Livio Di Matteo is Professor of Economics at Lakehead University in Thunder Bay, Ontario.  Visit his new Economics Blog “Northern Economist” at http://ldimatte.shawwebspace.ca/ This column was originally published November, 2002.

It is in Ontario’s interest to see the north of the province become economically self-sustaining. A growing north will create economic activity and ultimately tax revenue. – Livio Di Matteo (November, 2002)

Nearly one hundred years after the beginning of its first Northern Policy, Ontario is faced with a need for a New Northern Policy.  The rationale this time is not to open up an investment frontier but to salvage the economic potential of a vast geographic region that suffers from locational disadvantages when it comes to economic activity.  While the north and the northwest are ostensibly at the center of the continent, unfortunately the bulk of the continent’s population with their attendant market demand and job opportunities lie elsewhere. 

Unless policies are put in place to boost economic growth in the north and northwest, these regions are likely to continue their decline and become a drain on the public purse of the province of Ontario.  It is in Ontario’s interest to see the north of the province become economically self-sustaining. A growing north will create economic activity and ultimately tax revenue. Moreover, given the continued growth and congestion in southern Ontario, there are benefits to dispersion of development in terms of the quality of life.

The legs of a New Northern Policy should focus on reducing the region’s locational disadvantages, augmenting its capital infrastructure, deepening its human capital and creating new governance institutions that would assert regional control over local development.

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Livio Di Matteo is Professor of Economics at Lakehead University in Thunder Bay, Ontario.  Visit his new Economics Blog “Northern Economist” at http://ldimatte.shawwebspace.ca/ This column was originally published November, 2002.

Ontario obtained enormous benefits from the exploitation of northern resources and deliberately pursued a policy of resource revenue maximization that was partly responsible for launching the north on a development path that has brought us where we are today. – Livio Di Matteo (November, 2002)

The 2001 census revealed that for the first time, there has been an absolute decline in the population of Northwestern Ontario.  From a peak population of 244,117 attained in 1996, 2001 revealed a decline of 3.8 percent to just over 234,000. This absolute decline came on the heels of decades of relative decline as the population of the Northwest grew more slowly than that of Ontario as a whole.  Given that the population growth of regions is often a key indicator of economic growth, a historical view of the numbers is of some use.
 
Table 1 reveals that from the period 1871 to 1951, the population of Northwestern Ontario grew faster than Ontario as a whole.  As a share of Ontario’s population, the Northwest’s population peaked at about 3.6 percent of that of the Ontario total shortly after World War II and has since declined. During the 1990s, slower population growth rates in the Northwest tipped over into negative growth and we have reached the lowest share of Ontario’s population in 100 years.  We now account for barely two percent of Ontario’s population.  This relative decline has affected northern Ontario as a whole.

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Originally published in February,1997

Livio Di Matteo is Professor of Economics at Lakehead University in Thunder Bay, Ontario.  Visit his new Economics Blog “Northern Economist” at http://ldimatte.shawwebspace.ca/

These figures suggest that a province of northern Ontario would be as viable economically as Saskatchewan, Manitoba or any other of the Atlantic provinces and should be able to
generate comparable levels of government expenditure and revenue. – Livio Di Matteo

While the North would definitely have been economically viable as a separate province at the turn of the century, that does not mean it still would be today. Modern northern Ontario has seen a decline in its traditional natural resource and transportation employment base. Since the mid-twentieth century, the north’s economy and population have grown at a much slower rate than the south and the north has possessed a chronically higher unemployment rate. Since the 1960s, the north’s economy has been supported by a substantial expansion of government spending to the point where the broader public sector accounts for nearly one-third of the labour force.  

As well there has been a decline in the importance of natural resource revenues to the Ontario government to the point to where they account for barely one percent of provincial revenue.  Combined with the higher per capita cost of providing government services in the north, the implication is that the last twenty-five years have seen a reversal of the traditional fiscal flows from the north to the south.

Nevertheless, interesting questions are what an economy of northern Ontario would look like in terms of  size and whether it would provide the necessary tax base for our current level of government services. Unfortunately, estimates of Gross Domestic Product (GDP) are not provided on a regional basis. However, using data from the 1991 census, it is possible to construct a crude approximation to the region’s GDP using household income data which yields a regional output of nearly 21 billion dollars. With a population of about 870,000, the economy of northern Ontario would be at the middle ranks of Canada’s provinces. Northern Ontario’s economy would be bigger than any one of the Atlantic provinces, slightly smaller than Manitoba’s and about the same size as Saskatchewan.

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Originally published in February,1997

Livio Di Matteo is Professor of Economics at Lakehead University in Thunder Bay, Ontario.  Visit his new Economics Blog “Northern Economist” at http://ldimatte.shawwebspace.ca/

Between 1867 and 1899, the timber industry produced about 28 percent of total provincial revenues. These revenues contributing greatly to the welfare of Ontario citizens. Whereas northern Ontario accounted for at best 10 percent of the province’s population it consistently provided about one quarter of the province’s total revenue. – Livio Di Matteo

There are periodic calls for Northern Ontario to form a separate province, which seem to surface whenever the north feels it is being poorly treated by the provincial government.  The demand for a separate province feeds on the large amount of northern lore regarding the supposedly exploitative nature of the relationship between the north and southern Ontario.  A persistent theme in northern Ontario history is that it served as a natural resource frontier for the economy of the industrialized south by providing resource inputs into southern industry.  Moreover, much importance is attached to the natural resource rents from forests and mines which provided the Ontario government with a large proportion of its tax revenue in the first half of this century.

The case that usually follows is that northerners should have their own province so that the economic benefits from northern resources are retained for northerners.  The failure of the north’s economy to grow at the same rate as the south over the last 30 years, with the subsequent outmigration of youth, is blamed on the absence of provincial status and the ability to control our own economic destiny.  The implicit argument is that the North would be better off economically as a province though there have not been any arguments rooted in economic analysis to evaluate this point.  Moreover, given that the market for natural resources is international in scope, no explanation of how being a separate province might change the terms of trade for northern Ontario resources has been offered.

The best case for a province of northern Ontario rests in the past during the period 1870 to 1920 which was a time of rapid growth on par with the Prairies.  However, the Prairies were federal territories which obtained provincial status while northern Ontario remained part of Ontario. 

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