Prosperity is Created, not Inherited – Ontario Mineral Industry Cluster: A Case in Point (2007)

Published in the Ontario Mineral Exploration Review by the Ontario Ministry of Northern Development and Mines in 2007. www.omicc.ca

National, provincial and regional governments are continually searching for new tools to improve the economic prosperity of their citizens. Prosperity is a widely used term in government documents, reports and position papers. Evidence from both the developed and developing world is that economic prosperity is created, not inherited.

For example, some countries and regions rich in natural resources remain poor, whereas other countries and regions with little in the way of a natural endowment have and continue to enjoy a higher standard of living. Inherited comparative advantages such as natural resources, geographic location, or a supply of labour are becoming less important in achieving prosperity.

According Harvard professor Michael Porter, renowned for his pioneering work on competitiveness and cluster theory, “A nation can be prosperous and productive in virtually any field. What matters is how a nation competes, not what industry it competes in…we must stop thinking that traditional industries are bad and that the nation must move into high tech”.

The only way to have a prosperous economy is to have a high and rising level of productivity. A productive economy can pay high wages and can earn high returns on the capital it invests in its business activities. Prosperity comes from the ability to use inputs such as natural resources and human capital more productively than other countries and regions to develop value-added products and services. Productivity is not a function of lowering the cost of inputs, because low wages do not create prosperity; but instead, low wages hold down the standard of living. The path to sustainable prosperity is to build a business environment (government role), to create corporate strategies (private sector role) and to invest in higher education and skill development (people) that support high productivity.

There is a positive correlation between the development and commercialization of value-added products, services, technologies and an increasing standard of living. And  experience with sustainable clusters shows stronger innovation and commercialization of new ideas and technologies in clusters. This is because translating a concept into a commercialized product or service needs the expertise, co-operation and collaboration of  many organizations. However, companies within a cluster also compete with each other, and it is this mix of collaboration and competition that intensifies the cluster and accelerates commercialization. Clusters provide the critical mass for this to occur by facilitating the interactions of participants. Few companies have all the necessary skills to develop unique products and services by themselves, so clusters, rather than single companies or industries, are the primary source for income, jobs and export growth.

Having established a direct link between prosperity and clusters, it is not too difficult to see how Ontario’s Mineral Industry Cluster – a group of interrelated industries and institutions that make a significant contribution to the province’s economy – creates high-paying jobs and attracts investment, and is poised to create sustainable prosperity.

Ontario has a rich endowment of mineral resources, world-leading exploration industries, seasoned production industries, globally active suppliers, a top-ranked capital market, strong education and training capacity, dynamic research and development committed communities, and a supportive, stable political environment. Prosperity is not derived from the minerals and metals as such, but rather from the specialized high-paying jobs in the finance, legal, mining equipment and services sector; sector; education and training; research and development; management associated with their extraction; refining and value-added product development.

This conclusion is supported by the experiences of other resource-based clusters, including California and Niagara region’s wine, Chile’s mining, Finland’s mining and equipment services, Houston’s oil and gas, Italy’s ceramic tiles, Norway’s marine, and Sweden’s forest products. All are examples of a natural resource base, i.e., clay, forests, grapes, minerals and oil, that have enabled sustainable prosperity through clusters of interrelated and complementary organizations and businesses that created value-added products and service.

The mineral industry understands that innovation is its sustainable competitive advantage, and that other sources of comparative advantage, such as currency, exchange rates, labour rates and natural resources, are subject to a broader range of influences that are, in many respects, beyond their immediate control. The industry has transformed itself into a modern, innovative and highly technologically-intensive cluster. Ontario’s mineral industry is known throughout the world for its leading-edge mining and technology, and has exceeded the average productivity growth of Canada for the past two decades. The primary explanations for strong productivity growth are twofold: investments in research and development, human capital, new equipment and processes and a strong commitment to continuous innovation. Jobs in the mining industry have been, and continue to be, among the highest paid in all industries in Ontario, and the productivity growth is more than 50 per cent above the all-industry average reported by the Ontario Mining Association in its report: Ontario Mining: A High-Tech Productivity Powerhouse, 2006.

Since one of the key goals of the Ontario government is to create prosperity for its citizens through an ‘innovative economy’, it should not come as a surprise that it is interested in strengthening its clusters. Because “government has a role to play in fueling these engines of growth…”, it created the Ontario Mineral Industry Cluster Council (OMICC) to advise the Minister and act as an effective vehicle to influence government policies and programs which impact the mineral cluster. OMICC’s mandate is to lever the current mineral industry assets and bring together the cluster of mineral-related industries and organizations that must compete and cooperate to win more prosperity.

OMICC is a private sector led collaborative body, and its members come from major mine operators, junior exploration companies, suppliers, first nations, professional associations, education and academic institutions, and three levels of government. The Council is Chaired by Jim Gowans, President and CEO of De Beers Canada and Warren Holmes, Chairman Nuinsco Resources Ltd., two distinguished leaders in the mining community. Sue Herbert, Deputy Minister, and Christine Kasczycki, Assistant Deputy Minister of the Ontario Ministry of Northern Development and Mines (MNDM) are standing members of OMICC. MNDM, through its Executive Projects Office, provides executive support and project management services to the Council and its working groups.

At a very early stage, the Minister, Rick Bartolucci, asked the Council: “To examine ways to create or attract more high quality jobs to the North through mining-related, value-added activities, such as exploration and development of the next generation of very deep mines, and new innovative technology developments in production, milling, smelting, refining and rehabilitation.”

Both the Ministry of Northern Development and Mines and the Cluster Council recognize that value-added products and services are essential to creating sustainable prosperity as other nations have done. The Ontario Mineral Industry Cluster Council identified development and export of value-added products and services as one of its key priorities.

The growing world demand for commodities, commodities, driven by the industrialization of the BRIC countries —Brazil, Russia, India and China— and growing demand for services to identify untapped resources, and enable new and expanded uses of minerals, all provide unprecedented opportunities for the industry to develop, commercialize and export value-added products, services and technology. This, in turn, will help sustain a longer term competitive advantage in the global marketplace. Jim Milway, Executive Director of the Ontario Institute for Competitiveness and Prosperity, notes that “Ontario should exploit and capitalize its expertise in mining related health and safety, financial know-how, and management skills by exporting them to other mining jurisdictions”.

The Ontario Mineral Industry Cluster has all it takes to be a dynamic and vibrant cluster capable of creating sustainable growth. An expanded and globally competitive Ontario Mineral Industry Cluster will continue to be a major economic force for achieving sustained prosperity and an enhanced standard of living for Ontario and its mining-related communities.

For more information, please visit the Ontario Mineral Industry Cluster website at www.omicc.ca.

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