Hewers of minerals and drawers of oil and gas

As 2011 winds down, I took a look at some of the changes occurring in the national economy.   We are through the latest recession and into a growth curve – albeit a tenuous one.   Exports are up, employment is up, government revenue is starting to grow at a stronger clip.  There are certainly risks – particularly Europe – but as of now Canada is moving into a new economic reality.

This new reality is one that is heavily reliant on non-renewable natural resources revenue.    We are starting to see a Canadian version of Dutch disease emerging where resource sectors boom while manufacturing declines.

I have put together two charts – one shows the change in export intensity from 2001 to 2011 (based on the first nine months) and the second shows the change in employment patterns (2011 based on the first 11 months of the year).

This structural change in our exports profile will have an impact on many areas of society – foremost will be government revenue.  Those provinces with lots of non-renewable natural resources to exploit are well positioned, those without are not so.

 

 Exports by Sector (per $1,000 total exports)*

*2011 – using total exports from January to September.  Source: Statistics Canada.

 

Employment by Sector (per 1,000 total Employed)*

*2011 – using the average monthly employment January to November.

Source: Statistics Canada Labour Force Survey.

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7 Responses to Hewers of minerals and drawers of oil and gas

  1. Don Dennison says:

    Food manufacturing is up 24%, though agricultural employment is down 5%. More than one commentator at the last Ideas Ffestival in St. Andrews cited food production as an opportunity for the Maritimes. Is this area being overlooked or undervalued ?

  2. I agree, Don. The convergence of the local food movement, the high energy costs associated with food product transportation and other factors should mean that food production opportunities moving forward.

  3. Don Scott says:

    Good analysis David. Some actual facts instead of just spin. For 40 years, the country strove to move away from our “Hewers of Wood and Drawers of Water” image and the past decade’s politicians have deserted that path and run full bore into the easy stuff, natural resource exploitation and damn the consequences. Quick easy money that makes the government look good as revenues spike with resource revenues so we build a hollow economy with no future but temporarily balanced budgets. Look at BC as a classic example. Campbell’s BC Liberals (really Reformers more than Liberals as the old discredited Lib-Con coalition called Social Credit took over the tiny BC Liberal party when the disgraced Socred’s tanked)went full force into resource development, especially gas development (much of it fracking). Revenues soared with oil and gas exploration lease sales and subsequent royalties. However, we’ve make no real gains in key job creating areas such as manufacturing and design and most of our construction boom has been to feed an overblown real estate market ( and I think at some 23%, finance & real estate represents the largest single component of BC’s economy. If interest rates rise even a bit, or China’s economy slows and the Chinese money flowing into Vancouver real estate slides, the finance and real estate sector will collapse along with construction. All very short term thinking and it will cost us dearly as we have to clean up the environmental mess (the cost to clean up the arsenic laden tailing in my old town of Yellowknife will likley exceed the economic value of all the gold extracted from their now closed mines) and the damage to our international goodwill as Canada bet’s the farm on the Tar Sands.

  4. I think that the biggest challenge for NB’s agricultural sector is the big supermarket chains not sourcing locally for local stores but buying only from bigger producers for the entire chain.
    Sure some people will go out of their way to buy local but most people will buy whatever Sobeys or Superstore stocks whether that be local, from South Africa or from China.

    I’m not sure how we change that except to convince people to shop elsewhere that carries local food.

  5. Neil Milton says:

    David –

    I agree entirely with your analysis. I have been spouting the same argument for several years. However, I think you can take the story further – the demise of manufacturing (mostly in Ontario) will have radical consequences for the Canadian economy and federalism.

    The era of Ontario being wealthy is over. Manufacturing in North America is dying; manufacturing in high dollar Ontario will die even faster, and stay dead. It will not come back, and stupid ideas like building windmills to replace what has been lost are just that – stupid ideas that will not succeed in the face of economic reality.

    Even if Ontario recognized the problem it would be in for a long, painful adjustment; the current level of obliviousness to the problem suggests that it will be a long painful period of decline before Ontario even begins to contemplate adjustment to a new reality of life without manufacturing.

    Manufacturing in Ontario (especially cars) generated significant wealth for the past century. A key element of the economic compact of Canada was that some of this surplus wealth (much of which derived from selling goods to other provinces) was transferred by the federal government from Ontario to other provinces. Don’t get me wrong – Ontario did very well by this. But as a result, Ontarians virtually never think of themselves as Ontarians first and Canadians second, the way many people in the other provinces often do. Ontarians thought that they were Canada and Canada was them (which of course, fed much regional disillusionment).

    Already Ontario spends less per student in post-secondary education than most provinces; soon that will be true for virtually every other public good, like health and infrastructure.

    Some of the consequences of the end of a wealthy Ontario are obvious: much less money from Ontario to Quebec and the Maritimes. But, it will be a long time before the West has the wealth to support Ontario, so what happens in the interim? Ontario is ill-equiped to recognize, let alone deal with, the massive transition before it (more massive than the NAFTA transition before it). Ontario has does not have the local political, economic and cultural tools to grapple with the local issues (the west booms, while manufacturing burns).

    Federal Canadian politics over the past 50 years have been completely dominated by ‘angry Quebec’ and ‘angry Alberta’. Angry Ontario is whole different beast. What will it mean? Will we get a ‘mad as hell’ type party in Ontario? Perhaps, but almost certainly we will get more ‘parochial’ and ‘meaner’ Ontario voters, and provincial politicians, and generally, a lot more traction in Ontario from attacking Ottawa, and much more rhetoric about demanding a better deal from the federal government and/or other provinces.

    EI will be a very good test – will anger in Ontario force the federal government to address the inequities of the EI system?

    Neil Milton

  6. Richard Reeleder says:

    “I’m not sure how we change that except to convince people to shop elsewhere that carries local food.”

    There will likely be some opportunities for local production as transportation costs rise; we have already seen significant cost increases for many grocery items in big chains over the past year. I wonder if the ‘local food’ entrepeneurs will take advantage of that by keeping their prices from rising, thus making their product more attractive to mor econsumers. Or will they simply raise their prices in tandem with the chains, knowing that local foodies will pay the difference? That is, do they really want to expand, or do they just want the small niche?

    The real opportunities for food producers might be in exports to relatively nearby large markets (NE, ON, PQ). And much of that will have to be processed, I believe. Oh well, another opportunity for R&D, I suppose.

    “but almost certainly we will get more ‘parochial’ and ‘meaner’ Ontario voters”

    I agree. And that means NB is in for a major screwing over. Our collective alarm bells should be ringing.

  7. Pingback: How the resource boom is transforming our economy « Social Policy in Ontario

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