Canada’s ‘dig and deliver’ economy – by Robert McGarvey (Troy Media – June 10, 2014)

There has been a shocking collapse in Canada’s secondary economy

EDMONTON, AB, Jun 10, 2014/ Troy Media/ – The Ontario election is entering the home stretch: all three party leaders are in there pitching, offering the electorate ‘visions of sugar plums’ or variations on the theme. But none of the leaders dares address the most important issue: where are we going as a nation?

Political discourse in Canada these days is confined to the soothing and the trivial. It seems Canadians will tolerate only comforting noises. Meanwhile the country is on autopilot, rapidly being marginalized, reduced to a ‘dig and deliver’ Canada.

Economists have joined this soothing choir. On the surface, they assure us, the economy is fine. Canada is solidly middle-of-the-pack. Regrettably, a quick look beneath the covers reveals a very different, very troubling story of decline.

Consider the trade figures. On the surface figures vary month to month, but range within acceptable limits. On the other hand, beneath the surface, the figures reveal a frightening collapse in export trade. Doug Porter, BMO’s chief economist did us all a favour when he stripped out energy sector exports from the Canadian trade numbers. The results were shocking. Porter’s numbers have exposed a shocking collapse of Canada’s secondary economy.

According the Canadian Centre for Policy Alternatives, the collapse of Ontario’s secondary economy, its manufacturing sector, is systemic. Kaylie Tiessen, a researcher with the Centre was quoted as saying, “by the end of 2013, after shedding almost 300,000 jobs the manufacturing sector represents only 11 per cent of jobs in Ontario’s labour market”. And, she pointed out, this trend is unlikely to reverse itself, even if the United States economy recovers as fully as economists expect.

Although this is bad news, it’s not totally unexpected. The entire developed world is moving into a post-industrial economy. New (tertiary) businesses derived from intangibles (mostly technology) are, or should be, filling the gap created by the decline of traditional manufacturing.

Regrettably, in Canada, this is not happening. The tech sector in Canada has also been reduced to a ‘dig and deliver’ role.

Canadians spends hundreds of millions of dollars every year on research and development As a nation we support formal and informal research in a wide variety of sectors employing some of the world’s best brains.

What we don’t do is finance the commercialization of technology; by the time our world-beating innovation has run the gauntlet of Canada’s short-sighted and undercapitalized venture capital industry, it is exhausted and beaten. A technology success story in Canada these days is one where superior innovation is sold off to a large international company for pennies on the dollar. It’s not sad; it’s tragic.

Of course, Canada is now touting itself as an ‘energy superpower’; regrettably, this so called super power is abandoning almost all secondary refining and processing.

A few years ago plans were on the table for a series of upgraders and refineries in Alberta so that the primary bitumen produced from the oil sands could be processed in Canada.

Unfortunately, this plan has been scrapped; apparently unacceptably high labour costs have made the economics of upgraders and refineries uneconomic in Canada. So, what’s the strategy for energy in Canada? You guess it – ‘dig and deliver’ the world’s most unrefined energy product imaginable, raw bitumen.

Canada’s economic development strategy seems to be entirely predicated on a reckless pedal-to-the-metal expansion of mining operations in Fort McMurray and the construction of giant pipelines to ship raw bitumen halfway around the world so that others can enjoy the jobs and economic benefits of secondary processing.

No one seems to have put together the obvious fact that if we had a national strategy worthy of the name, and a more reasonable development plan, labour costs in Alberta would not be out of sight and our ability to develop the full potential of our resources maximized for future generations.

If there is a common thread in these stories, it’s the lack of vision and commitment to building a better Canada. There is an old saying in business: ‘control your own destiny of someone else will’. As for Canada, we’d better wake up and do just that or future generations will have to look elsewhere for leading edge futures.

Robert McGarvey is an economic historian and co-founder of the Genuine Wealth Institute, an Alberta-based think tank dedicated to helping businesses, communities and nations built communities of wellbeing. Robert is the author of The Creative Revolution, an historical guide to the future of capitalism.

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