Searching for growth in an age of austerity

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No one loves living on Canada's West Coast more than Dan Muzyka, the U.S.-born, European-seasoned academic who has led University of British Columbia's business school for 13 years. So it would have to be a pretty enticing job to turn him into a trans-Canada commuter, shuffling between Vancouver and Ottawa. In August, he becomes chief executive officer of the Conference Board of Canada, the business research organization, replacing Anne Golden, who is retiring. As dean of the Sauder School of Business, the 59-year-old has enjoyed the occasional dip into public policy, and his new platform will permit total immersion in the big issues, such as the economic debate buzzing around the oil sands.

What is your legacy at the Sauder School?

It really was renewal. The school had suffered in the 1990s because of government policy. We had both budget cuts and caps, and a hard-and-fast tuition cap, that kept tuition at a low level that was unsustainable. It hurt the school, which had been a major contributor on the world stage in terms of ideas that management uses today. I knew the school from that reputation before I came, and that attracted me. A lot of things needed to be renewed.

We are again entering an age of austerity, with a lot of talk about education cutbacks. Isn't that dangerous?

The global crisis has created a global dialogue: In a period of austerity, how do we work to create growth? And it cannot be government-driven. We're going to have to look at new formulas for supporting key aspects of our economy. It's one of the things that brought me to the Conference Board – to get into some of those dialogues.

But can we slash costs in education when it is so vital?

There is going to be austerity across the board; there must be, in order to balance the books. We know the formula of dramatically raising taxes, at any level, is simply going to slow economic growth, which only makes matters worse. And we need growth to fix the problems.

In education, there is a demographic shift happening, too. We have to realize, primarily in primary and secondary education, that the number of students is decreasing. That's going to force a dialogue around things like: Which schools do we keep open? How do we deliver effective learning with a smaller footprint? We've taken the baby bounce and now we've moved those people through the system. We also have a lot of baby boomers retiring out of the school system. So we have to manage several transitions simultaneously – and we have to add new learning models. Some traditional models don't work well for some of the demographics. For example, there has been a lot of dialogue about how boys learn.

What is the implication for universities?

There is a cost to [any cuts]– especially if you want world-class universities. And they do matter. We know world-class research universities drive economic growth and they come up with social solutions to difficult problems. So it is critical that we have them. But how do we balance the resources to go into that? The traditional model says if you're a group of students, you want no tuition and government pays for everything – but that just doesn't add up.

Where do you stand on "Dutch disease," whereby the energy boom and a supercharged dollar are undermining other industries?

We know Dutch disease is real. We know what resource discoveries can do, and having those valuable resources creates a drag on manufacturing. It doesn't give [manufacturers]much adjustment time. If I had the solution to this in my pocket right now, it would be a remarkable thing, but the fact is we need to find a balanced solution.

Resources are scarce; we have a world population that is massive and will continue to grow. Growth will slow and tap out at some point, but we will still have that scarcity. In Canada, what we can do is find ways to make the environmental and social impact of resource extraction as minimal as possible.

So does Ontario just have to buckle down and live with this high dollar?

Ontario manufacturing lived very effectively with a Canadian dollar that, for a long time, was below purchasing-power parity level [an exchange rate measure based on purchasing power] That made it easier to compete on a world level. It is something that can help you lose focus on the fact there are global markets.

My sense is it isn't just the oil sands creating an issue now. It is combined with the reality of where the dollar was trading for such a long time. We were at 63 cents [U.S.]when the purchasing-point parity level was at 88-89 cents. That creates an advantage in operations and in pricing on a global basis. We now face the pressure of globalization, some of whose effects we earlier avoided with an artificially lower dollar. And it is not just oil driving it up now – it is uranium, it is gold. …

So we live by the dollar and now die by it?

It can be a curse some days and you need to keep perspective. I've met a number of executives who wished they had got to the task of making things more efficient sooner. We have to have the discipline – to be fair to employees, shareholders, and to the economy – to link real wage increases to productivity increases. We also need to link salary increases to the appropriate market prices for given talents. And productivity doesn't mean you are working people harder; it means we are working smarter.

Investment in information and communications technology is low in Canada. We need to boost that game. The amount of money enterprise is putting into research and development is lower than it should be. We need innovation, not just in products but in processes that gives us those productivity gains. It's not that we aren't doing these things, but we need to step it up.

Do we have to become more of a Pacific country?

We need a much more balanced export portfolio. The growth economies are in Asia, particularly South Asia, and those are areas where we need a strong focus – not just for B.C., Alberta and the western provinces, but for the rest of the country. The U.S. shows signs of coming back but the fact we can ship our lumber to China, as well as to the U.S., dampens the cycles here.

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DAN MUZYKA

Outgoing dean, Sauder School of Business, University of British Columbia, Vancouver.

(Incoming president and CEO, Conference Board of Canada, Ottawa.)

Born: 1953, Pittsfield, Mass.

Education:

–PhD, Harvard University.

–MBA, Wharton School, University of Pennsylvania.

–Astrophysics degree, Williams College, Massachusetts.

Career:

–Worked in finance and strategy, General Electric.

–Strategy consultant at Braxton Associates.

–Senior jobs with academic institutions in U.S. and Europe.

–In 1999, appointed dean at Sauder School of Business.

–August, 2012: To join Conference Board of Canada.