Time For a New Northern Policy in Ontario – by Livio Di Matteo (Part 1 of 2)

Livio Di Matteo is Professor of Economics at Lakehead University in Thunder Bay, Ontario.  Visit his new Economics Blog “Northern Economist” at http://ldimatte.shawwebspace.ca/ This column was originally published November, 2002.

Ontario obtained enormous benefits from the exploitation of northern resources and deliberately pursued a policy of resource revenue maximization that was partly responsible for launching the north on a development path that has brought us where we are today. – Livio Di Matteo (November, 2002)

The 2001 census revealed that for the first time, there has been an absolute decline in the population of Northwestern Ontario.  From a peak population of 244,117 attained in 1996, 2001 revealed a decline of 3.8 percent to just over 234,000. This absolute decline came on the heels of decades of relative decline as the population of the Northwest grew more slowly than that of Ontario as a whole.  Given that the population growth of regions is often a key indicator of economic growth, a historical view of the numbers is of some use.
 
Table 1 reveals that from the period 1871 to 1951, the population of Northwestern Ontario grew faster than Ontario as a whole.  As a share of Ontario’s population, the Northwest’s population peaked at about 3.6 percent of that of the Ontario total shortly after World War II and has since declined. During the 1990s, slower population growth rates in the Northwest tipped over into negative growth and we have reached the lowest share of Ontario’s population in 100 years.  We now account for barely two percent of Ontario’s population.  This relative decline has affected northern Ontario as a whole.

TABLE 1: POPULATION OF NORTHWESTERN ONTARIO AND ONTARIO

NW ONTARIO ONTARIO % SHARE

1871 1,480   1,605,123 0.1
1891 15,194   2,032,930 0.7
1911 69,432   2,527,292 2.7
1931 108,396  3,432,683 3.2
1951 166,711  4,597,542 3.6
1971 224,370  7,703,106 2.9
1991 240,335  10,084,885 2.4
2001 234,771  11,410,046 2.1

The Northwest’s fastest period of population growth occurred prior to World War Two when the opportunities provided by railway construction, resource development and agricultural settlement fueled an economic boom. Substantial in-migration occurred in response to the job opportunities created. Since the 1950s, the failure of the Northwest and indeed all of northern Ontario, to develop a more diversified economy, as well as technological change that reduced the demand for labour in the resource and transportation sectors has resulted in slower population growth and out-migration. As private sector job creation slowed in the post-war era, government stepped in and stabilized the north’s economy with public sector employment growth but even that crutch was eventually removed with the deficit fighting cuts of the 1990s.

The Northwest enters the first decade of the 21st century facing a pronounced economic decline that in turn has fueled population decline.  There is a role for government to assist in reversing this decline based on historical precedent. The pre-1950s boom in the Northwest was not entirely private sector driven but was part of a provincial government economic strategy to develop the north as an investment frontier for the south as well as a source of government revenue via the exploitation of natural resources. 

With the onset of Confederation in 1867 and the completion of the Canadian Pacific Railway in 1885, Ontario came to see northern Ontario as a potential hinterland.  Between 1891 and 1911, the previously “barren north” became “New Ontario” and the emphasis placed on northern resource extraction to provide inputs into southern industry as well as generate government revenue in the form of timber bonuses and fees.  Ontario implemented a northern development scheme that could be termed a “Northern Ontario Policy” that operated parallel to the Federal government’s National Policy.  The Federal government’s National Policy consisted of railway construction, tariff protection for industry and western settlement. 

Ontario’s Northern Policy provided a regional program of northern land grants to promote agricultural settlement and the building of the Temiskaming and Northern Ontario Railway and colonization roads to foster access.  In addition, there was the passage of the “Manufacturing Condition” which required that timber cut on crown land be processed within the province so as to retain value added.  This development strategy was not based on altruism but on the economic needs of an industrializing province and a growing provincial public sector.  

At its peak, the province of Ontario obtained nearly one quarter of its revenue from northern resources and used it to fund expanding provincial services.  Indeed, in the early part of this century, Ontario’s northern forests were akin to Alberta oil today. Ontario obtained enormous benefits from the exploitation of northern resources and deliberately pursued a policy of resource revenue maximization that was partly responsible for launching the north on a development path that has brought us where we are today.  After all, at its peak, resource extraction provided high incomes for northerners but provided little incentive to diversify into other activities.

Continued …..

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