Singing a Different Tune and Embracing the Unknown

Cape Breton Island has a rich culture and fascinating history, matched only by its scenic routes and picturesque landscapes. The Island is highly sought after by vacationers searching for a new spot and golfers looking to play a few rounds at the famous Highland Links Resort. In addition, it is renowned for delicious seafood, hearty people, and, perhaps most importantly, the infamous “East Coast Kitchen Party,” which is an organization that promotes Atlantic Canada’s art scene.

Tourism Nova Scotia and the Government of Canada touts this embellished description of Cape Breton Island, however, it conflicts with a harsher reality: 16 per cent unemployment rate, reliance on government transfers, and a median income well-below the national average–in 2012, $26,160, compared with $31,320 nationally. Furthermore, several rural towns have disappeared, poverty is on the rise, and thousands of Nova Scotians have left the province for a better future.

Fixing these issues requires a momentous shift in the mindset of Nova Scotians and their elected officials. A different approach to natural resource development, for instance, may be the most helpful.

Cape Breton Island, and, in general, Nova Scotia, have a tremendous supply of natural resources, from oil in George’s Bank to natural gas in the Lake Ainslie area, not to mention coal deposits spread throughout the province. There are multiple local groups, however, that have convinced the public that natural resource development is not worth the risk, culminating in the decision to extend the moratorium on hydraulic fracturing indefinitely. Prohibiting all things that carry risk is a dangerous mindset, though. On one hand, residents of Nova Scotia demand jobs, and on the other, shun opportunities that would produce them.

Cape Bretoners must begin to sing a different tune. Industry experts suggest that hydraulic fracturing–colloquially known as “fracking,” could generate nearly $1 billion annually in the province. Former “ghost towns” in Pennsylvania, for instance, have begun booming due to natural gas development in recent years: the unemployment rate in the state is 5.6 per cent, compared with 6.1 per cent nationally, and as a whole, the industry supports roughly 1.7 million jobs in the country. Moreover, natural gas is a much more sustainable and environmentally-friendly alternative to coal and oil. Lastly, the correlation between fracking and earthquakes is weak and instances of pollution occurred due to breaches of government regulation.

Although there are risks associated with fracking, as is the case with any venture, those who are concerned about them exaggerate their scale and probability. Instead of banning the practice, the sensible approach would have been to mitigate the chance of disaster through sound regulation. Furthermore, natural resource development can provide support for local communities. In the United Kingdom, for example, the chemical firm Ineos offered local communities 2 per cent of profits from wells in the area to support hospitals and parks, and 4 per cent of profits to residents who own land near drilling sites. Greenpeace described this practice as a “bribe,” however, it is a common one in the United States that has delivered massive benefits to local communities. A similar approach in Cape Breton Island, and in Nova Scotia, could benefit communities tremendously, and a sound regulatory regime would reduce the risk of environmental damage.

In addition to the picturesque landscapes in the Tourism Nova Scotia commercials, the province should hoist an “Open for Business” sign. At least we could then start to improve the lives of Nova Scotians. In the meantime, however, shunning all, and every, opportunity to create jobs and generate economic growth will reinforce the status quo.

Corey Schruder is an AIMS on Campus Student Fellow who is pursuing an undergraduate degree in history at Cape Breton University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies

Revitalizing Atlantic Canada

Writing for Free Exchange allowed me to examine a multiplicity of issues facing Atlantic Canada and the following are some that I have found to be of paramount importance.

The most prominent issue in Atlantic Canada is slow economic growth, which has resulted in an enormous outflow of skill labourers, young professionals, and families who have left for British Columbia, Alberta, and Saskatchewan to find work. Economic growth rates in New Brunswick, Nova Scotia, and Prince Edward Island, for instance, have fallen below the national average of 2 per cent in 2013. Newfoundland and Labrador, which is currently booming due to oil production, is somewhat of an exception, however, declining revenues threaten to derail the province’s path to prosperity. In addition, the three Maritime Provinces experienced declining populations in 2013.

NL’s growth is largely attributable to strong oil and gas production, which has been growing in the province since the mid-2000s. The rest of Atlantic Canada could benefit from NL’s model and the region may need to look toward the oil and gas sector. New Brunswick currently boasts an opportunity to host the Energy East Pipeline and has a prospective shale gas industry. Other opportunities include increased cooperation or shared services between the three Maritime Provinces and exploring trade prospects with emerging markets.

Another problem facing the region, and the entire country, is unfunded liabilities. In other words, public sector pensions are a significant issue that plagues both federal and provincial government. This is where Atlantic Canada can lead: New Brunswick and Nova Scotia both made changes to their pension programs and the rest of Canada could learn from their progress.

In addition, Canada’s healthcare system requires additional consideration and policymakers must look into issues plaguing it. Through the Canada Health Transfer, the federal government allocates funds to the provinces to assist them with growing wait lists, quality assurance, and a number of other issues. However, progress has been futile. The federal government has given $41 billion in additional healthcare funding since 2004, yet, in 2010, Canada ranked last out of 11 countries in terms of wait times. This is why policymakers should consider alternatives to the status quo.

There are also serious democratic issues facing the country. The Senate remains unelected and unaccountable, and the Supreme Court’s recent ruling inscribed the current structure in stone. Its ruling does not need necessarily indicate defeat, though, and the Prime Minister, in addition to supporting premiers, must take the lead and ensure reform to the Upper Chamber.

While many Canadians may agree that these issues are of great importance, there must be action. We often criticize the political sphere for not dealing with these issues adequately, however, the truth is that we, as electors, must show that they are a priority or politicians will not give them due consideration. It is our duty to ensure that ideas, such as natural resource development, prudent fiscal management, and adequate healthcare, receive fair scrutiny, rather than arbitrarily dismissing them from the outset; it is our duty as citizens to place them on the political agenda.

Randy Kaye is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute

The Importance of Growth

Of the current issues facing the Canadian economy, the biggest of them depend on how Canada’s trade negotiations with other countries settle. The Comprehensive Economic and Trade Agreement (CETA) with Europe, for instance, creates enormous potential for Canada’s export-oriented industry to expand. In Atlantic Canada, however, there could be severely negative consequences if the provinces fail to take steps that bolster economic growth and attract new talent to the region. The new method of determining health transfer payments, which focuses on population and GDP, is just one illustration of how important economic and demographic development is in Eastern Canada.

Canada’s economic success is rooted in exports, and the export-industry, which is composed primarily of natural resource extraction, has an opportunity to not only supply other countries with raw materials and manufactured goods, but also value-added products. Reducing and eliminating barriers to trade with the European Union (EU) will likely benefit key economic sectors, such as energy, manufacturing, and seafood, and freer trade between Canada and Europe will encourage domestic economic activity, as it expands the market available to Canadian industry. The EU is currently Canada’s second-largest trading partner–behind the United States–and, in 2012, exports to Europe totalled $41 billion. However, it is critical that Canadian industry remains competitive in foreign markets and focuses on value-added products, as well as supplying factors of production. In fact, CETA eliminates protective barriers that currently prevent Canadian industry from exporting value-added products into Europe, and vice-versa, which levels the competition, in addition to providing an opportunity for Canadian-EU businesses to produce the most desirable products.

CETA also creates enormous potential for the Atlantic Provinces to expand the agriculture and seafood sectors into the EU, but they face significant demographic challenges that could restrict new prospects. In the last several years, Atlantic Canada’s population has declined and the average age has increased dramatically. In 2011, roughly 16 per cent of Atlantic Canada’s population was aged 65 or above, compared to 14.4 per cent of Canada’s entire population, and by 2036, Statistics Canada expects it to be around 29.1 per cent (compared to 23.7 nationally). Furthermore, Canada’s labour force increased by 1.1 per cent between 2012 and 2013, however, Atlantic Canada’s increased by half that amount, which is due in large part to an outflow of young individuals and families and an influx of retirees. As a result, the region is not equipped to attract large-scale industry, especially compared to British Columbia, Alberta, and Saskatchewan, and has contributed much less than other regions to Canada’s GDP in recent years. This is an important caveat, considering the federal government will begin calculating the Canada Health Transfer using population and GDP in 2018. If the Atlantic Provinces fail to generate economic growth and attract newcomers, they will receive less than other provinces to fund their healthcare systems, which will become more cumbersome in the future due to an ageing population and declining tax base.

In coming years, these two developments–freer trade and the new healthcare funding mechanism–will play a large role in determining Canada’s economic prosperity and the viability of its healthcare system. Canada’s export sector and healthcare system are rooted historically in the country’s history and it is unclear what changes will materialize because of modifications to them. In any case, the Atlantic Provinces need to take measures that bolster economic growth and attract new talent, both of which will allow them to take full advantage of CETA and other free trade agreements and create a sustainable source of funding for their healthcare systems.

Rachel Lowe is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute