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Strong governments in Asia and Finland, on the other hand, have been able to resist the self-interested demands of individual sectors, and have implemented country-wide innovation strategies that, while not without hiccups, ultimately increase the size of a country's economic pie over time.

The consequences of this global power shift could show up in lower pension benefits, substandard health care and rickety infrastructure for future generations of Canadians. Early signs are already apparent to discriminating eyes, such as those of Mr. Curtis, a former chief economist in the Department of Foreign Affairs and International Trade.

 

 "We are declining relative to many other parts of the world," he said. "You don't really feel it unless you're cosmopolitan and travel a lot. You now stay at the three-star hotel instead of the four. But our cities - and the country as a whole - are quite clearly relatively less well off than before." 

Where he sees languor in our policy apparatus, CAE's Mr. Brown detects an aversion to interventionist industrial strategy among governments. But as Canada has relied on the free market - auto bailouts notwithstanding - to determine its champions, governments elsewhere are actively nurturing their own winners.

 

 "We seem to believe the free-market system will work, but no one else operates that way," Mr. Brown said. "If you rely only on market forces, you are going to react to what others are doing, rather than anticipating what is going to happen." 

Research will become increasingly important to the competitiveness of Canadian auto plants as a strong loonie and wage concessions south of the border wipe out much of the edge they once held over U.S. facilities. But Washington's promise to provide $25-billion (U.S.) in loans to companies there to help develop more fuel-efficient cars threatens to widen the already gaping research chasm between each country's auto sector.

 

 "Without comparable support in Canada, manufacturing capacity could follow the funding, taking engineering work and suppliers with it," warns the Academies report.

 

 Still, foreign ownership is not the biggest reason for Canadian companies' R&D deficit. Despite a disproportionately large resource sector, compared with other developed countries, Canada has been a laggard when it comes to developing technology used to extract or process resources, or to blunt the environmental impact of such activities. Alberta's vow to plow $2-billion (Canadian) into the development of carbon capture and storage technologies is a start, but hardly a game-changing one.

 

 "The failure of Canada to develop global export leaders in advanced machinery and equipment for the resource sector is one particularly telling indicator of the country's innovation shortcomings," the Academies report concludes.

The Finnish Miracle is an example of an economy emerging from the pits to overtake those it used to envy. It's hardly the first. In 1982's The Rise and Decline of Nations, economist Mancur Olson advanced the idea that countries whose economic foundations have been suddenly shaken or destroyed subsequently tend to grow and innovate faster than more stable nations. The reason? Such crises break the hold of vested interests on government policy makers; dramatic change becomes a question of national survival.

Economically, we just muddle on

“Some programs in arts and culture have increased in funding, others have gone down – in total it's gone up.” Federal investment in culture for the 2007-08 fiscal year was $3.4-billion, up from $3.2-billion in 2006-07.

The Prime Minister's comments come in the wake of a recently released report from the Conference Board of Canada, in collaboration with the federal government, that confirms high economic returns on cultural investment. The report, entitled Valuing Culture: Measuring and Understanding Canada's Creative Economy, calls the cultural sector's role “as a magnet for talent, an enhancer of economic performance, and a catalyst for prosperity” a universal phenomenon.

 

 The Conference Board estimates Canada's cultural sector generated $46-billion, or 3.8 per cent of Canada's GDP, in 2007. The sector's total impact including “indirect and induced effects” on other sectors leaves an economic footprint of $84.6-billion, or 7.4 per cent of GDP, the report states. Those revelations paint a picture of industry stability: Statistics Canada reported culture accounting for an identical 3.8 per cent of GDP in 2006.

 

 The report put 2003 employment in the cultural sector at 616,000 jobs.

 

 Including direct and indirect contributions to employment, the report estimates that culture accounted for 1.1 million jobs in 2007.

 

 Canada's culture sector is being driven by growth in digital technology and expanding Internet use, the report states.

Fifteen years ago, all new housing in Toronto had to have a front door. The high-rise market was dead, the 905 was booming and surface parking lots pocked the face of the central city. But things have changed - and once again prices reveal all. A beautiful house in central Mississauga with parking for four cars costs less than $200 a square foot. A slice of a midtown Toronto "filing cabinet," as Mississauga Mayor Hazel McCallion calls high-rise condominiums, costs well more than $400 a foot.

 

Why? It's the subway, stupid. It's the power of proximity, the value of choice, the enduring appeal of urbanity. As reckoned by the free market, the price of gas remains a minor factor in the total cost of the suburban lifestyle. Many ordinary people in Toronto today, especially those of the new generation, are more than happy to pay their voluntary carbon taxes - simply by moving into the suddenly fashionable, high-rise city. So let the Ottawa gang play their "revenue-neutral" shell games. The real leaders are ordinary people responding to clear market signals, calmly building a new city for the new age.