In the decades prior to 2000, Canada made progress in moving away from being an economy of resource extraction. By that year, as labour economist Jim Stanford has pointed out in an analysis for the Centre for Policy Alternatives, well over half of Canada’s exports consisted of an increasingly sophisticated portfolio of value-added products in areas such as automotive assembly, telecommunications, aerospace technology and more.
But in the past decade, the clock has been turned back. Because of a boom in the oil and gas sector and a range of other factors, the economy has reverted toward being a staples-driven enterprise. “In July, 2011, unprocessed and semi-processed resource exports accounted for two-thirds of Canada’s total exports, the highest in decades,” Mr. Stanford wrote. “Compare that to 1999, when finished goods made up almost 60 per cent of our exports.”
That’s quite a change. A tilt, to be sure, that fits the old cliché about Canadians being hewers of wood and drawers of water. Our fur-trading legends, Radisson and Groseilliers, would no doubt heartily approve. But didn’t someone say the way to go in the 21st century is the knowledge economy?
Until now, the back-to-the-future trend line hasn’t stirred much debate. It’s probably been a case of not wanting to argue with success. Given our natural riches, we should be doing better through tough economic times than other countries, and as the government keeps reminding us, we have indeed been doing so.
But NDP Leader Tom Mulcair has been stirring the pot, sounding the alarm about how the resource boom has inflated the dollar and bludgeoned our manufacturing base, particularly in Ontario, while facilitating an ungreening of the environment. The West is unsurprisingly riled. While Alberta’s Alison Redford has been more circumspect, British Columbia Premier Christy Clark called Mr. Mulcair’s stance “goofy” and Saskatchewan Premier Brad Wall tore some strips off him as well. Mr. Mulcair’s views had been earlier put forward by Ontario’s Dalton McGuinty. He, too, got an earful from the Prairies.
It’s kind of like old times. Region pitted against region. East versus West.
One of the very smart things Stephen Harper did on the unity front was to terminate federal-provincial conferences, those annual confabs that inevitably led to major unity headaches. But it will be difficult to keep the peace now.
Mr. Mulcair, whose party is now leading in the polls, erred in speaking so bluntly. We can expect him to soften the pitch in coming weeks so as not to appear so hostile to the West’s economic interests. But given the opening, the Conservatives will try to take advantage, slotting him as being out to divide the country and comparing his view to Pierre Trudeau’s infamous national energy program. Nothing gets Mr. Harper’s ire up more than memories of P.E.T., and the NDP Leader is not without Trudeauvian touches.
The clash of visions will be rancorous but the debate is needed – indeed, it’s overdue. The increasing lopsidedness of the economy, the trending toward a raw resources mecca that hurls some provinces forward and others back needs address and redress.
The petrodollar is by no means the lone cause of the manufacturing decline in the East, but as University of Ottawa economist Serge Coulombe has found in a comprehensive study, it is a significant factor.
In addition to environmental stresses, Mr. Stanford noted in his report, the country’s resource-led trajectory has contributed to low productivity growth, a failure to develop global companies and an erosion of innovation and research and development.
Easy fixes are not available. For example, the idea that we should process resources at home sounds fine until you look at the prohibitive costs and market realities of doing so. The idea that the West should listen to any slow-down prescriptions from the East runs into harsh realities – such as memories of the NEP.
But let the debate roar on. The country needs a new industrial strategy, one based on more than corporate tax cuts, free-trade agreements and rampant resource exploitation.