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Canada’s entire history has been intertwined with its natural resources. But in our nation’s 150th year, our status as a resource economy may be at a crossroads as it grapples with a downturn in the energy sector. We’ve had cyclical ups and downs before, but might this time be different? And if so, are we ready for the challenges ahead?
Before there was a Canada, there were the resources.
The Europeans arrived in this harsh, untamed land more or less by mistake, looking for a shortcut to the Far East; but the abundance of natural wealth lured them back. The fish and furs and trees, the ores within the earth, the vast expanses of rich soil – the natural resources were the reason people came here, stayed, formed the communities and towns and cities that eventually banded into a country.
“The present Dominion emerged not in spite of geography but because of it,” wrote economic historian Harold Innis in 1930 in The Fur Trade in Canada, perhaps the most influential examination of Canada’s economic development ever written.
The land was, simply, Canada’s greatest competitive advantage in the global economy. The more mechanization opened up that land, the bigger an advantage it became. The way that advantage has taken form evolved as the Canadian economy grew and matured through the breakneck technological revolution of the 20th century and into the 21st, but the increasingly rich and complex economic house we have built still has, at its foundations, our natural resources.
If we had any doubts, the heady rise and painful fall of the Canadian energy sector, and the reverberations throughout the national economy, have put an exclamation mark on the point. Resources remain central to the country’s economic dialogue.
And there’s no question that Canada has greatly prospered from its resource wealth. But critics have argued for much of Canada’s history that this “staples” economy, with its dependency on export markets, has skewed our economic policy-making, left us susceptible to foreign appetites, and impeded the development of a more robust, self-sustaining domestic economy. We have remained prone to booms and busts that periodically whipsaw our well-being and re-divide our nation between haves and have-nots.
This is Canada’s “staples trap,” as famed Canadian economist Mel Watkins coined it in his seminal 1963 paper “A Staple Theory of Economic Growth”: The tendency for the country to tilt its economic resources and policies in support of one particularly in-demand staple or another that, inevitably, leaves the economy struggling when the staple falls out of global favour.
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