Wednesday, December 14, 2016

June 2011 Posts

18 Posts from June 2011

Ontario has a provincial election in October and the pace of the campaign will certainly heat up as the summer progresses. Tim Hudak's Progressive Conservatives are apparently heading towards a majority government in the Ontario election on Oct. 6, based on a new poll by Forum Research.  The poll of 3,198 people, a large sample size, suggests that 41 per cent of Ontario voters will vote for the PCs, 26 per cent support the reigning Liberal party, 22 per cent want the NDP to win, and eight per cent back the Green party.
Social media will also be important in this election and in a replay of what I did for the federal election this spring, here is the Twitter follower count for the four Ontario political party leaders as of noon on June 30th. 
Hudak (PC)
7899
Horwath (NDP)
4518
McGuinty (LIB)
11477
Schreiner (GR)
1386
A visual is usually much more interesting so a pie chart follows:


The results here differ from the most recent poll result and would suggest that the Liberals under McGuinty with 45 percent are still in the lead at least as measured by Twitter followers.  Tim Hudak (PC) is next with 31 percent followed by Horwath (NDP) at 18 percent and Schreiner (Green) at 6 percent.  However, at this early stage, all the Twitter count is probably showing is the number of core committed followers a leader currently has.  A poll is a much more random sampling and it will be interesting to see as the election campaign progresses if the Twitter distribution converges on the poll results.



Statistics Canada today released family income data for sub-provincial areas for 2009 taken from the 2009 personal income tax returns.  According to family income data derived from 2009 personal income tax returns, Ottawa–Gatineau was the census metropolitan area (CMA) with the highest median total family income ($89,410), followed by Calgary ($88,410), Edmonton ($86,250) and Regina ($83,550).  The largest percentage increases in median total family income between 2008 and 2009 in CMAs were in St. John's (+5.0%), Saint John (+2.9%), Ottawa–Gatineau (+2.3%), Regina (+2.3%) and Saguenay (+2.1%). 

Given the recession, there were also declines.  What is notable about these results is how many of the declines over the period 2008-2009 were in Ontario, reflecting how battered Ontario was during the recession.  Using the data for census families (census family refers to a married or a common-law couple, with or without children at home, or a lone-parent of any marital status, with at least one child living at home) and drawing graphs showing the percentage change in median total family income, it turns that that all CMAs in Ontario saw a decline except for   Ottawa-Gatineau and Kingston.  The largest percentage declines in Canada as well as Ontario occurred in Windsor and Greater Sudbury.  Outside of Ontario, hardest hit were Alberta and parts of British Columbia with Victoria as an exception.  All the other CMAs saw increases. The charts provide an interesting snapshot.



The most recent point of comparison between Ontario's Northern Growth Plan and Quebec's Plan Nord lies in the difference in marketing.  Quebec's Premier Jean Charest is in Europe promoting Quebec's economic development as well as Quebec's Plan Nord.  He will be visiting England, Belgium and Germany during the course of this week promoting Quebec but more importantly promoting northern economic development in the mining and resource sectors. Of course, Quebec''s plan is quite easy to market given the dynamic and assertive nature of its language and content.  Charest says that the Plan Nord could lead to 11 new mining projects during the next few years as well as 80 billion dollars in public and private investment.  Charest is also planning to visit China and Japan this month to promote the Plan Nord.
On the other hand, Ontario is not promoting its northern development and its Northern Growth Plan in as engaged a fashion as Quebec.  Why?  Well, Ontario's plan for the most part is a rather bland collection of plans to engage in further planning.  It is difficult to market boring platitudes in a manner that does not put your audience to sleep.  While Northern Ontario politicians have to sit through provincial government summits and seminars that endlessly repeat the same empty statements in order to demonstrate their fealty to Queen's Park, international financiers and politicians would simply leave the room. 
It is however, more than this.  Ontario's government  seems to be embarrassed about mining and resource development in the North whereas Quebec's government sees its North as a resource frontier and an opportunity for development.  Quebec's government has embraced its north whereas Ontario's government probably wishes it would go away.  The Queen's Park bureaucracy sees the North as a far flung region full of rocks and trees to be administered as a sparsely populated peripheral colonial possession with strange people who want to hunt and fish.  After all, the conventional wisdom at Yonge and Bloor is fish are our friends and not our food.  Food is something you find in its natural habitat - the supermarket shelf.  Northern Ontarians engage in activities not compatible with the environmental lobby that has swayed so much decision making at Queen's Park when it comes to Northern Ontario land and resource policy.
The Ontario Northern Growth Plan was not designed for Ontarians as a symbol of where their economic future can take them.  It is merely another cynical political device designed to make  Northern Ontarians feel that they are are indeed valued when in reality they are not.  There is a profound asymmetry in how the northern resource frontier is perceived and valued by the Government of Ontario and the Government of Quebec.  That is why Jean Charest is in Europe selling his province's north and Dalton McGuinty isn't.


On Thunder Bay City Council’s agenda for Monday evening will be the shortlist for the “proposed events centre” with the top three choices now narrowed down to: Innova Park, the downtown north core and land near the Thunder Bay International Airport.  What is remarkable is that the debate is focusing on location whereas the project has still not been approved.  Moreover, while the studies to date have noted a need to replace the aging Fort William Gardens facility, there has been little discussion of how the new multi-purpose events centre will impact the city-owned auditorium.  After all, the multiplex will also be an alternate venue for some of the smaller events that the auditorium currently hosts, which will eat into its revenue.  However, I believe there will be an events centre and that now makes its location the key issue despite the sideways process pursuing it.
If Thunder Bay is going to make a strategic investment in its future, a location in the north/Port Arthur core waterfront area should be its first choice given the waterfront development going on there and the designation of the area as a tourism/entertainment area.  The events centre should be a signature piece of architecture that will become a marketing symbol of Thunder Bay’s skyline and waterfront.  It will anchor an urban entertainment and convention area that will give the city  a concentrated area of walkable urban nightlife with diverse dining and entertainment opportunities.  The second best choice is neither the airport location or Innova Park, it is the downtown south/Fort William Core given the fact that it is already home to the Fort William Gardens (a home for sixty years despite the absences of acres of asphalt parking that seem so vital to proponents of Innova Park) and is also a higher density core area undergoing renewal.  Locating the new events centre either near the airport or Innova Park will be a decision made on the basis of short-term convenience and will set Thunder Bay back a generation in terms of its urban development.
Thunder Bay’s history as two cities gave it two core areas but much of the development since 1970 has occurred in the intercity area and created a dispersed, car-oriented and low-density urban area.  While the intercity area is a logical place for private sector development given its location between two population clusters, also locating public buildings there ostensibly to deal with north-south rivalry has destroyed the density needed for an urban feel to the city as well as cost-effective public transit.  It has only been the last decade that a move back towards the core areas has begun with the new historical museum, the courthouse, the casino and the new Magnus Theatre projects going into the core areas – unlike the auditorium and art gallery which went into intercity.  Putting the events centre outside either of the core areas will represent a reversal of this process.
Despite City Council’s assertion that all the short-listed sites are in the running, it is hard not to feel that the events centre is slowly being maneuvered into the Innova Park location.  The three short-listed choices have already set up the classic Thunder Bay location strategy maneuver – a north side choice, a south side choice and the middle “compromise” choice that will be many people’s second best solution.  We have already seen this employed before in Thunder Bay with hospital location.  Moreover, given what seems to be a concerted development strategy to make Junot/Golf Links a commercial corridor, major land owners and developers in the area (including the City which owns Innova Park) would also find their property values enhanced by a major new greenfield project in Innova Park. 
I think City Council after several more months of public contemplation and self-flagellating debate designed to demonstrate how personally hard this decision has been for them will opt for Innova Park because it enhances the Junot/Golf Links development strategy that seems to be occurring, makes use of Innova Park – the city promoted industrial park that has sat empty for years - and fulfills the desire of many car-oriented residents in the city for sites with lots of parking.  This decision will cement a new western fringe of dispersed urban development for Thunder Bay, set back the development of urban core density and leave us with a new generation of cheap box buildings that say we are still a frontier town with little long-term vision aside from having shiny new buildings.  City Council will atone for this decision by creating more bike lanes and sidewalks and start a new campaign on how wonderful the quality of life is in Thunder Bay.  I dare them to prove me wrong.  On Monday night, never mind a short list.   Given there is already an implicit decision to build the events centre, pick the north core waterfront location and start planning on how to make it work.



Northern Economist continues to attract interest and is now attracting over 1,000 visits a month.  Moreover, the visits are not just from Northern Ontario but from across Canada, the United States and indeed around the world as the map below indicates.  There have been recent visits from India, Taiwan, Spain, Russia, the UK.  Thank you to all visitors for stopping by and I look forward to visits in the future. 



 



I've just discovered that the Lakehead Public School Board in Thunder Bay is implementing a class size policy in its high schools for the coming school year.  To the best of my knowledge, the policy is if the class size is going to be below eighteen students, then the class will not be offered.  This is obviously based on cost considerations and having students in larger classes will allow the Lakehead board to have fewer teachers. 
This policy is interesting for two reasons.  First, there has been a general move by the provincial government towards smaller class sizes at the elementary school level.  Given scarce resources, if there are smaller classes at the elementary level, then the resources have to come from somewhere and obviously some are coming from the secondary school sector.  This means fewer electives at the secondary school level as only the most "popular" courses will generate the minimum number of students.  However, in some programs, even required courses are going to be impacted and may result in split grade classes.  What this may mean for the diversity of course offerings and the quality of the educational experience for secondary school students has not to my knowledge been elaborated on by the Lakehead Board. 
Second, what is more amusing about this is that during the school closures that occurred in Thunder Bay by the Lakehead Board during the first term of the McGuinty government when Gerard Kennedy was Education Minister - closures of the Port Arthur Collegiate and Fort William Collegiate high schools in particular - the case was made that those schools were too small to offer the diversity and breadth of courses that only larger high schools could offer. Well, here we are half a decade later and now it appears that even the much larger high schools are apparently having issues with resources and probably enrollment too.  
The new larger schools obviously do not have the student numbers to offer all the courses they used to.  It was my contention during the school closure debate that the Lakehead Board would probably have been better off with keeping FWCI and PACI and closing two of the larger high schools.  A system with one large and one smaller high school on each side of town was more in keeping with the projections for longer term enrollment.  Instead, there probably still is building overcapacity in the Lakehead board which when combined with a resource shift towards elementary schools is now aggravating the situation.  The Lakehead Board got its shiny new high school in the wake of the closures but there are still resource issues.  And of course, students now will have to pay the price in terms of diminished course offerings and probably crowded classes.  After all, while there is a minimum of 18, my guess is the upper end number will be much more flexible.  Of course, this is only the beginning.  Given that there is overcapacity, which Lakehead Board high school will be next to close?


Having just got back from a four-day fly-in fishing trip into Ontario's North, one acquires a new appreciation for the beauty of this vast land as well as the rugged geography and the challenges of providing transportation in this region.  Development of the Ring of Fire will require transportation infrastructure and the Ring of Fire Conference held in Thunder Bay yesterday discussed proposals for transportation infrastructure.  Of course, the proposals have a familiar ring - building new all-weather roads as well as building a new rail line.  These are expensive pieces of transportation infrastructure and will provide access to the Ring of Fire and immediately adjacent areas.  There are many First Nations living in Ontario's Far North who rely on winter roads for bringing in supplies and these ice roads have become increasingly fragile with the shorter winters brought about by climate change. A railroad or road to the Ring of Fire would not necessarily meet the needs of all remote First Nations.
One solution that would be cost-effective in meeting the needs of First Nations as well as providing a means to transport heavy equipment and supplies for mining companies lies in an old technology that is receiving some updates - Lighter Than Air Vehicles, also known as airships.  A visit to the Daily Climate website reveals an article titled Floating Into the Future that deals with new airships and their possibilities.  The new airships allow for heavy loads that can be transported long distances quite cheaply and with a minimum of ground infrastructure as airstrips are not required.  According to Barry Prentice, a transport economist at the University of Manitoba and a proponent of airships : "The cost of building all-weather gravel roads in northern Manitoba is $1 million per kilometer" but "If transport airships were available, then it would be hard to justify any roads." An example of the new technology is the prototype by Lockeed known as the Skytug that would have a range of 1,000 nautical miles and carry a payload of 20 tons. Such airships could also have some passenger capability.
Is this approach feasible?  After all, there have been similar claims in the past about new airship technology and airships have yet to stage a major comeback.  However, their utility in accessing remote regions is indisputable and maybe its time to look into their potential more deeply.  Think of the money that would be saved by not having to build major road or rail lines in areas with muskeg or permafrost.  Think also of the potential for manufacturing jobs in Thunder Bay to build and maintain airships as well as the transport jobs from locating an airship hub near rail and port facilities.  This is something that should at least be investigated given the potential benefits to the region's economy.

For me, Father’s Day is a time to reflect on the role my father played in my life and the examples he set.  He was the most amazing man I have ever known. Nicola was born and raised in harsh conditions near Ortona in Abruzzo, Italy and came to Canada in 1957 to start a new life.  On his return from railroad work in western Canada, he settled in Fort William, Ontario (now Thunder Bay) because its location on the western shore of Lake Superior reminded him of Ortona on the Adriatic.  My father worked construction and then at a pulp mill but he also was industrious after hours doing concrete jobs on the side and leaving hundreds of driveways and sidewalks in Thunder Bay as testaments to his work. With only a grade 3 education, he learned English and devoured books and newspapers.  He also taught himself carpentry, plumbing and electrical wiring and used those skills to build and maintain his family’s home. 
His most important lessons for life include hard work, perseverance and the importance of education.   He was always improving his house and garden even in the face of serious illness, which claimed him prematurely at the age of 57.  He made sure my sister and I both went to school, explaining how improved our lives would be if we learned to earn money “with our pens, rather than with shovels”.  Indeed, at about the age of six my father took me shopping at Loblaws and every week bought me a volume of the World Illustrated Encyclopedia, insisting that I read every volume. Finally, he taught me how important it is to always have a sense of wonder.  My father was astounded by Canada’s spectacular scenery, its forces of nature, and the opportunities opened up to him by what was a vast and magnificent land possessing infinite wealth and opportunities.  To this day, so am I.



The photo above is of my father and his traveling companions shortly before embarkation on the Saturnia at the Port of Naples.  He is in the back row at the far right - with what seems to be a rolled up newspaper in his jacket pocket.  Immediately to his right is his friend Armando, who also moved to Fort William and became my Godfather. In the front row, far left, are two brothers - Ariste and Alberto - who eventually moved to Hamilton and with whom my father reconnected after 30 years in Canada.  During a visit to Hamilton in the late 80s, my father went through the phone book and found them.

Bank of Canada Governor Mark Carney gave his talk in Vancouver yesterday and delivered a warning on housing prices and housing markets.  According to the Globe and Mail report:  “…the housing market may be overheating, as his ultra-low interest rates, combined with too much optimism on the part of buyers, fuels prices in the country’s hottest markets.”  He did not use the words or term “speculative bubble” but noted that housing prices in Canada were now 13 percent above their pre-recession peak.
I went back to my CMHC data from their 2010 Housing Observer Report and decided to extract the Ontario numbers for the 2000 to 2009 period to see what the increases have been like over the last decade.  Interestingly enough, over the period 2009 to 2009, average Ontario residential prices for 15 major centres rose steadily (Fig1) – there does not appear to have been any drop due to the recession in 2008 or 2009.  There were some drops for individual cities – Peterborough and Windsor – in 2008 and growth in Toronto slowed, but overall, real estate prices in Ontario cities continued to barrel ahead. 
  
Figure 1

 



However, some cities did better than others and it may surprise you to see where the greatest growth in average residential prices was over the period 2000 to 2009.  As the accompanying figure (Fig2) shows, the top three cities for growth in average residential real estate prices were Ottawa, Kingston and Sudbury.  Toronto, was in the bottom half of the pack in terms of percent increases though the lowest increases were in Oshawa, Thunder Bay and Windsor – all three cities ravaged by the manufacturing recession.  However, even Oshawa did rather well compared to Thunder Bay and Windsor and that is probably the advantage of being close enough to the GTA market that you can serve as a bedroom community.  Unfortunately, Windsor and Thunder Bay do not have that advantage and their housing prices bore more of the brunt of their local economic conditions. Still, they increased.

Figure 2
 

However, prices in 2009 are still highest in Toronto where the average was 396,154 dollars (Fig3).  Next was Ottawa at 304,801 dollars and then Hamilton at 290,946 dollars.  Despite having the second and third highest percent increases respectively over the previous decade, housing in Kingston and Sudbury was still quite affordable compared to the GTA.  The average price in Kingston was 242,729 dollars in 2009 while in Sudbury it was 200,947 dollars.  The lowest prices?  Well, Windsor and Thunder Bay at about 154,000 and 138,000 dollars respectively.

Figure 3
 

What is interesting about Thunder Bay and Sudbury is that in 2000, their average prices were almost identical – at 109,811 dollars for Thunder Bay and 109,262 dollars for Sudbury.   If you treat a house as an investment asset, returns have been much better in the Sudbury market than the Thunder Bay market over the last decade.  Of course, what is truly amazing is that even in cities where there was a lot of economic damage during the recession, housing prices still rose. In these major centres, housing appears to have been a recession proof investment.  Is this a sign that there has been a departure from fundamentals and that there is a bubble?


David Canfield, the Mayor of Kenora came out and stated that economic development in Northern Ontario requires that the North have more autonomy within Ontario.  According to a report on Thunder Bay Television news, on Tuesday morning during the second day of the Think North II conference in at the Victoria Inn Canfield stated: "If we could drive the policy, if the policies could be made in Northwestern Ontario for Northwestern Ontario I guarantee our economy would booming," and then proceeded to add:"Get Queen’s Park out of our face. Let us drive the policies not people driving policies that know very little or nothing about us."
Good for him.  It is about time our regional leaders spoke up and not unexpectedly its someone from one of the smaller towns who has shown the courage.  In my years of interacting with regional politicians, I've always been impressed on how much more open to action and ideas the mayors of smaller places like Kenora, Greenstone, Dryden and Atikokan were compared to the metropolis of Thunder Bay. Politicians in Thunder Bay have always seemed inordinately preoccupied by what Toronto thinks of them whereas politicians outside of Thunder Bay always seemed more comfortable with who they were and what they wanted.  This was certainly my observation during my participation with the Regional Recovery Committee which published the report "Enhancing the Economy of Northwestern Ontario" in 2007 and developed the concept of a Northwestern Ontario Regional Development Authority (NWORDA).  NWORDA would have been an agency charged with regional development but was not pursued by the province and its demise should have been met with more regional outrage.  Nevertheless, if the desire for more regional autonomy resurrects NWORDA, it would be a good start.  Canfield's comments are also a good start.  Let's see if these sentiments carry over into the Sudbury Summit.

18 Posts from June 2011
There has been alot of renewed interest in Canada's real estate market and whether or not it is immersed in a speculative bubble that once burst will provide homeowners with a soaking financial bath.  Indeed, Mark Carney, Governor of the Bank of Canada, will be in Vancouver tomorrow and is apparently scheduled to give a talk that will discuss Canada's real estate market.  What better place to do this than Vancouver which has seen its prices soar to astronomical levels.  In the United States, which saw its housing bubble burst, there was an interesting analysis and discussion by Robert Shiller in Sunday's New York Times titled the "Sickness Beneath the Slump".  After increases of 10 percent a year for a decade, U.S. home prices tumbled 34 percent between 2006 and 2011 and they still appear to be falling.  This decline according to Shiller is a significant long-term ingredient into the U.S. economic slump. The real estate boom was fueled by an exuberant optimism and expectation that prices would continue to rise and that optimism combined with rising asset values in turn fueled the rest of the economy.  I suppose just as  optimism amplifies upturns into bubbles, pessimism can prolong a slump.  Canadians consider themselves so much more prudent and yet average housing prices have soared dramatically in most Canadian cities.  Prices have even gone up in smaller centres like Thunder Bay, Moncton and Sudbury though not as dramatically as my most recent post on Worthwhile Canadian Initiative illustrates.  When a simple price/earnings measure for Canadian real estate is constructed, many Canadian cities are in a range that if it was a stock market valuation, it would be considered a speculative bubble.  It will be interesting to hear what Mark Carney says tomorrow. 

Next week's summits in Thunder Bay and Sudbury still seem to be suffering from divergent points of opinion as to what their purpose is.  On the one hand, the province has billed it as a Think North II Summit which implies yet another consultation.  Northwestern leaders as embodied by the Joint Task Force (JTF) see it as a Regional Economic Planning Zone Pilot Project Summit and some of their background reports suggest they are looking for more devolution of decision making authority.  Perhaps the JTF is not making its point strongly enough because it is not being very assertive in its language.  At the risk of coming across as yet another academic postulating from their ivory tower, let me suggest that perhaps at next week’s Think North II Summit in Thunder Bay there needs to be a change in thinking on the part of the region’s leaders.  Rather than enjoy a couple of days off from their day jobs savoring snacks and participating in yet another facilitated consultation that generates more reports as an input into yet another consultation, it is time for our political leaders to make a difference.   Rather than sit through yet another workshop whose questions have been designed by Queen’s Park, the participants to this conference should take a page out of history, find a tennis court to gather on, and make a Northern Declaration that:
The peoples of Northern Ontario, making common cause to ensure a better future for our children in this land we call home, have come together in partnership to speak and act with one voice.  We assert that Northern Ontario constitutes a distinct economic, social and geographic space within Ontario as embodied by its historic development.  We assert that Ontario’s North requires innovative institutional change that gives it the economic development tools to manage its own lands and forests, its energy costs, its transportation infrastructure and by extension, its people’s well being. We declare that such change requires the establishment of autonomous self-government institutions for the North within Ontario.  We pledge today to begin the work needed to bring about regional governance in the North, for the North, and by the peoples of North. We invite the Government of Ontario to join us in this new future. 
This institutional change is not economic planning zones but autonomous regional
government for the North within Ontario. Come out and say it.  At minimum, there should be established one government for the province's
 Northwest and another for the Northeast reflecting the vast geographic differences of the North.  A regional government for the Northwest can begin its work by planning and implementing transportation infrastructure to access the Far North and the Ring of Fire, design a regional energy grid and more competitive electricity prices, stop treating Crown Lands as a scarce resource and opening more up to cottage development, and help invest in water treatment plants, schools and training facilities, and medical facilities in First Nation communities. 
Functions to be devolved onto a northern regional government
 may include economic development, environment and energy, municipal
 affairs, natural resources, social services, transportation, culture and tourism.  Human capital investment such as health care and
 education can remain at the provincial level because of individual
mobility and access concerns and the need for common standards but the case can also be made for regional administration of health and education because of distinct regional needs and conditions – particularly in the case of First Nations.  Naturally, the
 transfer of these functions will be accompanied by the transfer of an
 appropriate own source revenue base.    This can be done through the transfer of points from the Harmonized Sales Tax as well as the provincial income tax combined with resource rents.  Bringing about regional government and new institutions for the North that enable it to take control of its economic future would be the defining event of the 21st century for this region.  Our region’s political leaders can either continue to be supplicants at Queen’s Park, or they can assert their own vision.  An election year is the time to do it.  After decades of endless consultation, what is there to lose?  The worse that can happen is the province will say no and force them to sit through another consultation next year after the election.


Next week is the Think North II Summit designed to bring together decision makers and opinion leaders in yet another consultation emanating from the one Northern Growth plan to rule them all that was forged and tempered in the fires of Queen's Park by the Ontario government.  According to the recent update from the Ministry of Northern Development and Mines, The Think North II Summit is "an opportunity for northerners to be actively engaged in shaping the framework for regional economic planning areas in Northern Ontario" and will feature hands-on workshops on "crafting a vision for regional economic development planning in Northern Ontario" as well as create "strategies for collaboration."  There will even be the obligatory S.W.O.T. analysis to identify the strategies, weaknesses, opportunities and threats of the "change" represented by regional economic planning.  The "threat" of change is a particularly amusing concept given that this entire process continues a process of consultation that has been ongoing for decades with not much change.  To date, the major obstacles to change in the North have been the policies of the provincial government itself which have hampered the ability of the region to take charge of its own development. Never mind regional economic planning, a regional government for the North with power over economic and resource matters is decades overdue.  
A close inspection of the agenda also shows that there is still no mention of the other "Northern Plan" that was recently introduced by the Quebec government.  Can we learn something from Quebec?  The Ontario government apparently thinks not.  An interesting workshop of the Summit is the one called Vision 2021 which is described as: "The year is 2021.  The Regional Economic Development Planning Areas are functioning well and Northern Ontario communities are prospering.  Describe what is happening in northern communities".  It would appear that the Northern Growth Plan is already a success!  Time travel to 2021 has occurred and the report back is that the North is prospering.  I had always suspected that the Ring of Fire was really an inter-dimensional time portal administered by Stargate Command.
Vision for the North requires more concrete action and less planning.  If you don't want to take my word for it, visit the following post on Stan Sudol's Republic of Mining which advocates a "Mining Marshall Plan" for Ontario's North.  The Marshall Plan was designed to rebuild Europe after the Second World War.  That we need a Marshall Plan for the North suggests we need to be rebuilt after decades of less than satisfactory provincial economic and development policies.
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From the June 8th, 2011 Winnipeg Free Press - PRINT EDITION

1998-2008: Golden Age to Govern
By: Livio Di Matteo

When future generations of Canadians look back on the early years of the 21st century just prior to the Great Recession, they will realize what a truly special time this was for the funding of government programs and especially public sector health.
Over the period 1998-2008, the median annual growth rate for real per capita public health spending was 2.4 per cent. However, real per capita provincial government spending net of health also grew, though at a lower median rate of 1.8 per cent. As well, government program spending actually grew faster than revenues, yet many governments managed budgetary surpluses.
The last decade has witnessed the power of the fiscal dividend. Balanced budgets and low interest rates reduced the burden of debt service costs on government and afforded a fiscal dividend that allowed them to both lower corporate and income tax rates and increase spending.
Much of this dividend was poured into public health care spending, although other areas of government spending such as education also benefited.
Moreover, a growing economy and tax base managed to expand revenues even with lower tax rates. Federal finances, for example, improved so much that they were able to increase health transfers to the provinces at six per cent a year while lowering corporate and personal tax rates as well as the GST rate from seven to five per cent.
As for the provinces and territories, their total revenues grew from $388 billion to $633 billion between 1998 and 2008.
The Great Recession and its large deficits have brought this short Golden Age to an end. Public debt has mounted dramatically and the only saving grace has been historically low interest rates.
The prospect of rising interest rates, however, means that the fiscal dividend is poised to work in reverse in a replay of the 1980s. Higher interest rates and large deficits will lead to mounting debt and debt service costs, which will then squeeze government program spending.
At first, areas other than health will bear the brunt of the cuts but eventually there will be spillover into the health sector as there was during the fiscal crisis period of the early 1990s.
Despite the perception of inexorable rises in health care spending, during the period from 1990 to 1996, real per capita public health care spending actually declined -- evidence that when push comes to shove, governments do reduce health spending.
All this is relevant to the current debate on the sustainability of public sector health care spending. Often, the argument is made that the substantial personal and corporate tax cuts of the last decade have eroded the resources available to pay for public health care. As a result, the perception is that rising health care expenditures have meant fewer resources for other government programs but the reality is more surprising.
The rising tide of the fiscal dividend raised all boats -- but some more than others.
The period from 1998 to 2008 is unique because the fall in interest rates reduced government debt service costs and allowed for resources to be diverted to both health care spending and tax reduction with money left over for other program increases.
Whereas in 1998, the debt interest share of provincial government spending in Canada was 14 per cent, by 2008 it had fallen to 8.5 per cent, freeing up resources that allowed governments to hit multiple targets.
In the wake of the Great Recession, however, with its lower GDP growth and the return of large public sector deficits, this fiscal dividend foundation for rising health spending is crumbling and will not be a basis for future expenditure growth. In a sense, governments will no longer be able to have their cake and eat it too. Some provinces will weather the coming storm better than others. Alberta and Saskatchewan, for example, actually reduced their net debt over the last decade.
Other provinces have not done as well. The Great Recession caused most provinces to pile on substantial debt -- Manitoba included.
Between 2007-08 and 2009-10, Manitoba increased its net debt by 16 per cent. Other provinces have increased their net debt by even more -- for example, Ontario by 26 per cent and British Columbia by 24 per cent. The consequences may indeed be serious as interest rates creep up and the fiscal dividend fades into history.
Livio Di Matteo is a professor of economics at Lakehead University.
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The April building permit numbers are out from Statistics Canada and they show that the value of permits in the Canadian Census Metropolitan areas for period April 2010-April 2011 is down by 18.1 percent.  However, as the accompanying figure shows, Thunder leads the annualized April numbers with the top growth rate of 328.9 percent.  The value of permits issued in Thunder Bay was 7.7 million dollars in April of 2010 and 32.9 million dollars in April of 2011.  The other major Northern Ontario centre of Greater Sudbury was also up over the same period but only by 4.2 percent.  April saw permit values fall in more than half of Canada's census metropolitan areas.  The value of building permits fell 21.1% to $5.3 billion in April, after increasing 16.8% in March and 9.8% in February. The non-residential and residential sectors both declined in April, with Ontario posting the largest decrease.  It would appear that the recovery is still sputtering along in Ontario given that springtime is usually when there is a pick-up in construction activity.

 

It was announced May31st by Canadian Wheat Board Chair Allen Oberg that the Canadian Wheat Board’s (CWB) monopoly of marketing spring wheat, durum and barley crops will come to an end in August 2012.  Technically speaking, this is also ending a monopsony as the wheat board is a single buyer of wheat from farmers. This is an important moment in Canadian economic history as it marks the first time since World War II that farmers of wheat, durum and barley will not be required to sell their crops through the board.  There is a long history of prairie farmers lobbying for changes to the buying and selling of wheat.  The creation of the Wheat Board in 1935 and the wheat pools in the 1920s were rooted in farmers seeking to get the highest possible price for their crop and therefore maximize their income.  Farmers supported the creation of the Wheat Board in 1935 because they believed a monopoly seller on world markets would get them the best possible price.  Decades later, those prairie farmers who wanted the monopoly ended believe that they can do better in a more competitive market despite the more consistent returns often provided by the wheat board monopoly.
The marketing monopoly will end for all three crops at the same time, rather than in phases and it can be expected to affect the Port of Thunder Bay. When the monopoly ends, companies such as Canada Malting Co. Ltd., Cargill Inc., Mission Terminals Inc., Parrish & Heimbecker Ltd., Richardson International Ltd., Viterra Inc., and Western Grain By-Products Storage Ltd. that have facilities in the Port of Thunder Bay will be able to buy directly from farmers instead of going through the Wheat Board.  

What will the impact be on Thunder Bay and its port?  Canadian Wheat Board shipments apparently account for sixty percent of the Port’s overall cargo tonnage while grain overall is about seventy five percent of overall tonnage.  As the accompanying figure shows, total tonnage has been in decline since the 1980s and if this change reduces tonnage, it could be a severe blow to the port.  

 

How things work out will now depend on the ability of the Port of Thunder Bay to compete for the business of farmers relative to the Port of Vancouver, Prince Rupert, Churchill, as well as American ports such as Duluth-Superior.  There is also the Mississippi route down through to New Orleans and the Gulf of Mexico.  In a sense, this is new territory and the outcome difficult to predict given that this type of competition has not existed since the 1930s.  However, given that everyone now has to compete, it is a new playing field and does represent an opportunity for the Port to compete for business and increase its grain tonnage. 
The demise of the Wheat board monopoly will probably have a bigger impact on Churchill than the Port of Thunder Bay as it is more dependent on Wheat Board grain shipments than Thunder Bay.  Nevertheless, Thunder Bay already ships about ten times more grain than Churchill, which means any additional business taken away from Churchill will be modest in its impact on Thunder Bay.  Thunder Bay will need to compete more aggressively with its sister port, the "American Lakehead" of Duluth-Superior as the accompanying figure shows.  Duluth-Superior has experienced a drop in tonnage and vessels using its port over the last few years and you can be sure they will be keen to generate additional business.


Being in the nation’s capital can have an exhilarating effect when it comes to fiscal matters.  It was a beautiful day in Ottawa today and I walked around the Parliament buildings before dinner and after dinner as I reflected on the Confederation Flame flickering on Parliament Hill, I began thinking about all the money that Ottawa transfers to the provinces.  Inspired, I decided to quickly download the 2010 Fiscal Reference Tables and calculated per capita provincial federal cash transfers for the last ten years as well as their percent growth.  The results were quite interesting.  There is a definite east-west gradient with the biggest per capita recipients being the four Atlantic provinces but then there is Manitoba. Indeed, Manitoba is definitely not like the other western provinces when it comes to transfers - it is more akin to the Atlantic ones.  

What is also interesting is the growth in per capita federal cash transfers over the 1999-2009 period.  The biggest growth was for Ontario – which grew 179 percent - from 511 to 1425 dollars per capita.  Next was Alberta, and then Quebec followed by British Columbia and Manitoba.  Indeed, it appears that many of the provinces are engaged in a game of federal transfer catch-up with Atlantic Canada.  Only Saskatchewan and Newfoundland exhibited muted growth over this ten year period.  With Ontario's superlative growth in transfers, it appears to have come a long way in redressing the fiscal imbalance. 


Well, I'm off to Ottawa for the annual meetings of the Canadian Economics Association.  There will be hundreds of economists from all over Canada, North America and indeed around the world and am certainly looking forward to meeting new people and renewing connections with old colleagues.  I will be involved in a number of sessions both as a presenter and a discussant.  If you are interested in some of my current research in the areas of financial and wealth history or health care sustainability, please visit my university web page Working Papers section for drafts of the conference papers.  Have a great week.