What Dominic Barton sees in Canada’s future

To see Canada’s future, Dominic Barton likes to look farther afield.

The Canadian who heads McKinsey & Co. worldwide and is helping shape Justin Trudeau’s economic agenda wants his country to think well beyond its borders and way beyond its comfort zone.

Think Nigeria, for instance. And food. Through the cloud.

“There were more babies born in Nigeria last year than in all of Europe. So if you’re Procter and Gamble, you will be irrelevant if you’re not in Africa,” Barton told an audience of university leaders in Ottawa as he laid out his latest thinking about the Canadian economy.

He is leading an economic growth council, with Silicon Valley investors, entrepreneurs, university presidents and labour leaders, to propose novel ways to jumpstart Canada’s slow-growth economy before the country’s aging population overwhelms its 0utput.

Addressing the theme of “small country, big impact,” Barton said Canadians need to come to grips with three mega-shifts:

The global economy is moving from the West to Asia and Africa.

Over the next 15 years, he forecasts, 2.5 billion people will join the middle class. And they’ll almost all be born in Asia and Africa. ”We’ve never seen anything like it before. It’s about 1,000 times larger than what was seen in the industry revolution.”

It’s not just a consumer boom. Most of the new large-cap companies — the next Fortune 500 — will be based in those regions, and will want suppliers and partners there, too. Canadians universities and cities need to be part of the shift, as does business, Barton said. “It’s a very different world than it was 20 years ago,” he said, with a big warning: “Most organizations are moving at way too slow a speed.”

The computing revolution is just starting.

Cloud computing and mobile devices have changed everything, and they’ve done it in less than a decade. Get ready for more.

About three billion humans are now connected through the Internet. That will double by the early party of the next decade. But in many ways, humans are the least interesting part of the ’net. There are 17 billion things now connected to the Internet, a number Barton says will jump by 50% in the next decade.

What does it mean? For one, every company is a technology organization. And those organizations need to get a lot flatter and more networked. The days of vertical structure, in other words, are numbered.

His favourite example: Barrick Gold, the Canadian mining giant that’s “now a technology company.”

Welcome to the data decade

The current iPhone is 150 times more powerful than the original, and our access to cloud computing means we are able to store and access piles of data that look like mountains next to the molehills we collected a few years ago. Thanks to our personal supercomputers, we’ve accumulated more data in the last decade than all of humanity did before then.

The growth council delivered its first set of ideas last October, including an infrastructure bank that the government seems open to creating, a more ambitious approach to foreign investment and much more immigration. Barton said Monday he thinks Canada should increase the number of economic immigrants from 260,000 a year to 450,000.

The council released another five recommendatons yesterday:

  1. Pick winning sectors

Governments hate that phrase — check the rearview mirror for a host of bad bets — so the council suggested identifying engines of growth. Its favourite new engine: agrifood. Barton believes Canada can re-assert itself as the world’s breadbasket, as global warming opens up more farmland and northern sea ports. Food demand, he says, could rise 50% in the next 25 years. And he thinks Canadian protein — soybeans, for instance — could help stop Asia from further warming the planet with runaway livestock production. The idea is brave, and will face a stampede of sectors claiming they are winners — and therefore deserve more support.

2. Create marketplaces for innovation

This recommendation would help bring together entrepreneurs, investors, technologists, big companies and government around emerging technologies such as artificial intelligence and quantum computing. Modelled after the ecosystems of Germany and Britain, where universities and other institutions are used to anchor superclusters, the idea has been rambling around Canada for years. Why hasn’t it been implemented before? Provinces and their universities usually want to do things their own way.

3. Underwrite growth

Another imported idea is a business growth fund, a concept that was launched about five years ago in the U.K. to address the perceived lack of credit for fast-growth firms. In the wake of the financial crisis, the British government twisted the arms of banks to finance the fund, which has yet to establish a clear record. The federal government has already endorsed the idea, by gathering Canada’s major banks to press them to adopt the idea. The desire is for a $1-billion fund — broken into two tranches — that would buy minority shares in companies that need capital to build new production lines, invest in new technology or expand their overseas markets.

4. Finance skills for the gig economy

The group fears Canadians are not prepared for a future of steady job turnover and career transitions. Barton’s blunt prognosis: “The half-life of a skill has dropped to 14 years from 25 years.” Government training programs and subsidies are hardly equipped to cope in a new economy in which self-employment and contract work are more common. The council has proposed a new agency — the “Future Skills Lab” — to identify skills most needed in a changing economy. Training funds and even unemployment insurance could then be directed to channels for part-time and self-employed workers who currently aren’t captured in formal labour market statistics. How Ottawa will convince regions that depend on traditional employment support is another matter.

5. Diversify trade

The council was developing this idea long before Donald Trump became U.S. President. His election only heightened the concern that Canada is far too dependent on its southern neighbour for trade. Barton recommends pursuing free trade deals with China, Japan and India. Trouble is, every government since the 1970s has been pursing the same goal. Today, Asian countries have more choice. Canadian businesses are also more integrated in U.S.-based supply chains, thanks to NAFTA. They’re also more concerned about intellectual property and other trade issues in China and India. And then there’s Ottawa’s focus on Trump and his desire to renegotiate NAFTA. Finding enough Canadian trade experts to travel to Tokyo, Beijing and Delhi will be a tall order.

Barton’s advice? Don’t let hurdles stop the race. “Be ambitious, in a Canadian way. We should expect a lot. For whom much is given, much is expected.”

Senior Vice-President, Office of the CEO, Royal Bank of Canada john.stackhouse@rbc.com