Social Policy in Ontario

Investing in Ontario’s future (or not)

Posted on August 25, 2012 in Debates

Source: National Post — Authors: David Frum

NationalPost.com – FullComment
11 August 2012.   David Frum

After years of lagging the rest of the advanced world, investment in Canadian plant and equipment has at last caught up.

That’s the good news in a recent report by the C.D. Howe Institute. Here’s the bad news. One important province has fallen even further behind: the province of Ontario.

The report by Benjamin Dachis and William Robson tracks Canadian performance by province over the course of the past decade. They observe: “In the early 2000s, the [investment] gap with the [rest of the] OECD widened. For every dollar of new business investment per worker across OECD countries from 2001 to 2005, Canadian businesses invested 94 cents, and for every dollar of investment per U.S. worker, Canadian businesses invested 79 cents.

“Since then, Canada’s performance has improved. From 2006 to 2010, our businesses invested 99 cents per worker for every dollar invested across the OECD, and 88 cents for each dollar invested by U.S. businesses. Preliminary 2011 data show Canadian businesses investing more per worker than the OECD average — 102 cents per dollar across the group — and maintaining the late-2000s average of 88 cents per dollar invested in the United States.”

Investment leads to productivity improvement. Productivity improvement leads to rising standards of living. Yay.

Unless you live in what used to be the economic powerhouse of the country. Then suddenly the outcome becomes grimmer: “Ontario … continues a long-term slide. After getting 77 cents of new investment for every dollar invested across the OECD in the early 2000s (65 against the United States) and 72 in the late 2000s (63 against the United States), Ontario workers may get a mere 70 in 2012 (and only 60 against the United States).”

New Brunswick does little better; Nova Scotia even worse. Quebec has avoided going backward only because it started so low in the first place.

The obvious explanation for the differential is the global resources boom. But Dachis and Robson point to some other important and likely-to-be-neglected factors as well, including:

(1) Because many Canadian industries remain protected from the full brunt of international competition, they may feel they do not need to invest as much as they would if they had to compete with the best in the world.

(2) The boom in residential investment may be diverting investment dollars that would otherwise have flowed to plant and equipment.

(3) The laggard provinces have failed to adjust their taxes in an investment-friendly direction — Dalton McGuinty’s Ontario being one of the very worst offenders in this regard.

The outlook is most grim for Ontario. Like the U.S. rustbelt, Ontario has been losing industrial jobs, and only new business investment can create the post-industrial jobs of the future. Ontario is not immune to the social consequences of deindustrialization: income decline among less educated people, especially men; family breakdown as men become less marriageable; diminished life chances for children raised without fathers.

Canadians should not arrogantly assume that what has happened to Detroit, Cleveland and Pittsburgh cannot happen to Brantford, Trenton, and Windsor. It can happen, and it is happening. Oil wealth may pay for social programs to cushion the shock of job loss, but a stable society must provide work, not welfare, to its young men and future fathers.

Tags: economy, globalization, ideology, standard of living

This entry was posted on Saturday, August 25th, 2012 at 10:35 am and is filed under Debates. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.