As a starting point, I agree with you. I said the same thing to our board last week. To a great degree, our governments have done the right thing in terms of tax reform: getting rid of capital tax, which for me is the dumbest tax you can imagine, taxing capital accumulation; reducing corporate income tax; harmonizing sales tax in the provinces, and on and on. There has been investment in everything from university chairs to the heavy public sector investment in Canada in R and D.
So I think our governments have largely done the right thing. The truth is that we probably went 25 years in Canada during which, because of the structure of our taxation system, we encouraged firms to underinvest. We did a piece of research last year, for example, looking at investment in human capital versus physical capital, and the track record is very clear. We have fallen behind. It takes time to catch up. I'm seeing that a little turning point event may be occurring right now. We've seen investment in machinery and equipment accelerate in the last three quarters--but this is only three quarters--which is what should be happening. Private firms should be investing now, when they can import technology at a much better exchange rate than they could for the last 25 years and when they have a very strong incentive, because they're not as competitive in the U.S. market or around the world, by virtue of the strong dollar.
So we may be at a turning point. The trouble is that our track record is so poor. We gave Canada a D in innovation for the last 10 years in our report card on Canada. We're doing that again now. It will be out in the next, say, six weeks to two months. My fear is that we're going to keep getting a D, because we really have not had to build a culture in Canada of innovation. I think that's maybe the critical piece.
So you're absolutely right, Mr. Chair, that the ball is being passed from governments, who have done their bit, to the private sector. Maybe we're seeing the early signs in terms of their investment behaviour, but maybe not. I'd like to look for more signs that firms actually appreciate that with globalization, in a very different world, we have to change our behaviour. We have to take business models apart, be prepared to relocate parts of our production, frankly, offshore, where it can be done more cheaply, and then focus on the high-value, high-wage jobs within Canada. But that's not automatic, by any means.
We're actually thinking of creating a new research centre at the Conference Board around this whole theme. I've spoken to some major corporations about that, and there's an appetite to invest in that kind of research, because it's the big challenge facing Canada: how to boost our productivity growth.