Laggard Ontario – by National Post Guest Columnist Livio Di Matteo

The National Post is Canada’s second largest national paper. This editorial opinion was originally published on November 17, 2010 in the Financial Post section. Livio Di Matteo is professor of economics at Lakehead University in Thunder Bay.

 “In the midst of all the economic carnage, the Ontario government is presiding over a massive hike in electricity costs — an energy source that used to be the foundation of Ontario’s economic advantage. Add to this the fiscal deficit and a net debt that is expected to reach $240-billion by 2011, and one has an economy that is on the verge of being unable to deliver the standard of living that its citizens have come to expect.” – Livio Di Matteo – National Post, November 17, 2010

Dalton McGuinty has presided over the province’s economic decline

The Ontario government will be tabling its fall economic statement in the legislature on Thursday. Premier Dalton McGuinty, who has been seemingly unaware of the impact of his energy and economic policies on the province’s economy, would do well to take heed from the danger signs provided by another update — the recent Statistics Canada update to provincial GDP numbers.

The new StatsCan numbers show that, as a result of the recession, real gross domestic product in 2009 fell in every province except Manitoba. Moreover, the declines were steepest in Newfoundland and Labrador, Saskatchewan, Alberta and Ontario.

Being in the company of so many poor performers will not be a suitable defence for Ontario’s economic record for two main reasons. First, while Ontario’s decline was smaller than that in Newfoundland, Alberta and Saskatchewan, those provinces can blame their drop primarily on the fall in natural resource commodity prices, namely oil. Ontario’s key natural resource sector — forestry — while hit hard over the last decade, is not as important a sector to Ontario as oil and gas is in these other provinces. The economy will grow in Newfoundland, Alberta and Saskatchewan as oil and gas prices recover.

Second, Ontario’s dismal performance caps a decade of dismal performance. Ontario has become a laggard in per capita GDP, as highlighted when it entered the ranks of the “have-not” provinces and began to collect equalization. A survey of statistics for the last two decades shows that Ontario’s share of total provincial GDP has declined from 42% in 1990 to 37% in 2010. More ominous, the bulk of that decline has occurred since 2000 — largely coinciding with McGuinty’s decade of political power. Whereas in 1990, productive Ontario’s share of national output exceeded its population share, we now are witnessing the sorry spectacle of the reverse.

When Ontario’s economic productivity performance is examined in terms of real per-capita GDP, it emerges that Ontario’s output has stagnated for an entire decade. Between 2000 and 2010, real per-capita GDP in Ontario actually declined by 8%. While one may wish to ascribe this to the impact of the recession and the global financial crisis since 2008, the fact remains that Ontario’s performance was the worst of all 10 provinces.

Indeed, over the first decade of the 21st century, eight out of 10 provinces experienced an increase in their real per-capita output, while only Ontario and New Brunswick saw declines. Even Quebec, which has been the historical poor economic sibling to Ontario, saw its real per-capita GDP grow 6% during the decade. Since 2000, Ontario’s real per-capita GDP has gone from being 25% above the provincial average to being barely at the provincial average. From having the second-highest real per-capita GDP in the country (second only to oil-rich Alberta), it is now the fourth highest. No wonder Ontario is now receiving equalization payments.

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