Stephen Poloz presenting at Lawrence National Centre AI symposium
The world is experiencing a revolution. The fourth industrial revolution that is, all during a time of de-globalization where trade is being used as a weapon.
According to Stephen Poloz, former Governor of the Bank of Canada, “the next stage of uncertainty is already here.”
Poloz, who was recently named to the Order of Canada, offered opening keynote remarks on the current economic climate at the Lawrence National Centre for Policy and Management’s (Lawrence Centre) recent symposium, Enhancing Canada’s AI Advantage in a Competitive and Uncertain World. The sold-out event brought together founders of artificial intelligence (AI) firms, as well as leaders from governments, academia, and various industries, including venture capital and pension funds, with the aim to identify actionable policy ideas to grow a domestic AI technology sector.
“The fourth Industrial revolution is the digitalization of our economy,” said Poloz. “AI is just a broad catchy layer of this broader wave…” However, given the general-purpose nature of this technology, Poloz noted, it promised to deliver massive increases in productivity.
Estimates from the World Economic Forum AI survey of CEOs suggests that 20 to 25 per cent of global workers will be disrupted, potentially leading to greater income disparities in the coming years.
In spite of this disruption and the workforce change expected with technological advancement, there is still likely a silver lining for the future.
“On the good side of the standard, every industrial revolution has created far more jobs than it has destroyed,” said Poloz “I am certain this will happen again, but it is a process that always takes time, and of course can be very painful for many folks.”
The state of AI in Canada today
The global AI technology market is projected to grow to nearly $2 trillion USD by 2030. While Canada has been an AI leader in scientific research, discoveries, and start-up creation, scaling-up firms has been a persistent problem—a problem reflected in the country’s lagging productivity. Additionally, Canadian businesses have fallen behind their international peers in the adoption of new technologies, as well as in research and development investments.
“We are already seeing higher productivity growth in the United States, which is very encouraging,” said Poloz. “We are seeing less elsewhere, but we are definitely not seeing it here in Canada.”
Poloz laments that under the current conditions, he expects business openings to run below average and business closings to run above average, as they have for some time. “There is a population of young companies with 'hockey stick potential' that will probably continue to languish in the context I’m describing,” he said.
According to research by the Lawrence Centre, Canada has one of the highest concentrations of AI start-ups. However, most of them have raised less than $1 million in funding and employ fewer than 10 employees, suggesting that they have a long way to go in scaling up.
Yet, Romel Mostafa, Director of the Lawrence Centre notes that Canadian start-ups are developing almost every known application that AI can afford. “So, imagine now if we had a more robust ecosystem to improve the odds of scaling our AI innovations, and export our applications and services around the world. Clearly, the opportunities are immense.”
The drag on Canada's momentum
Is Canada equipped to take advantage of the technological wave offered by the rapid development of artificial intelligence technologies?
Poloz sees a number of macro-economic impediments standing in the way.
Firstly, government is getting bigger. The share of the baseline spending by the federal government has increased by 2.5 per cent from its pre-pandemic average. “This means the private sector must shrink in relative terms, by about two and a half percentage points,” said Poloz.
Once the shrinkage is done, standard growth rates can realign once again; but according to Poloz, Canada is still in the adjustment phase.
Uncertainty around trade relations with Canada’s southern neighbour continues to be a concern. In fact, the angst never really went away during the Biden administration, reflects Poloz. With the United States-Mexico-Canada Agreement (USMCA) up for renegotiation, and a pending general election, he firmly believes it’s high time for Canada to “get out in front of these negotiations and play offence, not defense.”
The former bank Governor feels the current environmental and other consultation processes, while very well-meaning and important, have timelines that are often too lengthy and drawn out.
“We never put a deadline on,” said Poloz. “They just happen, and when it’s done it takes ten years, we say well, that’s a good process. But that [ten years] is too long. Time is money, is productivity—that’s been lost along the way. So, let’s at least impose deadlines on these processes that are real.”
Finally, Poloz believes government needs to actively participate in the fourth industrial revolution, with a policy to procure from young Canadian tech companies first.
“There is no reason they [government] can’t be models of efficiency, as opposed to being last to incorporate new technology,” said Poloz.
The symposium also drew out several concerns around scaling AI innovations in Canada, including access and retaining talent, availability of smart capital, and regulatory and market challenges AI start-ups face in the specific sectors they operate (e.g. healthcare, construction, etc.). Additional critical discussions included the recent trends in Cloud computing and their implications for scaling AI solutions; federal government’s strategy in promoting AI innovation; and changing capital market conditions and the role of institutional investors, such as VCs and pension funds, in investing in Canadian start-ups.
A number of actionable policy ideas and industry actions also bubbled up throughout the day, including the creation of “sandboxes” to encourage businesses to safely explore, evaluate, and adopt AI solutions offered by Canadian start-ups.
Canada at a critical juncture
In spite of impediments looming over the entrepreneurial spirit of Canada, Poloz chooses to remain optimistic.
“Nevertheless, you have to be certain of this, the fourth industrial revolution is already underway. So, we do have an amazing opportunity in front of us. An opportunity to catch that amazing tail wind and restore out rightful place,” he said.
Mostafa echoes this sentiment and opportunity, noting that Canada is at a critical juncture.
“So, do we seize this once-in-a-generation opportunity to shape the technological frontier of this industrial revolution by removing scaling barriers, which also involves developing guardrails…essentially building on our strengths?” he asks. “Lest we fail to act and squander this early advantage and fall behind in innovation metrics. Clearly, the stakes are big here.”
