Well, it was one of those interesting coincidences. Natural Resources Minister Joe Oliver unveiled new figures generated by Natural Resources Canada that apparently demonstrate that natural resources account for almost 20 percent of economic activity in Canada.
Meanwhile, almost simultaneously on the other side of the planet, the Australian Prime Minister Julia Gillard was countering the views of her Resources Minister Martin Ferguson, who last month declared “the resources boom is over”. However, Gillard also declared that the resources boom – in particular Chinese demand for Australian resources – was “now passing” but that “Reports of the mining boom’s death have been exaggerated”. Even the head of the Australian central bank has chimed in saying it was too soon to call an end to the boom.
Mining projects in Australia have been slowing down because of the depressed economic conditions in Europe and America as well as slowing economic growth in China. An iron ore project had a deferral announced on the day Gillard made her comments while the previous month a planned expansion of a copper and uranium mine was halted. There is a lively debate in the Australian media over whether or not the resource boom is indeed ending and whether or not this will end the remarkable Australian economic boom. Apparently, the Australians have been enjoying their resource induced economic growth and unlike Canada have not been fretting as much about Dutch Disease despite an appreciation of their currency.
While it can be argued these new figures from Natural Resources Canada are really designed to buttress the Federal government’s western pipeline project and oil sands development, they are also useful ammunition against Dutch Disease proponents. Of course, from the viewpoint of an economic historian such as myself, having the government come out and present a case for the importance of natural resources to Canada’s economy seems unnecessary. After all, the Staples Thesis is a Canadian contribution on how resource extraction makes contributions to direct and indirect economic growth.
In the nineteenth century, resource intensive production (including agriculture) contributed a much larger share of the domestic economy than today. Yet, there has been constant debate as to the relevance of resources to the Canadian economy even amongst economic historians. A great article on the role of resources in Canadian economic growth is Ian Keay’s “The Engine or the Caboose? Resource Industries and Twentieth Century Canadian Economic Performance” in the March 2007 Journal of Economic History.
A ratio of 0.823 is pretty close to saying natural resources contribute 20 percent to the economy. It would appear that the 20 percent estimate has been pretty much a constant for the last 100 years. Natural resource exploitation is important to our standard of living and in its absence, not only our economy would not have grown any faster, but the size of our economy would be smaller as would our per capita GNP.
The denigration and criticism of the resource sector in Canada is partly rooted in the discomfort many of our thinkers and opinion leaders have with the fact that so much of our activity is rooted in extraction as opposed to the supposedly more sophisticated value added activities that are seen as the hallmark of an advanced economy. The rise of the so-called new economy in the 1990s lead to repeated mantras about the end of rocks and trees and the dawn of the information age as the new economic driver. Yet, borrowing from Kenneth Carter in a different context, a buck is a buck no matter where earned.
Moreover, if one examines modern mining, agriculture and forestry, it appears that modern natural resource exploitation is also quite capital and knowledge intensive and no longer a bastion of unskilled labour. Of course a slowing international demand for resource and mineral products could affect projected mining development in Canada – particularly in Ontario’s “Ring of Fire” and northern Quebec. If there is a slowdown in the demand for resources and drop in commodity prices, there definitely will be a negative economic impact on the Canadian economy. In the absence of our resource sector, we will not effortlessly glide to a new set of shopping and dining experiences fueled by new age value added industries.