What is productivity? “I want AI to do my dishes and laundry so I have time to write and draw, not have AI write and draw for me so I do my dishes and laundry,” says a meme that has gone viral on social media. In a word: touched.
The way in which the governments of Canada and Quebec procure goods and services, then invest in the development of new technologies, demonstrates the same sense of the world being turned upside down. The Phoenix payroll system might be a bad story. The ArriveCAN app could be an isolated fiasco. SAAQclic could be a beginner’s mistake. The Digital Health Record is neither one nor the other yet, but we already know who it will benefit first: American companies.
All of this taken together, we have a trend that is detrimental to economic growth, both in Canada and in Quebec. After all, governments spend hundreds of billions of dollars this way every year. In 2021, the value of what public bodies purchased left and right, from local or foreign suppliers, reached 14.6% of national GDP.
“When governments in Canada struggle to purchase innovative technologies and the latest digital services, it weighs on our economy. And when governments disproportionately rely on foreign multinationals to provide poor quality technology solutions, it impacts the competitiveness of Canadian businesses here and elsewhere in the world,” writes in a report released last week the Canadian Innovation Council.
At the risk of repeating myself: touched.
It is easy to imagine what would happen if we leveraged this important economic lever of public procurement to encourage local innovation: we would at the same time increase the productivity of the country’s entire economy. Productivity which is calculated by the size of GDP according to the number of workers.
Canada is not very productive compared to the United States. Quebec is not very productive compared to Ontario. Automating office work using tools like generative artificial intelligence (AI) is the strategy proposed by the generative AI giants, these days, to increase this productivity. Governments are repeating this message word for word.
The profit margin of digital giants ranges between 25% and 40% of their revenue these days. When a government buys their technology, 25% to 40% of the amount paid is almost a net profit for these foreign suppliers.
For such a transaction to allow the national economy to catch up with that of its neighbors, it will have to generate a productivity gain that is colossal to say the least…
Performance obligation
The Canadian Innovation Council (CCI) lists a few elements in the federal and provincial procurement process which, if corrected, would strengthen the local economy.
The calls for tenders are too specific and too rigid for local SMEs to propose a solution which may not be the desired one, but which would also do the job. The CCI also does not find in the public service the necessary expertise to facilitate this knowledge of local technologies that could solve their problems at little cost.
The ICC believes that excessive risk aversion also prevents governments from opting for anything other than turnkey solutions created by foreign multinationals.
Ironically, the smaller companies and start-ups that are excluded are most often financed by investment funds whose capital generally comes from governments.
The ICC is neither neutral nor objective in its approach. He represents companies that would like to sell more to governments. But what he writes in his report echoes criticisms heard repeatedly in the world of Quebec technology companies, in Montreal, Quebec, Sherbrooke and elsewhere.
Another criticism has been heard in recent months. Quebec and Ottawa are extremely present in venture capital in Canada, through what are called “funds of funds”. These funds finance smaller funds — in AI, in health technology, in financial technology, etc.
The Institute for Socioeconomic Research and Information (IRIS) deplored this a little before Christmas: the indicators of success of this strategy are not the right ones. Otherwise, we would know: we would have a digital file made in Quebec ready to meet the needs of the province’s health system. Doctors would have a messaging system that is not the fax machine. In short, public money would have been used to resolve the most pressing shortcomings of the public system, with a gain in productivity as a result.
IRIS focused its criticism on health financing, but it can be extended to other sectors of innovation. In AI, for example. Minister Éric Caire has just promised productivity gains within the government thanks to automation, of which we do not know whether it will be in Quebec or whether it will help enrich American companies.
At least, if the AI promised by the Minister of Cybersecurity and Digital Technology was capable of washing civil servants’ laundry, they would have more time to draft calls for tenders that would stimulate Quebec innovation… and the sacrosanct productivity that accompanies them.