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

Sustainable Economy, Sustainable Development

Throughout history Canada has been known for its vast natural resources.  These natural resources have sustained our economy.  Weather it be the beaver pelts used for fashion; lumber used for building, or oil to fuel our cars, Canada’s responsible development of these resources has lead to our success.  Much of the wealth in our great nation, beyond our talented human capital, is found in Canada’s North.  Although I do not encourage a reckless development of our natural resources, it is by far the best way to move many Canadians in northern communities out of poverty.

The bulk of these resources are found in desolate areas, areas with small towns that lack a vibrant economy.  These towns would benefit from the development of these resources- so would native reserves.  This development would provide direct employment to members of the community, and the resulting economic spin off.  Take a diamond mine for example.  This mine would employ many people within its community.  As a result of the additional income in the economy, the community’s need for a barber would rise, as would their need for restaurants and clothing shops.  People would spend more on home repairs, hiring carpenters, plumbers and electricians.  These business opportunities are a result of economic spin off. The result of a diamond mine stretches far beyond the immediate employment.  This economic growth would result in a decreased reliance on government subsidies, as the economy would be finding a way to sustain its self.

Now, I realize that not every small community, nor native reserve sits on a diamond mine, nor has access to the many excellent employment opportunities it presents.   However, I guarantee that each has a resource that if they were willing to develop could help move many members of the community out of poverty.  The operative word of course, is willing. Without a willingness, nor motivation to develop these resources many communities will operate as artificial economies supported through government transfers.  Towns that would have been vacated years ago if it weren’t for government subsidies. Many people will say that’s nothing sustainable about the development of our resources.  I counter that there is nothing sustainable about these communities.  These communities  lack the motivation to seek greater success for their people because the government continues to subsidies their costs at the expense of other taxpayers.  It is not the fault of the individual, but rather of the collective mindset that these subsidies create.

Sustainable development is an industry on to its own.  For those community members who claim development of resources is unsustainable, may I suggest they join this growing industry that seeks to find a solution to make development of certain natural resources a sustainable endeavor?  There are many willing university students who would spend a summer planting trees, and many students who study earth sciences who would be excited to help develop a manner to reclaim land after a mine is finished.  Might we consider enlisting the help of some of sustainable developments greatest proponents in finding a solution that is fitting to all?

The greatest wealth a nation has is found in the creativity of its population.  The human capital’s ability to solve problems can make or break an economy.  With a population of over 30 million people, surely Canada must have the talent needed to develop Canada’s north in a sustainable manner that reflects the values of the community.  Coupled with the incredible natural resources Canada has been blessed with, it is no wonder that our country is a leading player in the global economy.  However, we must find a way to expand this growth to include our northern communities.

If we assume that humans act in their rational best interest, this quote from Adam Smith’s The Wealth of Nations becomes highly relevant:

“Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to society… He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was not part of his intention”

Evidently, society is improved by an individual acting in his best interest.  If we empower communities to do so, the results would be astounding.  The first step would be to reduce regulations on development of Canada’s resources, followed by reducing the transfer payments made to such small northern communities (and reserves).  Reducing the transfer payments over a period of time would enable the community to ease into the change, while providing an increasing incentive to find innovative solutions to create a sustainable economy.  This would also break the reliance on the government, while empowering individuals to become accountable for their own success.  Although yes, this means that some people can, and will fail, the community as a whole will be more successful when it can take ownership of its own success, and accountability to its own failures.

-Alanna Newman