Posted at Saturday, February 24, 2007  EDT  

The Tories listened to Bill Gates, but did they hear him?

JEFFREY SIMPSON, 

Bill Gates, Microsoft's brilliant founder and businessman engagé, dropped into Ottawa this week. He met the Prime Minister. Various ministers attended his address. Everybody listened attentively. But did they hear?

A difference exists between listening and hearing, and yet another leap extends to understanding.

Mr. Gates talked of many things, but his central message centred on the importance of human capital development. Microsoft's products assist that development. His foundation does marvellous work in that field. His company actively promotes the cause throughout Canada.

And yet, not to rain on the parade, but here's a question for Mr. Gates. Microsoft makes a lot of money in Canada selling its excellent products. It also scoops up lots of Canadian talent, especially from the University of Waterloo, which is one of Microsoft's top three recruiting institutions in North America, along with the Massachusetts Institute of Technology, and California Institute of Technology.

So why, given the money made and the Canadian talent used, does Microsoft not do any research and development in Canada? Canadian ministers have certainly asked. So have university representatives. The answer, however, is always a polite no. All Microsoft's research and development in North America happens at the company's sprawling "campus" at Redmond, Wash., outside Seattle.

Which leads to the next question: If a foreign-owned company such as Microsoft, in every other respect an exemplary corporate citizen led by a visionary human being, won't do any research and development in Canada, what would it take to change things?

If easy answers existed for boosting Canada's R&D, they would have been discovered by now. The country already offers, by international standards, quite attractive tax arrangements for encouraging research and development. Yet, Canada's overall private-sector record is well behind that of most other countries. (For confirmation, please read various OECD studies.)

Some sectors -- high-tech being one -- boast a good record with research and development. Others, such as the oil and gas sector, have an appalling one.

According to a report last year from the National Advisory Panel on Sustainable Energy Science and Technology, the overall Canadian industrial average for R&D was 3.5 per cent of corporate revenues. For the energy sector, the figure was 0.75 per cent; for oil and gas 0.36 per cent.

There being no quick fixes to the R&D conundrum, it's wise to hear, listen and understand Mr. Gates's message about the centrality of human capital development. A country's goal must be, by all means and through every policy, to focus on improving the education and skills of its citizens.

On this, more than on anything else, depends the life chances of citizens and the country's future well-being. Every government, in choosing among competing priorities, should have this one at the top.

By that standard, how is the Harper government faring? Here is where the question about understanding Mr. Gates, as opposed to just hearing him, becomes important.

In the Conservative iconic platform, Stand Up for Canada, there was next to nothing about education, human capital development, skills, competitiveness, productivity. Nothing in the party's famous five priorities had anything to do with this agenda.

Indeed, if anything, the agenda went in the other direction, away from human capital development. The GST cut, at a cost of $5-billion, was quite literally the most unfocused, policy-stupid tax cut imaginable. It did nothing to encourage human capital development.

Worse, the government is ideologically fixated on cutting the GST by another point. That, in due course, means $10-billion will literally have been squandered on political pandering, instead of targeted tax cuts to spur competitiveness or intelligent public investments in human capital development.

Think of it. The GST gets cut by $10-billion. Over 10 years, that means $100-billion in forgone revenue. A nanosecond of thinking would suggest dozens of better ways of promoting a Gatesian agenda focused on human capital development.

Think also of the mythical "fiscal imbalance" that the Finance Minister knows (and has admitted privately) to be a political invention rather than a serious argument.

His political master, however, has accepted the existence of one, largely for political purposes in Quebec. So we are about to witness the squandering of additional billions of dollars in money, without direction except into provincial government coffers. The one exception will be federal money for universities to be announced in the budget.

Tom Courchene, the iconoclastic Queen's professor, describes the right vision for Canada as being a State of Minds. That's a twist on the Gatesian message delivered in Ottawa this week.

Messrs. Courchene and Gates get what it takes for a country to be successful in the modern world. Any budget policy based on GST cuts, "fiscal imbalance" mythology, and assorted other goodies means the government might have heard Bill Gates this week without understanding what he said.

jsimpson@globeandmail.com