David Olive Opinion
Jan. 11, 2020
Big government will get bigger, money will flow to meatless meat, wind power will boom and 5G will change society - for better, and perhaps, worse
A comeback for big government
Popular sentiment swings between antipathy toward government and demand for more state intervention. In recent years, governments in Western economies have been in retreat, afraid of their own shadows. Business has not filled the void. Left to its self-determined course, capitalism has failed to address the crises in climate emergency; income inequality; shortages of affordable housing and of skills; and of deficient transportation and other infrastructure. Business investment has not risen in tandem with burgeoning corporate profits. Instead, the profits have gone into stock buybacks, executive bonuses and dividends rather than sufficient reinvestment, slowing the pace of innovation.
"Warnings that the capital markets aren't functioning properly are everywhere," Mariana Mazzucato, director of the University College London's innovation institute told Fortune in December. In Canada, popular support for pharmacare and the world's first national carbon-pricing system mark a turning point. So does the growing public demand that governments rein in Big Tech and the threats it poses to personal privacy and public safety. But the swing in favour of state involvement will be most pronounced in the climate crisis. The Bank of Canada and other central banks are warning with ever greater urgency that the global economic system cannot withstand the unprecedented catastrophes - what Warren Buffett calls "super-cats" - for which humanity must brace. A start this year will be discussions over a new state-supported global backstop for insurers, who face insolvency with the first string of claims arising from massive climate-related property damage events. Climate crisis demands a return to the model of public-private partnership that created the modern computer age, space missions, and the internet era.
The current plant-based food movement is driven by concerns over healthier diets, animal welfare, and the smaller carbon footprint of plant-based foods than that of livestock.
The next step, food derived from the cells of cows and poultry - or "cellular agriculture" - puts protein-rich meat back on the menu with no slaughterhouses and, unlike plant-based food, less use of limited fresh water and other taxes on the land imposed by plant cultivation.
Plant-based meat replacements also require extraordinary processing to make them palatable, and the disagreeable taste of first-generation plant-based foods is a stigma the industry is still working to overcome.
The 30 or so Canadian and global firms developing "cultivated meat" from animal cells won't have their first products to market until 2023. But investment in lab-based meat has ramped up, increasing by 120 per cent globally last year, to $80 million, to supply a market modestly estimated at $514 million by 2030. For Canadian start-up firms in this new realm, including Edmonton's Future Fields and Appleton Meats of Vancouver, the challenge isn't the science. The obstacle is a lack of venture capital for the costly equipment required in the manufacturing process.
A fraction of the billions of dollars Canadians invested in the pot craze would ensure that Canadian scientists and entrepreneurs have a place in what could be the biggest revolution in food production since the advent of crop rotation. Otherwise, the new industry will be gobbled up by the same foreign-based Big Food combines that have long dominated Canadian food consumption.
The rise in renewable energy
and the SUV challenge
Fortunately, coal, the dirtiest of all fuels used in electricity production, is projected to drop to 34 per cent of global power sources by decade's end, and be overtaken by renewables such as wind, solar and hydropower, accounting for 42 per cent of global electricity production by 2030.
Wind power once dismissed as an unreliable energy source, is poised to boom in 2020 and beyond. The European Union (EU), the world's third-largest economy after the U.S. and China, already looks to wind for two per cent of its power generation.
That percentage was recently forecast to rise ninefold by 2040 by the International Energy Agency (IEA), in its annual World Energy Outlook report in December. Companies are not only planning huge offshore wind farms in the North Sea - where energy firms can harvest stronger and steadier winds - but in offshore North America, China, Japan, and South Korea, as well.
That favourable trend strengthens another, the higher-than-expected adoption rate of all-electric vehicles (EVs), a record two million of which were bought last year.
But against that gain for cleaner air is a surge in sport utility vehicle sales (SUVs), now accounting for 42 per cent of passenger-vehicle sales, more than double the rate in 2000. Note to investors: Pay attention to firms like oil giant Suncor Energy Inc. of Calgary that are investing heavily in wind power, wisely hedging its bets against a decline in fossil fuels; and automakers like Nissan, Hyundai and Volkswagen's Audi that lead in the electric SUV race.
New debate about 5G's implications
The social consequences of fifth-generation (5G) wireless networks will start to come under scrutiny in 2020, as 5G networks roll out in Canada over the next two years.
About 10 times faster than current technology, 5G will see data moving at record speed and volume and promises to connect every digital device, from cars to refrigerators to water-filtration-plant control rooms.
The widespread misgivings that have already arisen about massive data collection will become acute. Who will set the rules on what data can be collected, and to what use it can be put? What new cybersecurity threats are we creating?
That discussion will intensify this year, as the telcos pursue their goal of connecting everything digital in the country. The new technology has its virtues. As an enabler of low-cost virtual reality (VR), 5G will provide surgeons with detailed images of the patients they are treating, and tell firefighters exactly what they will encounter as they enter a burning structure.
With an error rate one-thousandth that of current technology, 5G will be a blessing in "mission-critical" applications in health care, manufacturing, and transportation networks. And consumers can expect more efficient households, eHealth systems, and supply chains in retailing, utilities and public safety, with 5G's ability to connect about one million digital devices per square kilometre.
Yet 5G also raises the spectre of a surveillance society, with ubiquitous sensors tracking our every move. We can't allow 5G to proceed as social media have, an unregulated phenomenon whose downside caught us unprepared.
Business loses an excuse for underinvesting in Canada
Canadian businesses are expected to continue underinvesting in their enterprises in 2020, according to the Business Development Bank of Canada (BDC), worsening a trend that has seen Canadian corporate investment drop by about 20 per cent since the oil-price slump of 2014. Canada touts itself as an emerging high-tech superpower, given all the global firms that have set up their artificial intelligence (AI) workshops in Canada. But that's foreign capital.
By contrast, Canadian firms have cut investment in intellectual property development by $532,000 per worker over the past decade and reduced their total CAPEX by $1,446 per worker. No wonder Canadian GDP per capita - that is, the standard of living - has actually dropped three per cent from 2010 levels, a lost decade that contrasts with the 35 per cent surge in U.S. GDP per capita in that period.
Business-lobby whining about unfavourable Canadian tax and regulatory conditions is nonsensical. Even before Ottawa gave business a whopping additional tax break in accelerated depreciation on capital investments, Canada was already in the highest ranks of countries for ease of doing business.
And offshore investors facing those same "unfavourable" Canadian conditions poured $65.8 billion into Canadian investments last year, close to the record set before the oil-price collapse.
The stark reality is that Canadian business has less faith in Canada than outsiders.
With the likely ebbing this year of global trade tensions that Canadian business also cites for lack of enterprise, we'll see this year if judicious caution or unwarranted trepidation is the real issue here.
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