Possible Canadas is a project created by Reos Partners, the J.W. McConnell Family Foundation and a diverse coalition of philanthropic and community organizations. For longer versions of these interviews, or to join the conversation, visit possiblecanadas.ca
In a six-week series of interviews, Canadians with a variety of experiences discuss the major challenges our country is facing and how best to address them. This installment deals with our use of natural resources.
David Emerson, former minister of international trade, was interviewed on Aug. 15 by Monica Pohlmann, a consultant with Reos Partners.
Pohlmann: What keeps you up at night about what's going on in Canada?
Emerson: We are not managing our natural-resource assets well. We pay insufficient attention to long-term growth, stability, and intergenerational fairness. I look at what we are doing with non-renewables, and I despair. We have allowed a gold-rush mentality to prevail. When markets are strong, we have massive investment in projects like the oil sands, leading to cost inflation, social and economic growth pains, and pressures on the environment. Then we take the revenue from these resources – the one-time revenue from the sale of a publicly owned asset – and use it to pay for health care, government programs, and services that are deeply embedded in our public-sector expenditure base. But the cycle inevitably turns, and we end up with fiscal and economic devastation. The revenue is no more, but program expenditures continue. Costs that rose easily won't come down. This approach to resource management supercharges fiscal and economic volatility both nationally and among regions.
This volatility also has a troubling effect on that part of our economic base that is globally mobile. Costs and fiscal pressures created in a boom are very sticky, and correction is stubbornly slow and painful. Industry, capital and the skilled people needed to drive innovation, and new products for the global marketplace can and do go elsewhere. You basically force the economy to rely on those activities that have to be near the resource … the opposite of economic diversification.
In a similar vein, we have witnessed the erosion of manufacturing in the Canadian economy, and I am concerned about that. I believe a balance of manufacturing, resource extraction, technology and services is important for a healthy, dynamic and stable economy.
I worry about Canada's North. Geographically, most of Canada is a huge mass of land and water penetrating the Arctic, at the front line of climate change, and sparsely populated. Gradually, attention is shifting to Northern issues and concerns. But the challenge of the North will be akin to the challenge of developing early Canada. It will require enormous investments with very long "payback." Issues around sovereignty and security will be paramount. Assessments and potential impacts will require intense discipline and focus. The costs of mistakes will be high, but the cost of neglect higher. Sir John A. Macdonald must be turning in his grave.
Pohlmann: If 20 years from now, things haven't turned out well in Canada, what will have happened?
Emerson: This negative scenario would reflect failures on a number of fronts. Pipelines critical to getting products to market won't be constructed in a timely way. Critical economic infrastructure, particularly transportation infrastructure, will be rejected in every strategic "neighbourhood," reflecting regulatory licence being replaced by the amorphous "social licence." We will fail to restore momentum to multilateral trade talks, and attempts to forge regional trade agreements will falter. We will fail to adapt to the reality of global warming, and the world will be confronted with an urgent international public-policy crisis. Related to climate, and our failure to manage well our natural resources, we will see technological advances that result in consumers finding economic substitutes for carbon-based energy. Given our extreme dependence on carbon-based energy, our economy and public finances will take a serious hit.
The lead times for transformative initiatives, whether they're regulatory, legal or infrastructural, are enormously long. We will have failed to tame the forces of short-termism, and this will feed the tendency of political parties to neglect a broader vision for the country in favour of playing to narrow, sectional political bases with baskets of goodies and favours for the base, but insufficient focus on the big issues around building Canada's future.
In short, future generations of Canadians will be severely challenged to achieve the kinds of opportunities and standard of living enjoyed by first few postwar generations.