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

It is in Ontario’s interest to see the north of the province become economically self-sustaining. A growing north will create economic activity and ultimately tax revenue. – Livio Di Matteo (November, 2002)

Nearly one hundred years after the beginning of its first Northern Policy, Ontario is faced with a need for a New Northern Policy.  The rationale this time is not to open up an investment frontier but to salvage the economic potential of a vast geographic region that suffers from locational disadvantages when it comes to economic activity.  While the north and the northwest are ostensibly at the center of the continent, unfortunately the bulk of the continent’s population with their attendant market demand and job opportunities lie elsewhere. 

Unless policies are put in place to boost economic growth in the north and northwest, these regions are likely to continue their decline and become a drain on the public purse of the province of Ontario.  It is in Ontario’s interest to see the north of the province become economically self-sustaining. A growing north will create economic activity and ultimately tax revenue. Moreover, given the continued growth and congestion in southern Ontario, there are benefits to dispersion of development in terms of the quality of life.

The legs of a New Northern Policy should focus on reducing the region’s locational disadvantages, augmenting its capital infrastructure, deepening its human capital and creating new governance institutions that would assert regional control over local development. First, highway transportation corridors should be targeted for improvements, as improvements would boost commerce and activity through the region in both the short and long runs. Ontario should set as its ambitious goal the four-laning of the Trans-Canada highway through all of northern Ontario by 2020. 

Second, the province should explore the creation of northern tax incentives to spur activity and attract investment. While this is already being explored via the concept of tax incentive zones, the province should go further and foster northern development by creating preferential northern sales tax, personal income tax and corporate tax rates for the entire province north of the French River. 

Third, the provincial government should make a concerted effort to provide incentives that would encourage new immigrants to settle in northern Ontario.  This would go far in helping to stem the outflow of population that is reducing the critical mass necessary to provide local services in northern communities. 

Fourth, given the traditional under funding of northern educational institutions relative to their southern counterparts as well as the weaker health care sector in the north, the province of Ontario should create a new northern health and social transfer (NHST) that would augment funding in these sectors.  Finally, the province should foster the creation of regional governments in the north to foster regional planning and direction in the areas of health care, transportation, economic development and resource management.  Many of these steps will require cooperation and support from the federal government.
 
During the first half of the twentieth century, Ontario benefited immensely from the resource revenues afforded by Ontario’s north and northwest. The process of resource revenue maximization in the long run was partly responsible for biasing our economic development away from a more diversified and innovative economy. The failure of the north to evolve a more diversified and dynamic economy has now come back to haunt the south for faced with a declining and dependent north, it must decide what assistance, if any, it plans to render. 

If Ontario is not committed to its north, it should state so explicitly so that we can all make the necessary decisions and get on with our lives. False hopes should not be created by short-term measures that – with a few exceptions – have characterized so much of northern policy for the last 30 years.  Let us know whether or not the north is to be given a real hand up. 

A recent comment by the regional director for the Ministry of Health was to the effect that people make choices about where they live and if they chose to live in a small isolated northern community, by extension, they are choosing to live without adequate medical care. This comment, if taken to its extreme conclusion, also suggests that by choosing to live in the North, we are somehow not full citizens of the province of Ontario.  If full rights of citizenship mean that we need to all move to southern Ontario, let us know now.  If not, devise and implement a credible and effective northern policy.

TABLE 2: ANNUALIZED  POPULATION GROWTH RATES (%)

 NW ONTARIO ONTARIO

1871-1891 11.6   1.2
1891-1911 7.6   1.1
1911-1931 2.2   1.5
1931-1951 2.2   1.5
1951-1971 1.5   2.6
1971-1991 0.3   1.3
1991-2001 -0.2   1.2

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