80) ;;;;;0;40) 0;0;80) (r er 0;(( ( ( e ( ( (( ov ( und 80) 60) 40) 20) ;20) 20;0) ( er 20;40) 40;60) 60;80) ( ( ( ( 80;60;40;80;100) 100;( ( ( ( ov ( under Fig. 2A-7. Scatterplots of GRP Growth Rates (Axe OY) and Assessments of the Factors Growth Rates (Axe OX) for the Period between 1997 and Fig. 2A-8. Scatterplots of GRP Growth Rates (Axe OY) and Assessments of the Remainder Growth Rates (Axe OX) for the Period between 1997 and Fig. 2A-9. Scatterplots of GRP Growth Rates (Axe OY) and Assessments of the Remainder Growth Rates (Axe OX) for the Period between 1999 and Note. Cartography by I. Mazayev 4. Economic Growth in Regions. Relevant Canadian Experience While the “Economic Geography of Canada” defines and describes some 68 “economic regions” of Canada. for most purposes, the breakdown is by groupings of the 10 Provinces and 3 Territories:
• Atlantic Canada (Newfoundland, Nova Scotia, Prince Edward Island, New Brunswick), • Quebec (Part of Central Canada, usually classed on its own), • Ontario (Part of Central Canada, usually classed on its own), • Prairies (Originally 3, Now more usually 2: Manitoba, Saskatchewan), • Alberta (Originally classed as “Prairie”, Now more usually classed on its own), • British Columbia, • The North (The 3 Territories: Yukon, Nunavut, Northwest Territories).
Canada’s economic development generally can be seen in several “phases”:
• Resource Extraction.
• Agriculture & Resource Processing.
• “Services” (“Knowledge Work”).
These phases in economic development roughly track Canada’s progress towards self-government and independence from Britain.
To simplify, in the beginning Canada provided raw resources (fish, furs) and the Imperial centre provided finished (higher value per item) goods; later, more and more, further processing was to occur in Canada.
However, much of this “finishing” was to occur in Central Canada, with other Regions (in their eyes, and those of a number of observers) relegated to suppliers of raw materials.
This theme of industrializing Central Canada, with the other Regions concentrating on providing raw materials to, and markets for, Central Canada is dealt with in more detail under the heading “National Policy”.
Briefly, one way of seeing Canada’s political-economic history is progress towards the development of the northern half of North America with all of its resources and opportunities; and at the same time remaining in “balance” with the inevitable – and over this time growing – power and influence of, and integration with, the US.
And, as indicated above, part of the Canadian balancing act over time has been to achieve independence from Britain.
4.1. Capital Imports –Human and Financial It could be rightly said that Britain began its Canadian adventure in earnest 1760/63 (on the base of some 10,000 in its small colonies in Newfoundland, Nova Scotia, PEI, and New Brunswick) plus the sparsely inhabited northern Hudson’s Bay Company Lands (known as Rupert’s Land) with some 60,000 settlers – recently subjects of France, augmented by some British settlers, and soon to be augmented by some 40,000 Loyalist refugees from the American Revolution (with Britain losing millions of former subjects in its original Thirteen Colonies). So, some 110,000 plus or minus to hold, occupy and develop a vast space – with little or no capital, and an Imperial system that preferred to keep colonies supplying raw materials to, and buying manufactured good from the Mother Country.
Accordingly, the critical themes in Canada’s development over the next years, and indeed, continuing to this day, have been:
I) Immigration, II) Investment.
4.2. Federal “National Policy” Although the St Lawrence River-Great Lakes System constitutes one of the biggest water systems in the world, and an east-west highway to the centre of North America, with some exceptions, natural trade routes have tended to be North-South: the Atlantic provinces to New England and the Caribbean (and Europe), Quebec and Ontario to New York and the US Mid-West, the Prairies to the US West, BC to California (and the Far East). This was enhanced by the Erie Canal ensuring that western grain would be shipped via New York rather than Montreal; and by the US as a source of investment capital. As well, the surfacing from time to time of both Canada-US annexation and reciprocity movements has tended to reinforce this. The “National Policy” (below) was intended as a an East-West counterbalance.
In substance, the National Policy was composed of several basic parts: a) western resources, b) eastern manufacturing, c) protective tariffs, d) bound together by a national railroad. This was supplemented by western settlement, the necessary immigration to support it, and associated development and transportation and financing.
4.3. US-Focus – Reciprocity / Free Trade / Continentalism The phases of “Colony-British Empire” and “National Policy” having passed, and the flirtations that characterized parts of the 1960s and 1970s with more European and more Pacific Trade having – in a sense – passed too; Canada has found itself with the reality of greater and greater trade and economic ties with the US. The Auto-Pact entered into with the US proved extremely beneficial to Canada – especially Ontario.This is now reflected by the NAFTA arrangement (Canada-US-Mexico, which quickly followed on the earlier Canada-US arrangement), likely to be followed by a Free Trade Area of the Americas.
Accordingly, it is now clear that Canada is not (and cannot be) a “stand-alone”, and that its Regions not only relate to each other and to the National Government but also to the broader US, Continental and indeed Hemispheric framework. (The “global village” will be addressed later.) The theme of Continental Security – for economic as well as military matters – is now front and centre, with a clear emphasis on development in critical regions, especially the energy-rich west.
4.4. Resource–based Growth: Extraction and Processing As described by Bank of Canada Technical Report 51 (more fully dealt with below):
“The export-base or staples approach treats the demand for regional exports as the principal determinant of economic growth.
Better known in Canada as the staples thesis, it was developed by Canadian economists H.A. Innis and W.A. Mackintosh. The staples thesis views economic growth as the result of the exploitation of a series of staple products, where staples are defined to be export goods with a high natural resource content. Though the thesis was initially intended to explain the development of Canada, it applies equally well to regions.
“According to the staples thesis, growth begins with the emergence of foreign demand for a staple product. This foreign demand may arise as the result of a change in tastes or because new technological developments have led to a reduction in the staple good’s cost of production. Generally, it is assumed that the region is initially short of the capital and labour necessary to develop the staple; however, the high returns to developing the staple will raise the returns to the capital and labour employed in its production, prompting the inflow of both factors from other regions.
“The extent of the economic growth arising from staple production will depend on the strength of various types of linkages. First, there are backward linkages, which involve the development of local industries that supply inputs for the staple’s production. The need for transport facilities has proved to be one of the strongest backward linkages. Next, forward linkages involve the development of secondary industries that use the staple product as an input.
Such industries increase the value-added of regional exports. Third, there are lateral linkages, which according to Marr and Patterson (1980) occur ‘mostly in the form of external economies generated by the export and related industries which stimulated the growth of some third industry.’ Examples would be the development of a transportation network or the growth of a pool of skilled labour within the region. These types of external economies reduce costs not only for the staple industry but also for other industries, and this may attract new businesses to the region.
“Last, there are final-demand linkages, which are really a type of backward linkage. The term refers to the growth of industries that supply consumer goods and services to the labour employed in the expanding staple industry. As the local labour force grows, so will the local market for goods and services, and it will become more efficient for the region to produce these goods locally than to import them from elsewhere. The growth of these industries will in turn stimulate the growth of the regional economy” (pp. 34–5).
Another author (Watkins) put the Staples Thesis this way:
“A theory asserting that the export of natural resources, or staples, from Canada to more advanced economies has a pervasive impact on the economy as well as on the social and political systems. Furthermore, different staples (fur, fish, timber, grain, oil, etc.) have differing impacts on rates of settlement, federal provincial conflicts, etc. The thesis was formulated in the 1920s by economic historians Harold A. Innis and W.A. Mackintosh. Agreeing that Canada had been born with a staple economy, they differed insofar as Mackintosh saw a continuing evolution toward a mature industrialized economy based on staple production, whereas Innis saw a tendency for Canada to become permanently locked into dependency as a resource hinterland. Contemporary proponents of the thesis argue that Innis’ version more accurately describes the Canadian situation to the present. The thesis may be the most important single contribution to scholarship by Canadian social scientists and historians; it has also had some influence internationally, notably in the analysis of a comparable country such as Australia”.
Bank of Canada Working Paper 96–12 (Lefebvre & Poloz) “The Commodity–Price Cycle and Regional Economic Performance in Canada www.bank–banque–canada.ca addresses regional development and convergence of regions by looking at commodities.
The Abstract, referring to the period since the early 1970s, gives the following summary:
“We believe that, to a significant degree, regional diversity in economic performance reflects movements in Canada’s terms of trade, which very frequently are tied to developments in world commodity markets. To state our hypothesis briefly, an improvement in Canada’s terms of trade due to a rise in world commodity prices tends to boost output in the regions that produce primary products and dampen output in those that use primary products as an input. Because these activities are not uniformly distributed across regions in Canada, such shocks have implications for regional economic performance. A qualitative analysis of three episodes, 1974, 1978 and 1987, seems to broadly supportive of this theory. A statistical analysis using VARs also provides some support. Our results may have implications for other branches of the economic literature. One example is studies of long-term convergence between Canada’s regions. Such studies might in fact be underestimating fundamental convergence because occasional termsof-trade shocks are tending to derail the process; alternatively, these studies might actually be detecting evidence of reequilibration to terms-of-trade shocks rather than fundamental convergence”.
4.5. Trade-based Growth Although Canada’s natural resource base (see the Staple Thesis) coupled with a small population and small internal market has forced it (despite the National Policy) always – to a greater or lesser degree – to look abroad for sales opportunities, since Confederation in1867 it could be said that the theme has been one a country focused on nation-building within and raw materials sales outside. Canadians have seen themselves as “exporters”, but not really as either “traders” or “entrepreneurs”. Indeed, many provinces over the years, relied on foreign entrepreneurs – in effect financed by provincial incentives of one kind or another – to use “mega–projects” to revitalize and restructure their economies. One of the most famous of these, for example, was a giant oil refinery at Come-by-Chance Newfoundland, developed under the auspices of an American businessman.
This passive/reactive mindset is, however, changing – witness the Alberta website materials cited above, and the initiatives described by the in-coming Prime Minister, Paul Martin below.
One model for this new re-orientation to “trade and entrepreneurship” is pre-Confederation Nova Scotia and New Brunswick (both now “have-not” provinces). Together, these two then colonies had the 4th largest merchant marine in the world (source; Rowell– Sirois Report). They built their own ships; they shipped their own produce (fish, farm goods); and traded with the US (New England – for shoes and linens), the Caribbean (for sugar cane, molasses, and rum), and Britain (for linens and steel); and in doing so, earned both sale-of-goods profits, but also the shipping charges.
4.6. Finance-based Growth As stated earlier, Canada has needed to rely heavily on foreign capital (with a heavy emphasis – first on British, then American sources) throughout its history. The Canadian Encyclopedia gives the following summary:
Foreign investment in Canada is very large, with the consequence that a considerable fraction of the economy is controlled by foreigners (mostly Americans). This large foreign presence in the economy, quite unparalled elsewhere in the world, has deep historic roots. Beginning in the mid-19th century, when Canada was still a British colony, British investors readily supplied capital, chiefly of the portfolio type, that financed construction of canals, railways, urban buildings and public works, in the half century prior to WW1. [And thereafter, there was heavy foreign investment in natural resources and branch plants.] The Province of Ontario (Canada’s largest with 41% of GDP.
Pop of some 12 million) Task Force on “Competitiveness, Productivity, and Economic Progress” issued a Report www.competeprosper.ca/task/ar2003.pdf November 25th, highlighting a relative lack of growth in the Region (compared to a peer group of leading US States) and blamed a number of factors, working together to impair productivity, including: