NDP could advance policy built around the Alberta oil sands as a “growth pole”
By Markham Hislop
My first reaction to NDP leader Thomas Mulcair’s argument that Alberta’s oil sands are responsible for hollowing out Canada’s manufacturing sector was to grab a match and a torch, then round up the other villagers.
Westerners are a mite touchy about Eastern Canadian politicians suggesting that our economic boom isn’t in the national interest. The last time that happened was 32 years ago and every Albertan can tell you how well that worked out. I have Calgary friends who still talk about colleagues and business partners whose lives were ruined by Pierre Elliott Trudeau and the National Energy Policy.
The energy sector now has deep roots in Saskatchewan, too, largely because of the southeast Baaken reservoir, and Premier Brad Wall isn’t happy about Mulcair’s comments. The Saskatchewan Party leader scolded the federal NDP leader on Twitter Monday morning: “@ThomasMulcair calls the strength of our resource sector a “disease” Resources have been the cure not the problem.”
The next few days will see plenty of economists arguing whether Canada has Dutch Disease or not. University of Calgary economics professor Jack Mintz has already argued convincingly in The Financial Post that Ontario’s manufacturing sector has been in relative decline for decades and there is no causal link between resources prices, exchange rates and the health of manufacturing. Mintz says the general trend for manufacturing to relocate to low-cost countries, like China, is the real culprit.
I think Mintz is right. But let’s leave the Dutch Disease debate for another day.
It was another Wall tweet that caught my eye this morning. In it he asks Thomas Mulcair if he thinks a “strong resource sector” is a disease, what’s the cure?
Very good question. Mulcair, who says he doesn’t oppose oil sands development, didn’t have an answer, but he did hint at one during his comments during a CBC interview Saturday.
“This is a question that we have to address across the board because we are such a resource-rich country,” Mulcair said. “We’ve got to learn how to add value here, to stop shipping raw logs, to stop shipping raw bitumen.”
Now we’re getting somewhere. Thomas Mulcair needs to add some meat on that pretty skimpy skeleton, but he’s headed in the right direction.
Let me help him out a bit.
During the 1990s I spent some time post-journalism working in economic development, including supervising the development of an economic development strategy for a Western electrical utility. Utilities are very large, capital-intensive organizations. They buy a lot of inputs and they have a very significant impact on the economy.
Our team of economists used a very simple concept from economic development theory called “growth pole development.” In this case, the utility was the growth pole. The team identified four economic linkages from the utility: backward (inputs purchased by its operations), forward (how did industry use power to generate business activity and jobs), technological (how did the utility affect the development of new technologies or the diffusion of existing ones) and final demand (how did the utility affect consumer decisions).
The team then developed a chart of multipliers for the provincial economy that told them if you spent a dollar in farming or manufacturing or retail or whatever, you would get X dollars of economic activity as a result. Some sectors, like agriculture, had a high multiplier, and others, like retail, had a low multiplier.
Our strategy recommended the utility invest in key industries where growth would have the highest impact and create the most business activity and jobs.
The methodology was a tad more complicated than that, but you get the gist.
Well, that same strategy would work pretty well if we think of the oil sands as a growth pole.
Backward linkages: hundreds of billions have spent building out the plant for oil sands production. How much of that equipment could be built in Ontario? This discussion has already started with the Ontario and manufacturers, but Thomas Mulcair could help it along by giving it a national profile and pushing the Harper government to do more.
Forward linkages: Turns out Ontario has 30 per cent, and Quebec 20 per cent, of the Canadian petrochemical industry. What if pipelines were built from Alberta and Saskatchewan eastward (instead of across BC, which is another contentious issue) to facilitate more processing of oil sands bitumen for the Eastern Seaboard?
Technology: I know from experience the oil and gas industry is a very high tech industry. Where is that technology developed and manufactured? Could more of it come from Canada? Once established for the Canadian market, could those firms export?
Final demand: Some, if not most, of the oil sands bitumen refined on the Gulf Coast of Texas will be exported. Why can’t those refineries be located in Ontario? One of the reason is opposition from environmentalists. The NDP and Mulcair could help with that divisive debate, assuming it’s serious about creating more jobs at home.
Even the simple ideas I’ve outlined above would make a positive contribution to the national debate over the oil sands. Who would be against the creation of high tech, highly paid, mostly unionized jobs? Not Thomas Mulcair, I’m guessing.
Most importantly, such a strategy wouldn’t pit one region against another. Mulcair claims he’s not indulging in wedge politics, but his protestations ring hollow.
As official opposition it’s his party’s duty to advance alternative policies to the federal government. Let’s see him put some on the table. He can use the ideas above if he likes, no credit required.
Then Westerners will trust that Thomas Mulcair isn’t just pandering to his party’s large base in Quebec.
We might even put away the torches and pitchforks.