COVER

THE FUTURE NOW

April 20 1987
COVER

THE FUTURE NOW

April 20 1987

THE FUTURE NOW

COVER

Eighteen months ago, 31-year-old Allan Lee was a systems analyst at the University of Manitoba. Now, with the help of seed money from the Manitoba government, Lee runs his own small company, CAD Systems Inc., in downtown Winnipeg. His three employees are all computer scientists proficient in the specialized task of using computers to design systems for other computers. Currently they are working on contracts to produce a desktop system fin' a customer in Montreal and the software for a computer-aided design for space satellite communications systems.

At one of General Motors’ auto plants in Oshawa, Ont., Timothy Hamre, 29, watches as half-ton Chevrolet and CMC trucks roll toward him on platforms steered to his work station by an invisible electronic guidance system. Hamre, working as acting foreman in charge of

two work stations, says that the new system is superior to the old continuous assembly line, where workers had to insta! parts on moving vehicles. Now, workstation teams at GM’S ultra-modern AGV (Automatic Guided Vehicle) plant act as their own quality-control officers and can keep the vehicle until they are satisfied with the job they have done.

Standing at a bank machine in the lobby of a midtown Toron to office building hi-year-old Joan Welling—a pseudonym—is engaged in creative electronic bookkeeping. Touching a few pushbuttons, she pays off a bank credit card debt of almost $1,800 that is about to begin accruing interest charges at a rate of almost $1 a day. By shifting the debt to a line-of-credit account, she has staved off the day of reckoning and will reduce her interest charges by more than one-quarter. As well, thanks to computerized

banking, Welling avoids a lunchtime lineup inside the bank—and saves the 36 cents it would cost to mail a cheque.

Across Canada, and in all the world’s manufacturing nations, the post-industrial revolution is transforming economies, creating new kinds of work and new ways of working. By providing an endless flow of new services and products, from automatic bank machines to video cassette recorders and compact discs, the revolution is also changing the way people live. More ominously, the overthrow of old technologies is shutting down outmoded factories and has triggered a high-stakes struggle for a place in the global technological race. Now, many scientists and economists fear that Canada, with its historical reliance on natural resources as its main source of income, may be falling dangerously

behind in scientific research and development—the vital functions that produce winners in the fierce competition for high-tech prowess.

In a mounting chorus of protest and concern, critics have warned that unless Canada steps up its efforts in science and technology, the trade-dependent nation could some day be reduced to the status of a Third-World country. By failing to mobilize the human effort required to build technological strength, warns the Canadian Advanced Technology Association (CATA), an industry lobby group that is meeting this week in annual conference in Ottawa, “we face the prospect of swift and certain decline: our standard of living and jobs are at risk.”

Reliance: The growing unease over Canada’s standing in the technological world stems from a complex assortment of factors. Those include Canada’s historic reliance on its resource industries—forest, mineral, farm and sea products—the relatively small size of Canada’s manufacturing industry and the high proportion of foreign ownership in it. As a result, the money invested in research carried out by Canadian industry, governments, universities and other institutions amounted in 1986 to only 1.2 per cent of the Gross Domestic Product—less than half the proportion of national wealth devoted to research in each of the United States, Japan and West Germany.

In 1985, the last year for which figures are available, Canada exported $12 billion worth of high-technology products, including computer and telecommunications equipment, aerospace hardware and scientific instruments, while importing almost $18 billion—to incur a high-tech deficit of almost $6 billion. Declared John Evans, the former University of Toronto president who now heads Allelix Inc., a Mississauga, Ont., firm that operates in the highly research-intensive area of biotechnology: “Unless we as a nation are willing to upgrade our industrial base with knowledge-intensive technology, Canada could sink to a very secondary status among nations.”

Seed: In fact, Canada has niches of high-tech strength in such areas as laser technology, telecommunications and transportation. The Toronto-based Canadian Institute for Advanced Research (CIAR), a nonprofit corporation using seed money from the Ontario government, private industry and foundations, is funding basic research through networks of scientists in a $3million-a-year program that has helped to stanch and even reverse the braindrain. And a study issued last month by the Ottawa-based Institute for Research on Public Policy concludes that

not only have high-tech exports been growing at almost twice the pace of imports, but that even technology bought or borrowed from abroad improves Canadian industry. As well, a nucleus of Canadian-owned companies—including such outstanding performers as Spar Aerospace Ltd. and Northern Telecom Canada Ltd.—have established international reputations in making and marketing high-tech products.

Ideas: Still, critics argue that “scientific illiteracy” in Canadian society is holding back development of a competitive high-tech economy. They point to a culture and an educational system that often seems biased against science, and a university research establishment that is seriously underfunded, with the result that some of Canada’s brightest scientists leave the country. University of Toronto scientist John Polanyi, winner of a 1986 Nobel Prize in chemistry, has observed that even to import hightech products and processes Canada needs the scientific know-how necessary to select and apply new ideas.

Prime Minister Brian Mulroney,

whose government has been criticized by the scientific community for reducing federal funding for universities and the National Research Council (NRC)— where Polanyi developed his prizewinning work leading to chemical lasers— has repeatedly cited a comparison indicating that Canada lags in high-tech brainpower. He says that Canada has only 90 scientists and researchers per 100,000 of population compared to 280 in the United States, 240 in Japan, 150 in West Germany and 140 in Britain. Said Mulroney, referring to Canada’s anti-science bias in a March 4 speech to the engineering and science-oriented University of Waterloo, Ont.: “We have relegated research and development to a peripheral role in our national life when in fact it is the cornerstone of great and sustained future endeavor.” There are more specific economic reasons for Canada’s inferior performance-including the relatively small size of its economy, the high degrees of foreign ownership in Canada’s manufacturing sector, and the absence in Canada of the massive spending on de-

fence-related research that takes place in the United States and some other industrialized nations.

There is even concern that in an increasingly tough international trading environment, Canada’s low level of made-at-home technology could ultimately pose a threat to national sovereignty. That might come about, critics say, if current negotiations with Washington for a free trade pact break down. Protectionist U.S. trade measures could then progressively close off U.S. markets for Canadian goods and services—and cripple the economy. In the face of such an economic collapse, warned CATA, there could be “a weakening in Canada’s ability or wish to remain a politically sovereign country.”

Painful: So far, Ottawa’s response to the issue has been, by turns, hesitant and then painfully lacking in specifics. Mulroney’s government came to power in 1984 with a pledge that spending on research and development should be doubled. But a 92-page internal cabinet memorandum on federal science and technology strategy, dated last Oct. 28

and obtained by Maclean's, acknowledged that “unfortunately this target will likely not be met in the near future as the government has not been able to devote sufficient resources to this issue, given the pressing need to reduce the [budget] deficit.” As part of its efforts to hold the line on budget spending, the government last year provoked protests by effectively freezing funds for university research and slashing the budget for the National Research Council (NRC).

More recently, Ottawa has begun to address the issue with a public relations campaign—a series of announcements and meetings outlining the need for a long-term national science and technology strategy. The activity is based in part on last October’s cabinet memorandum circulated by Minister of State for Science and Technology Frank Oberle. The strategy sets general goals but relies mainly on trying to generate a climate of enthusiasm that will encourage scientific research and development in the schools and in the private sector. Indeed, although the October memorandum predicted that “the public is expected to react positively,” it added that the strategy also risked incurring criticism on the grounds “that it’s too little too late; that there’s no emphasis on basic research and no evidence that the government will meet its pledge to double R and D expenditures.” Despite that risk, Ottawa has taken a series of steps in recent weeks. Among them:

• In federal spending plans for the fiscal year that opened on April 1, the government in February allocated modest budget increases of between 2.5 and 5.2 per cent for five national scientific research councils—some of the increments partly restoring funds cut last year, and some of them conditional on receiving matching private money.

• Mulroney met in Ottawa on Feb. 16 with his new National Advisory Board on Science and Technology, made up of 39 scientists, academics, government and business people, to outline its functions in providing what the Prime Minister described as “tough and honest

opinions on what the problems and opportunities are in science and industrial technology.”

• Oberle met his provincial counterparts in Vancouver on March 12 where they signed a vaguely worded framework agreement to consult on national science policy and formed working groups to study “areas of action” on technology research.

• The science minister unveiled the long-promised, and sketchy, federal strategy statement in Toronto on March 24 at a Financial Post research and development conference. Entitled InnovAction, the five-point strategy aims to encourage the application of new technologies, assist industry in innovation, manage existing federal funding effectively, maintain a supply of qualified scientists and technologists in Canada and promote technological literacy. Oberle has hinted that Finance Minister Michael Wilson may introduce legislation soon to provide new tax incentives to stimulate privately funded research and development.

Urgency: The slickly packaged InnovAction plan pledged undefined “further initiatives,” including a national conference on technology and innovation in January. But many critics say that more active programs—and money—are urgently needed to stimulate scientific research and development. Part of the urgency stems from the rapid shift that has occurred in recent years in global trade, with demand declining for Canada’s traditional resource staples as new and more cheaply producing nations enter the marketplace. As a result, economists say that Canada in the future will have to pay its way by competing more aggressively in hightechnology goods and services—at a time when global competition is becoming steadily more intense.

Indeed, nearly all of Canada’s major trading rivals have launched massive research efforts designed to produce new technology. Besides the military advantage that Washington’s “Star Wars” Strategic Defence Initiative (SDi) is intended to yield, SDI is expected to turn up new technology in areas ranging from robotics and data processing to lasers and biotechnology. Japan has launched a Fifth Generation Computer project to introduce an artificial intelli-

gence system by the 1990s, while 19 European nations have joined in the fiveyear, $13-billion Eureka project in a drive to find new technologies.

By contrast, Canada’s science and technology effort is not only small, but increasingly biased toward applied research—which can yield short-term commercial benefits—and away from basic science, which may produce larger payoffs in the long run. It was the basic research begun 30 years ago by Nobelist Polanyi that provided the basis for Canada’s present role in laser technology. But critics note that the current financial squeeze afflicting Canadian universities restricts pure research. As well, government guidelines permit NRC laboratories to spend only about 18 per cent of their diminished budgets on pure research. “All research is fighting for the same dollar,” said Prof. Michael Ward, vice-president of research at the University of Calgary. “But basic research is fundamental if we ever want to ensure a future of not being hewers of wood and drawers of water.”

The economic dominance of such resource industries in Canada has tended to discourage the growth of hightech development. Although some of the resource-based firms are turning to high-tech methods in search of renewed profitability, in the past there has often been little incentive for forestry or mining firms to carry out research. Extracting minerals from the ground “doesn’t take a lot of brains and scientific talent,” noted a senior federal government official. “It’s like shovelling snow and being able to sell it.”

Pressed: At the same time, many parent companies of Canadian firms that are foreign owned—a majority of manufacturers in Canada—concentrate their research and development programs outside Canada. But in the application of high-tech systems in the workplace, a 1986 survey by the Ottawa-based Economic Council of Canada found that foreign-owned firms were more innovative than Canadianowned companies. As well, pressed by Ottawa over the years, some major foreign-owned multinationals have given their Canadian subsidiaries responsibility for part of the parent’s worldwide R and D. Among them: Pratt and Whitney Canada of Montreal and Toronto-

based IBM Canada and Imperial Oil.

Despite the constraints facing Canadian high-tech entrepreneurs, a small but vibrant group of Canadian-controlled firms has emerged in the areas of technology that experts say will dominate the 21st century. High-tech enterprises are multiplying with fresh discoveries and new combinations of existing knowledge. They encompass developments from work on artificial intelligence, including a computer that may teach itself new functions, to fresh applications of lasers in operations as various as engraving, supermarket checkouts, manufacturing and medicine. But there are four areas of advanced technology regarded by many economists as strategic:

• Microelectronics, the basis of computers applied in widening fields of endeavor during the last 30 years as scientists developed ever tinier, more powerful, quicker and increasingly versatile electronic circuits to channel electrical signals in new ways—hairfine integrated circuits known as chips. The power is packed microscopically onto fingernail-sized slivers of silicon or, next, the even speedier semiconductor material gallium arsenide.

• Biotechnology, an even younger revolution in applied science which exploded out of the 1973 discovery that DNA (deoxyribonucleic acid)—the molecule common to all living cells that contains the code of characteristics conveyed to new-born cells—is transferrable. Socalled recombinant DNA technology and cell-cloning permit the transfer of inborn traits between different plants, between different animals and also— potentially and controversially—between unrelated organisms and even humans.

• Advanced manufacturing materials—the new-generation plastics, ceramics and synthetics, often with rearranged molecules and in hybrid combinations—have replaced metals since 1980 as the most commonly used industrial material in North America after wood and concrete. More variations, even lighter and stronger and cheaper, are on the way.

• Telecommunications, a service industry which has been transformed in 15 years by the use of microelectronics, by the transmission of sound and images in digits of data (digital signals)

and increasingly by fibre optic systems—light-conducting strands of pure glass—instead of copper wires. The greater transmitting capacity of fibre optic circuits may soon even challenge the long-distance communications role of satellites—less than two decades after the launch in 1970 of Canada’s Anik A, the world’s first communications satellite to be parked in an orbit that kept it in the same spot relative to the earth.

‘Strong’: Canadian companies and researchers are active in the most strategic high-tech fields—although not strongly in advanced materials—and are among the world leaders in telecommunications and some specialized areas of the others. Indeed, follow-up reports from 15 members of a Japanese economic mission to Canada last October concluded that “Canadian compa-

nies excel in very high specialization in technological fields and the development of advanced technology.” At the same time, one of the reports noted that “Canada is strong in the fields of computer software and telecommunications equipment and weak in the field of microelectronics.” In biotechnology, said another Japanese report flatly, “the present size of research investment ($70 million by the private sector in 1985) is not large enough.”

Debate: The size, and ^ the source and allocaI tion, of research investment funds is a central issue in the growing debate over high tech in Canada. Figures issued by Statistics Canada show that of last year’s total national pool of $6.3 billion spent on scientific and engineering R and D, private business provided about 45 per cent and spent 56 per cent of the total, the federal government funded 36 per cent and its departments and agencies spent 21 per cent, while the provinces, universities and private foundations together generated 19 per cent of the total and spent 23 per cent.

The statistics also show that, since the Mulroney government took office, an increasing share of total R and D funding has shifted to private industry-reinforcing concerns among advocates of more basic scientific research in universities and in the National Research Council.

For his part, Mulroney said in his Waterloo speech that all sectors of society should contribute. Added the Prime Minister: “The facile approach to our science and technology dilemma is simply to have the federal government spend more borrowed money.” But the federally funded NRC, in an internal 1986 study, declared that both privatesector and public research programs— including its own—need more government aid to expand, cooperate and meet the high-tech challenge.

Noting that more than three-quarters of the roughly 1,250 Canadian companies conducting research are smaller firms with fewer than 500 employees, the study concluded that “it is unrealistic to expect such firms, already investing heavily in R and D, to increase their research budgets much further.” Said the NRC: “Unless things change, hard times are in store—more jobless, a shrinking national income and an end to the standard of life we know.” □