Inkless Wells

Paul Wells on all the latest out of Ottawa—along with the occasional post about jazz. Follow Paul on Twitter: @InklessPW

Categories: Capital Read, Inkless Wells

"The Swedish state is not prepared to own car factories"

by Paul Wells on Sunday, March 22, 2009 10:28pm - 22 Comments

Too bad, Saab. How can Sweden just let an industrial pillar go like that? That’s a complex question. The decision, like every decision any government anywhere makes these days, will strike many as wrongheaded. I’m not sure how much of Sweden’s employment is attributable to Saab; it may well be lower than the fraction of Canada’s (or Ontario’s…) employment that depends on the Big 3. But if Sweden’s centre-right government believes the country’s future need not look like its past, this chart may offer part of the answer:

This is a chart of GERD, gross expenditure on research and development (here shown as the sum of business expenditure, or BERD, and government effort). It’s a rough measure of how much a country spends on new ideas. Canada’s at 13, the U.S. is at 5, and Sweden’s at No. 1. (For the past five years, successive Canadian governments have tried to make our performance look better by saying Canada “spends more on university-based research than any other G7 country,” a nice distraction from both our mediocre private-sector R&D effort and the stronger university-based effort of non-G7 countries like Israel and… Sweden.)

Sweden may be more comfortable letting go of its past, in other words, because it has made such a determined head start on its future.

Tags: bailouts, Saab, sweden

More by Paul Wells

Olivier

Maybe that’s a problem we oughta have when a big part of our economy is based on natural ressources extraction and primary transformation; maybe our private sector landscape isn’t populated by enough knowledge-rich companies, no?

I’d be curious to see a sector by sector split of R&D expenditure in Canada and Sweden.

Paul Wells

People offer all kinds of explanations for Canada’s very modest private-sector R&D performance, many of them plausible. One is that we run a branch-plant economy, and companies with large subsidiaries here still prefer to do their research in the home country’s base plant. On resource extraction, it’s not as though natural-resource industry has no need for new approaches and new techniques. All that’s needed is for Canada’s oil patch (and forestry sector) (and many others) to seek those new techniques.

One program the federal Conservatives introduced, apparently to good effect, is IRAP, which seeks to speed the lab-to-factory-floor translation of research into new business processes:
http://www.nrc-cnrc.gc.ca/aboutUs/corporatereports/fact_sheets/factsheet_irap_e.html

Olivier

Every industry needs R&D expenses, we all know that.

That’s why a sector by sector split of R&D expenses would be interesting. It’s a wild, wild guess on my behalf, but I’m not sure ressources extraction is as R&D intensive as, say, Pharmaceutical or Aeronautics (or whatever, maybe I’m completely wrong…).

Paul Wells

I’m fairly sure you’re right in general, and certainly the way resource extraction — emphasis on the second word — is practised in Canada:

http://tinyurl.com/cdkjph

Critical Reasoning

Objection, irrelevant. Refining is indeed value-added, but the technology is already well established, so the construction of a new refinery in Canada would not affect our national R&D expenditure.

Extraction is actually the focus of most R&D in the oil & gas industry. Consider the billions of dollars being spent in SAG-D and CCS research, which accounts for a significant fraction of Canada’s private sector R&D.
Kenneth

Sorry guys, resource extraction is heavily dependent on R&D. We are just not the ones doing the research. In logging all the equipment is from Scandinavia (super high-tech remotely operated logger/fellers). In mining the equipment is from all over except Canada, and even in oil well drilling with its retrograde reputation the last 40 years have seen a staggering change in methods. We have a huge amount of hydro-electric power and build virtually nothing for that industry.

About the only aspect of any of the research needed for resource extraction that has happened in Canada has been work done in Hamilton related to metalurgy and materials development.

i would love to hear the government scold the private sector and its lackadaisical research attitude.
Kenneth

CR – Refining is in a huge R&D period now, mainly concerned with shifting the energy in/energy out ratio and meeting toughening environmental regulations in places that aren’t Canada.
Dot

Consider the billions of dollars being spent in SAG-D and CCS research

Got any data to back that up? I know in CCS the Alberta Gov’t has continuously announced $2 billion for CCS and I hear the feds mentioning $1 billion, but I thought that the majority was for pipeline gathering/dist’n – which is not very R&D intensive.
Dot

Reguly on CCS – March 2009 ROB Magazine
http://tinyurl.com/c88zf9

thomas

Just to clarify one point the IRAP program has been around for a long time. It was the government of Chretien that created it in its present form. While a good program, its effect is mitigated by underfunding.

Paul Wells

Ah. Handy correction. Thanks.

Critical Reasoning

Too bad it’s so difficult to measure the results of R&D spending (economic benefits, etc.). I’ll bet some of the countries on this list spend their research dollars much more productively than others. Does Sweden’s higher GERD generate proportionately greater results? Or is Sweden a victim of diminishing marginal utility?
Sisyphus

Well, they don’t have the rationale that Saab is in bad shape because they build bad cars.

As part of my punishment for committing the sin of insomnia I listen to a lot of European radio late at night , including the English service of Radio Sweden. That government is in trouble on a lot of fronts.
http://prairiewrangler.wordpress.com/ Olaf

Aren’t we all kind of missing the point here? I have a few questions from the social sciences which may focus the discussion somewhat: What are the implications of government R&D spending on diversity and multiculturalism? What proportion of general revenues did Renaissance France divert to R&D? How does R&D spending necessarily discriminate against women? How do we collectively, as a society, feel about R&D? What is Canada for?

Now, if only we had the research dollars to answer these and millions of other similar questions, I think that we could start moving ahead with wealth creation. And yes, I know I’m a jackass, but I couldn’t resist. :)

Dot

Ikea, Swedish for common sense (I wonder where they get the raw logs).

Derek Pearce

I thought IKEA was Swedish for “out of stock.”

archangel

Join the rest of us Canucks sitting on the porch beside the two-four, brown bottle in hand, watching the world cart away our future.

Jim

Statistics, damn statistics. As Paul pointed out, successive Canadian governments (Liberal and Conservative) have used these figures to tout Canada’s governmental expenditures on R&D as a fraction of the total GERD as being highest of the G7 while conveniently overlooking the fact that this is only so because of the low rate of non-governmental (private sector) R&D. Politicians ask their “researchers” to find mays of showing data to support their position – even better if they can point to being “Number 1″. How they use these data (and whether the 4th estate challenges their assumptions) is variable but in the case of GERD it is used to demonstrate that the government is generous in its funding for science and technology. This is not only disingenuous, it is the wrong thinking. The amount spent is simply a number the department of finance accountants are interested in. What is more relevant is whether that money is spent effectively. Seems no one is asking THAT question.
Bill Simpson

This was the quote from Swedish government on the matter:
“We are very disappointed in G.M., but we are not prepared to risk taxpayers’ money. This is not a game of Monopoly.”

This is the first rational comment I have heard on the subject of failing car companies from a government.

In any event, I suspect that it has no connection to the R & D numbers that Paul has indicated. These could be an indication of the excessive and still lingering government role in the Swedish economy, that has been retreating everywhere else, including in relation to propping up failing enterprises like SAAB.
Bill Simpson

Does anyone know the exact amount given out by the government for SR&ED (tax rebates for research and development)? I have seen a number as high as $6billion touted.

My own direct experience of this program is that it is nothing more than a straight government subsidy, with very little of the claimed expenditures actually being spent on true “research and development”. Add to that a large industry of tax experts and consultants working to squeeze this program to the maximum.

I doubt very much if this program has resulted in one new useful idea being dreamed up in Canada, but it obviously managed to subsidize some jobs!
sf

Canada will do better on that chart with the lower oil prices and the downturn in the resource sectors.

I don’t really like charts where a country looks worse if its GDPis higher.

A per-capita chart would be more informative.

John.K

Canada and Sweden’s GDP and Population are in approximately equal ratios – in both cases we’re about 3 times their size. So for at least these 2 countries, relative positions would not change on a per-capita chart.