Resources ‘R’ Us [Canada] – by Philip Cross (National Post – April 13, 2012)

The National Post is Canada’s second largest national paper.

Philip Cross is the former chief economic analyst at Statistics Canada.

There seems to be more than the usual disconnect between the business community and economists in Canada these days. Open any business page or stock market report and they are positively gushing with stories about our natural resources: oil prices hitting near record highs, new plans for pipelines on what seem a daily basis, a revival of mining development on an epic scale, and land prices on the Prairies at stratospheric levels.

The trend is so pronounced, even governments have sat up and taken notice. Western Canada has long tied its economic development to natural resources. Newfoundland lifted itself out of “have not” status by adopting this strategy, starting with offshore oil and gas and more recently mining in its interior.

In their latest budgets, the federal and Quebec governments have clearly embraced natural resource projects as the road to prosperity, however ill-conceived their attempts to subsidize a booming sector. While the Premier of Ontario equivocates about the possibility of “Dutch Disease” in its manufacturing sector, investments in energy and mining in the real world of Ontario now total twice as much as in its manufacturing sector.

However, most economists in Canada are quiet on the subject of the resource boom. Economists seem uncomfortable with the resurgence of the resource sector over the past decade, and you have to wonder why they would be. Want to boost productivity? No sector has higher output per hour worked than natural resources. Want well-paying jobs? Check the average hourly wage in mining of $36, nearly 60% more than in factories and almost triple what restaurants pay.

Worried about the boom-bust cycle? Look at the massive busts in auto manufacturing or information and communication technology and the U.S. financial sector in the past decade, compared to which resources are a beacon of stability. Maybe the ambivalence to resources reflects a lack of understanding that the resulting strong currency raises living standards, not devaluation à la Zimbabwe.

Recently, a friend’s son graduated with a degree in mining engineering. His annual starting salary, including perks, is more than I ever earned in 36 years in government. Good on him: He took a risk and it paid off. I am sure when he was in high school in Ottawa around the year 2000, career counsellors were telling him to go into computers to prepare for a career at Nortel, and never mentioned mining. One of the beauties of the resurgence of the resource sector is how unplanned and unpredictable it was, which should discourage ideas about the usefulness for a government industrial strategy or a council of national champions.

For the rest of this column, please go to the National Post website: http://www.nationalpost.com/Resources/6451616/story.html

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