Canadian Disparities Have Become Regional

October 24, 2019

 

What the Canadian election did prove is that economic growth in Canada has spread unequally over regions. It also proved that Alberta-first and Quebec-first policies have intensified the polarization in these regions and increased the disparities between the have and have-not provinces. Indeed, the resource-rich regions can reduce regional disparity as long as oil and natural gas prices remain high or investment opportunities take place to extract these revenue streams. Alberta's oil and natural gas are there to increase provincial treasuries and hence provide social benefits and services for the have-not provinces.

 

Atlantic Canada has remained in the low-end of the economic scale for a decade now. They simply do not have the economic opportunity to sustain economic activity and overall growth to support their population. Some economists have argued that regional disparity in Canada could only be solved when transfer payments to the poor provinces are cut back. This would inherently put them on the scale along with the national government to invest. The real problem is the federal government doesn't understand that the real economic trend of the world has changed. National leaders of other countries are now forced to go out of their comfort zone and make trade deals and mutual investments to diversify risk.

 

Investments, due to their natural characteristics, seek out poorer regional areas that are attributed to lower costs and greater potential opportunity to sustain business activity and growth. Before Andrew Scheer was leader of the Conservative Party, he indicated he would restore the shipbuilding industry in Atlantic Canada. It was an appropriate concept, however to revive shipbuilding in Canada we needed global partners like France, the UK, and Italy. We would need to partner with these countries for any hope of restoring a historically dignified industry. What would Canada offer? Innovation, capital, and efficiency in bringing overall costs of shipbuilding down which all partners would be able to partner from.

 

The government could give Bombardier $1 billion to save jobs because of a lack of efficiency and competitiveness. However, a leader who has some poetic sensibility would tell Bombardier's CEO that they don't only want to see an increase in jobs, but a increase in return on investment and growth prospects to catapult their equity further. Bombardier once received hundreds of millions of dollars in funding from the Canadian government, yet they chose to spend it on increasing executive bonuses. Everyone wants Bombardier to be successful in making planes and trains, but they have to prove that they can globally compete against China by building a better economic mousetrap.

 

The equalization transfers in the federal system create inefficiencies of resource allocations in provincial economies with more than one level of government. It does not consider global efficiencies and the external competitive climate that these industries are facing. Alberta and Saskatchewan have no problem in paying $25 billion in transfer payments to the poorer regions of Canada for their social well-being. However, just like Ontario they want sustained developments and capital investments for our rich natural resources. Quebec may claim they don't want Albertan oil simply because they're purchasing it from the United States. US oil is predominantly harvested by fracking so as long as no pipeline ever ends in Quebec soil they are indeed happy rather than generating domestic revenue for the rest of Canada.

 

Equalization of transfer payments is a great design but it only feeds a domestic economy and a build up of public debt rather than investment and return to the poor regions that need to generate revenue for social services. For example, Trudeau indicated that he wants to plant a billion trees to curb climate changes in our global environment. Let's not kid ourselves, this is a national commitment that requires an enormous amount of investment and capital. The US reforestation enterprise generates $9.5 billion annually. So if you're going to plant a billion trees then we should sell the same amount globally and make it into a business.

 

You bring British Columbia, Ontario, and Atlantic provinces together not as a mismatch imbalance between revenue resources and expenditure responsibility but as a cohesive unit to innovate and export our trees all over the world to relinquish some sense of climactic change in our world. Global economies are changing rapidly, you can see China investing in Africa and other emerging markets with infrastructure programs to uplift people out of poverty. This becomes a prerequisite of a financial return whereby the social responsibility of all poor regions points towards them having the capability to raise their expectations. These expectations create the greater good resulting in higher wages, efficiencies, and national unity. Today Trudeau announced that he's going to build a pipeline, he had no choice.

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