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Economic Club of Canada, Ottawa An address by Professor David Naylor President of the University of Toronto to the Economic Club of Canada, Ottawa Tuesday, May 7, 2013 Check against delivery I am grateful to the Economic Club of Canada for the honour of inviting me to speak here today, and humbled to share the head table with a distinguished and interesting group of people. Ladies and gentlemen, good afternoon to all of you… With a famous former Ambassador speaking not only at the same time but in this very hotel, today was Taylor-versus-Naylor, a history-making hero versus a pointy-headed professor. In those circumstances, special thanks to everyone for being here. Of course, I recognize that time is your most precious non-renewable resource. I will not go much over 20 minutes. But I do hope to hold your interest with a rather un-Canadian proposal. In brief, here’s what I have to say. Almost everyone agrees that research performance is an important factor for any jurisdiction in attracting, training, and retaining the talent on which our capacity for innovation depends. I believe that, contrary to widespread assertions and assumptions, Canada is at increasing risk of losing ground on this crucial front. In Budget 2013 the federal government signalled a very welcome interest in reinforcing excellence in post-secondary research. So today, I will make the case, if I can, for a Canadian research excellence fund, as a practical, necessary and inclusive step in support of sustainable success for our society. What are other countries doing? Let’s start by looking at other nations. Take a little old place like the United Kingdom as an example. You may have noticed and wondered how its most famous universities, Oxford and Cambridge, remain solidly among the world’s top few institutions in so many league tables, and how it is that they keep winning Nobel prizes. Well, the UK has created two tranches of operating grants for universities. One tranche supports the teaching mission. It reflects student mix and numbers, and it has some variable components based on high-needs students and innovative programming. The other tranche supports the research mission and related graduate education and post-doctoral training, programs, and activities. It is based on the 1 results of peer review and also relies heavily on transparent research metrics. The following figure provides a good example. Figure 1 For 2012-13, Oxford’s initial allocation for education was about £43.4M. Its research allocation was £131.5M, with an additional £2.9M for innovation. Neighbouring Oxford Brookes University, a smaller institution with a strong vocational focus, received a base grant of £23.7M for teaching, but only £3.5M for core research support with an innovation tranche of £1.6M. Project-specific funding from the UK equivalent of our granting councils comes in on top of these core funds. Each of those council grants is grossed up by 48 cents for the indirect or institutional costs of research, to ensure the full costs are covered. In fact, to avoid perverse incentives, the government even pays the institutional costs on top of major foundation grants, such as those from the Wellcome Trust. 2 And by the way, there is also a constant flow of special competitions. To cite one that’s afoot right now, through the £300M Research Partnership Investment Fund, launched a short time ago, a single initiative at Oxford has already won £20M. Small wonder then, that the UK’s great, publicly-supported research universities have sustained their place in the world, with more of the Russell Group of institutions joining Oxbridge atop the league tables. What about a big emerging nation like China? In 2011, the government allocated $11.4-billion towards achieving world-class status for 100 of the country’s more than 3,000 universities. This is part of a strategy that began in 1995 to raise the research standards of China’s strongest contenders. At the pinnacle is the C9 group of universities, which are now receiving per-faculty research funding that, with adjustment for purchasing power parity, has reached U.S. Ivy-League levels. Tsinghua, Beida and Fudan are not household University names in this part of the world. I assure you, they will be in the years to come. Why are they doing it? I could cite other examples. From up-and-comers such as Brazil, India, and Singapore, to advanced economies such as Australia, France, Germany, and Japan, governments all around the world are rethinking the mechanisms through which they fund universities, and ensuring that research performance is recognized and supported. Here’s one dramatic consequence. U of T enjoys a strong and growing relationship with the University of São Paulo or USP, the rising giant of South America. The following two figures show publication productivity. 3 Figure 2 Figure 3 I’m pleased to say that Toronto is holding onto its spot at number two in the world, after Harvard. But watch out for our friends in São Paulo. You can see where USP was in 2007 [Figure 2]. In the following figure, you can see where it was in 2011 [Figure 3]. Just as we’ve seen the rapid movement of this great Brazilian university up the ranks, we will see similar developments around the world. The bottom line is that our peers and competitors are investing selectively in a limited number of universities that can carry the flag in the global arena of advanced research and post-graduate education. They are doing it by running open merit-based competitions to spur individuals and teams; by fostering institutional differentiation using a variety of policy instruments; and by avoiding perverse incentives and mission drift across universities and colleges. Why are they doing this? I think these countries realize that efficiency and social equity are both served best by a diversified mix of universities and colleges – not a one-size-fits-all approach. And most pertinent to my argument today, these countries recognize that strong research-intensive universities are integral to attracting and developing talent, and in the process, fostering innovation, prosperity, and long-term social success. 4 What is Canada doing? What, then, is Canada doing? In terms of the international examples I just mentioned, the answer is: Some of the above; and not enough. I want to make it clear that we have made real progress. Federally, we’ve moved forward in research and innovation under both Liberal and Conservative governments. And a variety of provincial governments have also stepped up in encouraging ways. Under the federal Liberals, we saw the creation of the Canada Foundation for Innovation, the Canada Research Chairs program, Genome Canada and the Canadian Institutes for Health Research, and expanded funding for all three granting councils. Under the current Conservative federal government, we’ve seen capital funding to universities through the Knowledge Infrastructure Program and, in the latest Budget, from the Building Canada fund; continued support for the Canada Foundation for Innovation and Genome Canada; along with the Vanier graduate scholarships and the Banting post-doctoral fellowships. It’s all good. It’s just that good isn’t good enough at this point in global history and global competition. Why are we lagging? I’ve asked myself why Canada lacks a plan that mirrors the initiatives underway in so many other countries. Some of it is constitutional gridlock – but then again, China, the US, and Australia all have complex federal structures. Some of it is institutional politics, or more accurately, the politics of envy, for all the obvious reasons. But I also worry that we’ve nurtured complacency through what I might call half-truths. And in research funding, we have also institutionalized some truly perverse arrangements. Here’s a half-truth. We hear a lot about how Canada leads the G7 in spending on higher education research and development (so-called HERD spending). I don’t doubt the sincerity of this claim. But it is misleading. It doesn’t take into account the fact that, compared to other jurisdictions, an outsized portion of that spending is subsidized by universities themselves. Those subsidies are drawn from many revenue sources. The two biggest ones are inevitably provincial funds tied to the educational mission and students’ tuition fees. In many jurisdictions, government 5 research-related funding is designed exactly to prevent those types of inequitable cross-subsidies. Not here. With the best of intentions, we rub them in our hair. As to perverse incentives, about 25 universities at minimum in Canada are fighting an uphill battle to cover the indirect or, institutional costs of federal research grants. Put simply, someone has to pay to provide researchers with adequate space and with the wide variety of support services they need. Unfortunately, compared to many other countries, federal support for these costs remains low. And, believe it or not, it’s calculated at a rate inversely proportional to the amount of research an institution does. As I’ve said before1, it’s Orwell without the irony. You can see it here in all-too graphic terms. Figure 4 1 “Thin and Thinner: Reflections on Research and Higher Education in Canada” http://www.president.utoronto.ca/speeches/thin-and-thinner 6 We’ve used total sponsored research on the Y-axis, but it would look exactly the same if we were to use federal tri-council funding. This graph simply provides a sense of scale. At UBC and U of T, the federal government contributes approximately 17 cents on the research dollar – about one-third of the audited costs of research, with two-thirds coming from students and our operating budgets.
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