Jack Mintz: The art of research
Posted: May 19, 2009, 7:20 PM by NP Editor
Jack Mintz, Federal Budget, research
If Canada wants to be a leader in R&D, the solution isn’t more government money; it’s a smarter approach
By Jack Mintz
T
he federal government’s recent budget has taken a lot of heat over its support for research, including in a letter signed by 2,000 researchers dependent on government support. Not only is the heat unfair but it is also contradicted by the facts.
The real issue is not the amount of money being spent but whether the government’s approach is the best innovation strategy. Researchers could help a lot by framing the discussion in this way.
Much of the criticism laid against the Harper budget reflects reduced funding provided to three granting agencies following a federal strategic review. Arguably, the purpose of a review is to improve the program’s efficiency, reducing expenditures that are overlapping or not effective. The 3.4% cut is being redirected to other research funding, including graduate scholarships, and, in fact, the 2009 budget provides for a substantial increase in research funding.
While much fanfare has been made about the newly-found U.S. budget commitment to research, it must be remembered that this only follows a secular decline of 50% of research funding for physical sciences as a share of GDP in the past 25 years. In other words, the United States is now in catch-up mode. Yet a close look at the U.S. budget numbers for research and development suggests less than meets the eye. In a recent review of the Obama budget, the Office of Management and Budget shows that federal funding for research and development will be $147-billion in 2010, just slightly more than the Bush administration’s $144-billion in 2008 and less than an estimated $165-billion in 2009 (including stimulus spending).
In comparison, the Harper government in its 2009 budget will increase science and technology funding by $5.1-billion on top of $2.2-billion in new funding in the previous three budgets. Adjusting for size of the economy, this is more than the U.S. spending increases. Over $2.75-billion is devoted to repairing post-secondary infrastructure that has seriously impaired scientific research and teaching due to inadequate facilities. A further billion dollars is spent on clean energy, clearly one of the most critical areas for research in the coming years. Other funds are devoted to various programs, including the National Research Council’s successful Industrial Research Assistance Program to assist corporate innovation and the hiring of graduate students.
The recent report by the Science, Technology and Innovation Council does an excellent job laying out information about our research performance. In 2006 (the latest year of available data), public expenditures on research and development as a share of GDP was 0.9% in Canada, more than the 0.8% share in the United States. Further, once the research and development tax credit is included, Canadian funding of business research was 0.23% of GDP compared to 0.22% of GDP in the United States (2005, the latest year available). Much of our support is provided through the tax system while the United States directs most of its public support through grants given to defence, health, space and energy industries, among others.
And, more of our population has post-secondary education than in the United States, although Canadians favour colleges over universities compared to Americans. Given the differences in education structures, it is not entirely clear whether some Canadian college education is much different than certain types of U.S. universities — for example, Canadian colleges like Ryerson have become universities recently.
The problem is research intensity as a country. Total public and private research and development spending in Canada is still lacklustre, just slightly better than the OECD average. Although research and development expenditures have improved from 1.6% of GDP in 1996 to 1.9% of GDP in 2006, it is still less than the 2006 G-7 average of 2.2%. Our mediocre performance is primarily a result of low business-funded research, which is only 1.1% of GDP, compared to 1.8% in the United States for 2006. Even after accounting for differences in industrial structure, resource-rich Canada’s position improves little.
So if we are graduating lots of students, and governments are coming to the table, why is research and development performance so mediocre? Clearly, the effectiveness of public programs, not the size of spending, is the heart of the matter. To illustrate, Canada’s public support for business research is one of the highest in the world, primarily delivered through R&D tax credits. The advantage of a tax credit program is that reduces the complexity involved with grant applications as well as leaving it to the private sector as to where to best spend research money.
The United States is able to achieve much greater success with its grant-based regime, which is focused more on communications and transportation industries. In contrast, Japan provides far less government support for business research than the United States and Canada, it is more reliant on fiscal incentives like Canada and it has an even better R&D record than the United States. Obviously, our generous tax support has not done the job.
Canada has done admirably well in recent years funding new professors and graduate studies. Yet, fewer students graduate with PhDs compared to other countries. Further, insufficient support is given to post-doctoral fellows who must take a salary cut (including losing tax-exempt status of scholarships) when completing their doctoral studies.
And venture capital funding has been poor, providing less than 2% of 2007 funding for small and medium size businesses. Our labour-sponsored venture capital credit has been ineffective yet governments cling to it. A capital gains tax regime to encourage the rollover of investments in new investments is not leading to high rates of small business growth.
If our policies are not working well enough to achieve better research performance, perhaps it is time for the federal government to put some of our best brains together to figure out how we can improve our innovation performance. Just spending more is not the answer. Spending wisely is.
Financial Post
Jack M. Mintz is the Palmer Chair in Public Policy, School of Public Policy, University of Calgary.
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