” Atlantic Provinces swamp to suggest their solutions, ranging from tough love on unemployment benefits to eliminating regional development subsidies to bringing in large numbers of immigrants to address the region’s increasingly warped population composition. There are merits to such ideas. However, what continually gets omitted are such key factors as entrenched illiteracy, abysmally low productivity, and poor technology adoption.

This brings to mind that across the pond reside relevant examples of coastal-based small countries that have done rather well for themselves. Setting aside historical differences, one important point to keep in mind is that Canada’s 10 provinces have enormous autonomy when placed against other countries, including the United States.

Norway Globe

So what countries are we talking about? Well, how about Norway, Sweden and Finland. Yes, Finland’s having a tough time due, in part, to a plunge in its oil exports to Russia and the country’s decision to adopt the Euro. However, the country’s well positioned to find new sources of growth, owing to it placing second in the world in innovation, helped by its numerous start-ups. And then there’s Finland’s flagship company, Nokia. In Canada, Nokia’s purchase of French-based Alcatel-Lucent in January 2016 included assuming its Kanata (West Ottawa) R&D-focused campus. Indeed, Nokia has had the perception of being primarily a mobile phone handset maker (sold to Microsoft in 2013) when in reality half the company’s business has been in telecommunications networks.

Sweden’s economy remains strong and diversified. And for Norway, sure it has oil and gas production, but that’s been only a very small part of that nation’s long history. For example, Norway began commercial aquaculture in 1970 when the first cage was introduced; it’s now the biggest producer in the world (photo: aquaculture in Norway). However, aquaculture first appeared in 1850. While 95% of production (of a wide variety of fish and shellfish) is exported to the European Union, salmon is shipped around the world.

Of significance, to address concerns such as contaminated salmon and an over reliance on prophylactic antibiotics, Norway recently has moved to eliminate them. Contrast that to Chile, another huge fish farming nation which is trying to respond to international criticism on using antibiotics.

Ironically, it was the Norwegians who in the early-seventies were asked by the New Brunswick government to share their experiences on fish farming and applications for the Bay of Fundy. New Brunswick, whose small-scale fish farming industry (relative to global competitors) has consolidated in recent years, has no-where near the sophistication of Norway’s industry. Yet New Brunswick has been in the business for four decades. It’s about technology adoption and enhanced productivity.

Indeed, it took until 2015 for new federal regulations to be proposed for Canada’s aquaculture industry to clarify federal-provincial jurisdictions on such issues as the use of chemicals (eg, pesticides to control sea lice) and the overall health treatment of farmed fish stocks. In 1998, the Government of New Brunswick ordered the slaughter of several million salmon because of the threat that wild salmon faced from a disease that spread among aquaculture farms. Canada’s aquaculture industry is about $1 billion a year. (British Columbia started into aquaculture around the same time as New Brunswick.)

Consider a few salient statistics from these Nordic countries.

Aquaculture Norway

Norway (population 5.1 million) is not the most climate-friendly country, stretching across the top of Sweden and bordering on the icy Norwegian Sea and North Sea. (Photos: aquaculture farm Norway; tidal power.) It isn’t situated in as geographically advantageous locations as New Brunswick (with its deep water ports) and Nova Scotia (with ready access to Europe and the U.S. Eastern seaboard).

Yet Norway’s GDP per capita is an eye-popping $97,000 against Canada’s $50,000. Sweden comes in at $58,000, with Finland at $50,000. Sure, Norway’s benefited from oil, and invested wisely, with $803 billion in its sovereign wealth fund as of January 2016 (the largest in the world by assets). In contrast, oil-rich Alberta, through poor fiscal leadership, squandered a portion of its royalties over many years (and, yes, it has contributed significantly to equalization payments to Quebec and the Atlantic Provinces.)

Indeed, while countries such as Russia are burning through their oil-based reserves, Norway is taking a prudent approach. As the finance minister, Siv Jensen, said to Bloomberg BusinessWeek in early 2016: “The fund has a very long-term perspective. It’s constructed to sustain large fluctuations in exposed periods.”

On unemployment, Norway is at essentially full employment, recording the envious unemployment rate of 3.5%. Finland’s and Sweden’s unemployment rates are around 9 and 7%, respectively, with Canada’s at about 7% (the Atlantic Provinces run several percentage points higher). Yet Norway’s managed to contain its inflation rate to 2% (the other three are lower).

When it comes to health, Norway’s mortality rate is between that of its two neighbors and Canada. But it has a higher fertility rate than Canada (1.8 vs. 1.6), and just behind Sweden’s which is almost at the replacement rate of 2%. Life expectancy is pretty much tied (82 years), with Finland’s slightly lower. However, infant mortality in Norway is only 2.8 deaths per thousand vs. Canada’s 5.2 (Sweden and Finland are at about 3.0).

Canada has an overall internet usage rate of 85%; Norway’s is 95%, with the other two Nordic countries at about 93%. Mobile cellular subscriptions are 81 per 100 people in Canada, while Norway has 116. However, Finland has an astounding 172 and Sweden 125, representing how skewed the statistics are when placed against Canada which has been a laggard on mobile technology adoption.

wave-and-tidal_lahmeyer.jpg

The point in illustrating some statistics from Norway and its neighbors is to underscore that very small countries are capable of achieving not just robust economies but, just as important, healthy societies from which creativity and innovation emerge. (Photo: Norway tidal power project.) In the words of the late British economist E.F. Schumacher: Small is beautiful.

That Norway is located at a very northern latitude with a less than desirable strategic geo-location shows a country that has focused national leadership with a view to the long-term. It’s not just about the immediate “now” when it comes to placating the electorate, one of Canada’s (and America’s) political competencies.

Norway may be an out-of-the-way small northern country, but what it lacks in access to sandy beaches and warm tropical waters it more than makes up in the way of brain-powered innovation. As reported in Wired’s June 2015 issue, Norway is blazing ahead on several new technologies, from robots used in drilling to social media indexing tools to expanding the use of electric vehicles through accessibility to charging stations to smart products for home remote connectivity.

It’s not just about exploiting resource extraction and related exports. More importantly, it’s about building a country’s collective brain capacity and know–how when it comes to creating a spirit of innovation and intelligent technology adoption. Smart leaders, whether at the nation-state, organization or community level, engage their constituencies to bring out the best in them, to share a vision of the future, and to move forward together to improve their well-being.

Behind the clouds the sky is always blue.
– Norwegian proverb

 

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2 Comments leave one →
  1. April 3, 2016 11:50 pm

    I wonder if it’s easier for a small nation to build a consensus and have similar goals based on similar problems that need to be solved. The more geographically large and spread out a nation is, it is probably likely to have more people, more TYPES of people, all of whom have divergent goals and interests.

    What concerns me most in your post is, “…entrenched illiteracy, abysmally low productivity, and poor technology adoption” in the east coast region of Canada. Why do you think this is so? Are people not attending school? Or does the culture there denigrate literacy and white collar jobs, feeling that the only “authentic” people are those who do manual labor or work with their hands? Are there other problems of just such a low level of poverty that people are so focused on basic necessities that they have no energy or time to encourage their kids’ studying? Don’t they want a better life for their children? Or do they disagree that literacy will give them a better life? Or, do they feel if their children become literate that, “…they won’t be like us (their parents and their family) anymore,” in other words, they won’t “fit” any longer?

    • April 4, 2016 12:05 am

      Yes, it’s absolutely easier for a small nation with a more homogeneous population to find a consensus. I allude to some of Canada’s key challenges. Aside from geography, Canada’s decentralized form of government presents some big challenges. But that doesn’t negate or override the critical importance of national leadership.

      With respect to Atlantic Canada’s four provinces, there’s a long history here. Back in pre-Confederation days (pre-1968) and for a while afterwards, the trading pattern of this region (ie, the three Maritime Provinces) was along the US eastern seaboard. Shipbuilding was a big industry. Over time, with the growth of political-economic power in Central Canada (Quebec and Ontario) and the imposition of tariffs, the east coast began a long economic decline. Right of centre economists argue that the social welfare net, including employment insurance, and large regional subsidies have repressed the region and created a dependency mindset. There’s a lot of truth in this.

      And for whatever reasons, education overall is generally in a weaker state than most of the rest of Canada. Illiteracy remains stubborningly high, unacceptable in a technologically-knowledge driven society.

      And there is still an historically-based provincial political culture based on croynism which detracts from smart business development.

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