Lakehead economics professor describes what is holding back the region’s growth and prosperity
This column is republished with permission from the author of his Northern Economist’s Blog.
Ontario suffered from slower economic growth during the 20th century, but nowhere in the province has the problem been more severe than in northern Ontario.
From 1990 to 2005, total employment in Ontario increased 23% and real GDP per capita increased 17%. However, even omitting the pandemic year, from 2005 to 2019, total employment in Ontario grew by only 15%, while real GDP per capita increased by 8%. There is a similar trend of slower employment growth after 2005 on a regional basis, but some regions – especially the North – have done worse than others.
The most alarming picture comes from a glance at the overall picture of job growth from 1990 to 2019 (we have to omit 2020 as this is the year of the pandemic and makes it still worse).
As the accompanying figure (picture above) shows that from 1990 to 2019, total employment in Ontario increased by 42%.
The fastest growing regions were Kitchener-Waterloo-Barrie, Toronto / RGT and Ottawa. This triangular region has indeed become the new core of the Ontario economy, with the rest of the province increasingly relegated to a more peripheral status, with the peripheral nature worsening as one moves away from it. core. In Ontario, being out of sight of Toronto, at the end of the day, also means being out of mind.
Indeed, the regions furthest from this core – Stratford-Bruce, Windsor-Sarnia and the North – have done the worst. But it is only the North that has seen long-term employment decline over the past 30 years, with the Northeast shrinking by one percent and the Northwest by seven percent.
Of course, the first reaction of most of the elite movement and unrest in Northern Ontario will be to stand up on their hind legs, wave at the government and lament its failure to promote the northern economic development and support that we need a new agenda to tackle northern needs.
The point is, the government has not paid enough attention. Indeed, the most significant growth industry of the past 30 years has been the government-funded studies, reports and programs designed to jumpstart Northern Ontario’s economy and help create a new golden age of growth.
Here is a quick list of major initiatives at the federal and provincial levels that show that the past 50 years have seen a plethora of plans, programs and policies.
Here they are:
1969-1987: Regional Economic Expansion Department (DREE)
1987 to present: FedNor
2018-Present: Prosperity and Growth Strategy for Northern Ontario
1966: Regional development councils created (NWORDC and NORDC)
1970s: Design for Development: Designation of “Primate Growth Centers”
1970: Creation of the General Directorate of Northern Affairs within the Ministry of Mines
1977: Creation of the Ministry of Northern Affairs
1977-85: Royal Commission on the Northern Environment
1985: Creation of the Ministry of Northern Development and Mines
1985: Advisory Committee on Resource Dependent Communities: Rosehart Report
July 1986: Northern Ontario Resettlement Program (1,600 public servants in the North)
1987: Northern Ontario Heritage Fund
1999: Regional development teams
2002: Smart growth panels
2004: Plan for Northern Prosperity
2005: Northern Development Councils and GO Nord investment program
2008: Northwestern Ontario Report: Rosehart as Facilitator
2010: Law on the Far North
2011: Growth Plan for Northern Ontario – a “25 year plan” to strengthen the northern economy
2011 to present: promotion of the four-lane highway / Ring of Fire / Northern Policy Institute
It’s not that there haven’t been enough government attempts to save the North, it’s that they’ve all been unsuccessful or at best short-term action because they haven’t. not solved the fundamental economic problem of the region.
The three main drivers of economic development in Northern Ontario are natural resources, transportation and, indeed, government. During the development of Northern Ontario, economic growth was most robust at times when the three engines came together to drive economic growth and job creation.
The strongest periods of economic growth and development occurred during the periods 1867-1913 and 1946-1969.
These two eras coincided with good global economic conditions, which fostered demand for resource-based products and led to private capital investment flowing into production facilities and transmission networks. These two eras also saw an important role in government spending and policies, especially in infrastructure that facilitated resource development.
However, the institutional environment of a region reliant on external decision-making, both in terms of public and private sector decisions, has resulted in the region’s inability to retain the maximum benefits from resource development.
The fundamental problem is the stoppage of economic development rooted in the long-term inability of the economy to diversify beyond the industries that propelled its initial take-off due to the inability to substantially retain the economic ties generated by these industries.
Successful development and diversification through retention of linkages requires retaining a greater share of income through local entrepreneurs and government institutional policies to enable local decision-making in the development of the export base of natural resources – l comparative advantage of the region.
Aside from wages and labor during labor-intensive phases of development, the vast majority of northern development income streams have gone to external owners of investment capital in the North. the rail, mining and transport sectors which also made the investment decisions. The absence of such flows reduces the opportunities that exercise and promote local entrepreneurial talent and development.
It was not that there weren’t successful local entrepreneurs in forestry, mining and transportation. It’s just that they weren’t that many and they didn’t persist.
The failure of the persistence of local entrepreneurship tycoons was partly due to their ability to make more money elsewhere and partly the result of government policy at the federal and provincial levels.
Government institutional decisions regarding taxation and natural resource policy were external as they were made in Queen’s Park or in Ottawa.
In addition, during the first 50 years of northern development, the region’s private income streams were supplemented by rents from forestry and mining resources going to Queen’s Park – which provided on average about 20 percent of the country’s income. provincial government.
In the case of northern Ontario, it lacked its own institutional capacity to promote continued ties by being part of Ontario rather than a separate province like Saskatchewan or New Brunswick. Government decisions have been made more to promote provincial or national development strategies rather than for the long-term economic success of the region.
In the end, the North was useful in creating economic opportunities for Ontario and Canada, but in the end it was not used.
All these plans and programs? They weren’t designed to really do anything important. These were short-term political bones thrown in to appease locals and secure the election by providing proof that the government really cared.
And, in the short term, they created a few temporary jobs and allowed some people to make money before they left, while professing how much they loved the North.
The long-term implications are now evident. Regional economic development stopped.
Livio Di Matteo is an economist in Thunder Bay and conducts research in public policy, health economics and economic history. He is currently Professor of Economics at Lakehead University and writes extensively on these issues in his hometown, region and economy.