Dependency and federal aid in Canada’s Arctic – by Heather Exner-Pirot (Alaska Dispatch – August 23, 2012)

Nunavut is a wealthy region. With a GDP/capita of $53,506, if it were a country it would easily rank amongst the top ten richest – ahead even of Canada, which using the same formula has a GDP/capita of $47,605.
But of course, Nunavummiut themselves are not wealthy. They are more likely to live in poverty than any other Canadians, and have the lowest human development ranking in the country. This is because most of Nunavut’s income does not come from employment, profitable businesses or even resource development. It comes from the federal government.
Indeed, 92 percent of the Government of Nunavut’s revenue comes from federal transfers, compared to 9.1 percent for Newfoundland at the provincial low end, to 39.9 percent for PEI at the high end. Yukon and NWT stand at 71.7 percent and 76 percent respectively. This amounts to, as they say in the development biz, a “high level of aid dependency.”
Money transferred from Ottawa to Iqaluit is not, technically speaking, aid – citizens in Nunavut pay taxes and transfer royalties to the Crown, after all – but comparisons between Nunavut’s and Africa’s situations are unsettlingly easy to make. 
Dependency in the North

Roger Riddell defines aid dependency as “the process by which the continued provision of aid appears to be making no significant contribution to the achievement of self-sustaining development,” while Deborah Brautigam and Steven Knack identify it as “a situation in which a government is unable to perform many of the core functions of government, such as the maintenance of existing infrastructure or the delivery of basic public services, without foreign aid funding and expertise.”

Sound familiar? The problem in Nunavut, and, to a lesser but equally problematic extent, Yukon and NWT, is not that the federal government is ‘wasting’ billions of dollars in transfers to the North. The problem is that the money it sends does not and cannot provide reasonable rates of literacy, employment, health outcomes and educational achievement. Because the high level of federal transfers and the culture of dependency it breeds is the problem.
Two prominent books have come out in recent years that highlight the pitfalls of dependency. One is Dambisa Moyo’s 2009 “Dead Aid,” that looks at how decades and tens of billions of dollars of aid have not only failed to improve Africa’s well-being, but have exacerbated its poverty. The other, Calvin Helin’s “Dances with Dependency,” urges aboriginal people to actively seek the self-reliance offered by economic and business development rather than settle for the welfare trap engendered by the current system.

The two books have been controversial, and they are not without their faults, but their main message seems to apply very well to the North: that reliance on external funding will inevitably result in less self-sufficiency. This is because while the public sector plays a critical part in any society – infrastructure, law and order, and education being only a sample of the goods governments provide – there is a point when the public sector gets so big that it suffocates innovation, reduces incentives to work, and occupies parts of the economy that could otherwise, and more fruitfully, be filled by the private sector.

In other words, you need to find a happy medium. Inasmuch as the long term objective of Nunavut, and many other indigenous communities and regions in the North, is to achieve a level of autonomy and self-determination, solutions will need to be sought, and produced, from actors other than the federal government.

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