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Canada's latest report card has disappointing marks [US a lot worse!]

According to the Conference Board, Canada does well in economics but skids
in health and social areas, BRUCE LITTLE says
By BRUCE LITTLE,  Saturday, Oct. 4, 2003

If the Conference Board of Canada's latest assessment of Canada were a
school report card, the teacher's comment might read like this: Your hard
work has paid off in some noteworthy improvements, but because others in
the class have made even greater strides, our previous advice bears
repeating --you can, and should, do better.

Compared with other leading industrial countries, Canada scores high marks
on the economic front and does moderately well in the areas of education
and innovation. But its performance on a range of health and social
measures falls short of many other countries and Canada is well down the
list for its environmental efforts.

Despite its evident gains in some areas, Canada slipped relative to other
countries last year. In its 2002 report, the board found that Canada placed
among the top 12 countries in all six groups of indicators it uses; this
year, Canada made the top-12 club in only five categories, having slid to
16th in the environmental rankings.

The board's conclusion -- contained in its eighth annual Performance and
Potential report -- is based on 100 economic and social and environmental
indicators for 24 countries.

The survey is a benchmarking exercise that goes well beyond the United
Nations' better-known Human Development Index, which uses only four
indicators for its research.

The Conference Board says Canada's glass is both half full and half empty.

"On balance, the prospects for Canada are more positive than at any time
since we began to publish our annual assessments of Canada's socio-economic
performance and potential in 1996," the board says.

But there remains an "urgent" need "to make strategic policy choices to
define and secure the Canadian advantage."

Canada's "actual performance is not as strong as many Canadians think" and
the kind of contentment that it says comes naturally to Canadians may be a
problem, it adds.

"We're in a position where we can make some choices, but there is this
Canadian complacency," Charles Barrett, the board's executive
vice-president, said in an interview. "It's hard to light a fire under
people who don't think anything is wrong."

To measure Canada's place in the world, the board grouped its national
indicators into six categories -- economy, innovation, education and
skills, health, society and environment.

Using data for 24 members of the Organization for Economic Co-operation and
Development, it ranked countries under each heading and then subjected the
top dozen to closer analysis.

Only two countries -- Sweden and Switzerland -- pulled off a top-12
placement in all six categories. Canada was a top performer in only five,
and had to share that distinction with Germany, Australia, Finland and
Denmark. Other Group of Seven countries, with which Canadians usually like
to compare themselves, fared worse: The United States, Japan, France and
Britain made it to the top 12 in only three categories, and Italy in only
two.

Here's how Canada stacks up in the board's six measures.

Economy

In its best showing among all indicators, Canada tied for third with
Ireland and Australia for its economic performance -- behind South Korea
and Norway, but ahead of the United States.

This measure is volatile because it is based largely on a country's showing
in the latest year for which data are available, so countries can move up
and down the list fairly quickly. Australia, for example, did not even make
the top 12 last year.

Even though South Korea is the poorest country of the group in terms of
gross domestic product per person, it won top honours with a combination of
strong growth in productivity and employment, low unemployment and high
levels of investment.

Canada finished among the best in measures of job growth, long-term
unemployment and growth in unit labour costs, a gauge of international
competitiveness. Canada's strong showing in unit labour costs is unlikely
to persist because it has already been erased by the dollar's sharp rise
this year.

The board noted that Canada's standard of living -- defined as GDP per
capita -- increased to more than 83 per cent of the U.S. level in 2002 from
81 per cent in 2000. But Canada also had "the dubious honour of having the
highest unemployment rate among the top 12" -- 7 per cent compared with
Switzerland's 2.9 per cent, the lowest rate.

"Canada's level of unemployment might be considered unacceptable in some
(particularly European) countries, yet we have become accustomed to such
high rates," the board says. "A chronically high level of unemployment is
costly, both in lost human capital and in social spending. Happily,
Canada's unemployment rate is expected to decrease over the next several
years."

Innovation

The pursuit of a more innovative economy has been a government priority in
recent years, a focus that the Conference Board favours.

"We rely on innovation for our future economic and social well-being -- and
we ignore it at our peril.

"To our credit, we have been paying attention and we rank fifth against the
best," trailing only Finland, Sweden, Iceland and the United States, the
board says.

"These countries and others offer stiff competition, driving just as hard
-- or harder -- to be the most innovative they can be. Canada must continue
to raise the bar just to keep pace."

The board says innovation is more than just the generation of new ideas
through research and development. It also includes the diffusion of ideas
through the economy and the actual use of them through selling new
products, processes and services.

Canada is near the bottom of the pack in terms of creating new ideas.
Canadian investment in R&D, relative to GDP, is only two-thirds that of the
United States' and even worse when compared with Sweden, the leader in this
indicator; for every dollar that Swedes invest in R&D, Canadians invest a
mere 43 cents.

Canada is better at diffusing new ideas but underinvests in training; it
scores badly in measures of R&D personnel and researchers, and in the
number of graduates in science, mathematics, computing and engineering.

In terms of using innovation, Canada is at least "headed in the right
direction," with high rankings for investment in venture capital and the
share of manufacturing companies introducing new products and processes.

But the board also says Canada's business community is investing too little
in R&D, worker training and new machinery and equipment. Canada ranks 10th
in corporate outlays for R&D and that spending is declining, "while that of
countries like Sweden, Finland and [South] Korea (which is not even in the
top 12) continues to grow. In fact, Sweden's industrial financing of R&D is
four times greater than Canada's."

Environment

Canadians take pride in their country's beauty and resources but have been
"lulled into a false sense of security about the state of our environment,"
the board says. Canada placed a dismal 16th among the 24 countries whose
data were examined.

"Yes, we have abundant resources . . . but we are not managing them well
enough."

Denmark, Sweden and Austria won top marks because "they are actively
managing their environment through such means as environmental planning,
the enforcement of strict standards and the use of best available
technologies."

Environmental progress need not come at the expense of economic gains, as
many believe, the board notes tartly. Many of the countries that lead the
environment list "also make the top 12 in the economy category."

After outbreaks of water contamination in Walkerton, Ont., and North
Battleford, Sask., Canadians can no longer take water quality for granted.
On a per capita basis, Canada uses 2½ times as much water as Germany and
double that of the Netherlands but is well behind most countries in
treating waste water, pointing to a need for more investment in municipal
water treatment systems, especially in major cities.

Air quality is not only poor but declining, with a rate of sulphur oxide
emissions that is three times higher than the 12th-ranked country. In two
other emission categories, nitrogen oxide and carbon dioxide, Canada ranks
23rd and 24th, respectively. Canada also produces far more hazardous waste
-- like heavy metals, medical waste, acids and solvents -- than most
countries.

Education and skills

What jumped out of the education rankings for the Conference Board was the
fact that "the Scandinavian countries are among the very top performers,
immediately followed by several English-speaking countries." Norway and
Finland were in first and second place, followed by Sweden and Australia in
a tie for third and then Canada and Denmark in a tie for fifth.

Canada spends slightly more than the OECD average on education (5.7 per
cent of GDP compared with 5.2 per cent), but performs poorly in measures of
student-teachers ratios. Denmark, the leader, has one primary school
teacher for every 10 students, compared with Canada's one teacher for every
18 students. The figures are similar for high schools: a teacher for every
10 students in Norway and every 19 in Canada.

Even so, Canada scores well on education outcomes. It has the largest share
of postsecondary graduates -- 41 per cent -- among the top 12 countries and
"Canadian students are among the strongest performers in international
testing for math, science and reading." The Canadian school system also
delivers greater equality.

Although kids from poor homes do worse than kids from rich homes, the gap
is smaller here than in other countries.

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