Canada suffers from Dutch Disease

TimG · June 1, 2012

Overall, 1/3 of the manufacturing job losses can be attributed to dutch disease.

It is one study that makes that claim. Other studies have smaller numbers.

If we could indeed get 1/3 of those jobs back, that would be significant.

They don't have to be manufacturing jobs. They just need to be jobs.

mentalfloss · June 1, 2012

1/3 is significant. What is required now is the cost benefit analysis.

I agree.

It would be the fiscally conservative thing to do.

cybercoma · June 1, 2012

a uniquely Canadian strain of Dutch Disease! ... "tarsands fever"... producing near-term economic benefits that are often overstated and unevenly spread across the country, and may be masking more significant long-term economic challenges.

Like the disastrous economic position of the Atlantic provinces?

cybercoma · June 1, 2012

That's because the CBC focused on a report by the Pembina Institute....they are not a public policy think tank, nor do they have any balanced expertise in Economics - they are Environmental Activists. "Vindication" at the hands of CBC/Pembina is.....well, it is what it is.

If you have nothing to offer against the argument, attack the person/group presenting it, right?

Claudius · June 1, 2012

a uniquely Canadian strain of Dutch Disease! ... "tarsands fever"... producing near-term economic benefits that are often overstated and unevenly spread across the country, and may be masking more significant long-term economic challenges.

How is it uneven? It's $19billion in transfer payments each and every year. That's almost the entire cost of Ontario healthcare. It's not like the West gets to decide who gets that money.

What's really funny about all this dutch disease talk is - and everyone knows this - is that Ontario, long before any "Dutch Disease" came along has tried and failed 3 or 4 times in the past 100 years to generate life into a manufacturing sector. Now the oil and gas is floating this country and all anyone can do is spit at the people producing it and blame them for job losses. If it weren't for the oil and gas people would be a hell of a lot worse off because there's nothing in the history of this country to show that if there was no dutch disease that Ontario manufacturing would "take off" as it is always predicted and always failed to do. The D.D. is just a convenient excuse this time.

Edited June 1, 2012 by Claudius

Claudius · June 1, 2012

That's because the CBC focused on a report by the Pembina Institute....they are not a public policy think tank, nor do they have any balanced expertise in Economics - they are Environmental Activists. "Vindication" at the hands of CBC/Pembina is.....well, it is what it is.
If you have nothing to offer against the argument, attack the person/group presenting it, right?

Have you ever looked at them?

About the Pembina Institute:
The Pembina Institute is a Canadian non-profit think tank that advances sustainable energy solutions through research, education, consulting and advocacy. We promote environmental, social and economic sustainability in the public interest by developing practical solutions for communities, individuals, governments and businesses. The Pembina Institute provides policy research leadership and education on climate change, energy issues, green economics, energy efficiency and conservation, renewable energy, and environmental governance.

http://www.pembina.org/about/about-pembina

madmax · June 1, 2012

It is one study that makes that claim. Other studies have smaller numbers.

They don't have to be manufacturing jobs. They just need to be jobs.

Correct. And the highest density in job creation is manufacturing. When one province sheds 500,000 jobs, and another creates 35,000 , that is alot of ground to make up.

Yes the studay says 1/3 and other studies actually take it up to 40%.

That said, we can always move on to the next level.

The fact is that the higher dollar is also negatively affecting Alberta.

the inflated loonie hurts Alberta as well, with every one-cent increase over a 12-month period costing the Alberta treasury $247 million, as it incurs oilsands costs in Canadian dollars, but sells to international markets in U.S. dollars.

That is interesting as I have seen two models.

One based on US dollars (the assumed)

and one also based on Canadian dollars

And yet both come to a similar outcome.

I find this interesting and a valuable discussion.

I was not a firm believer in "Dutch Disease" but I do see it as described as a uniquely Canadian scenario with more variables then in Holland.

It cannot be dismissed nor overrated.

It exists, it has an affect and it is real.

Again, the question comes back.

Is the federal government doing enough to create a sustainable resource sector.

Is this mildly overheated, short term affect or is this the beginning of a oil rush, overheated unbridled run and gun challenge to the overall Canadian economy.

Like any market, they heat up and they cool down.

Is this market purposely being overheated by Federal policies and will it become worse?

That is a question, not a comment.

Perhaps the answer is within the budget and rush to the Chinese market.

Canuckistani · June 1, 2012

Canuckistani, on 01 June 2012 - 12:16 AM, said:
If we could indeed get 1/3 of those jobs back, that would be significant.

It is one study that makes that claim. Other studies have smaller numbers.

They don't have to be manufacturing jobs. They just need to be jobs.

As long as they pay as well and don't cause harm - like jobs in the financial industry, say.

madmax · June 1, 2012

How is it uneven? It's $19billion in transfer payments each and every year. That's almost the entire cost of Ontario healthcare. It's not like the West gets to decide who gets that money.

My understanding of transfer payments is that it is essentially Provinces getting their own money back, consider it a Federal Tax Break to the Provinces. Money is Transferred from the Federal Coffers to the Provincial, NOT from Alberta to another Province.

Thus, Poor example coming..

Provinces Paid in taxes

Ontario 100x

Quebec 75x

NS 2x

NFLD 1x

Alberta 20x

BC 14x

And the two highest per capita provinces were ALBERTA and NFLD you can see that is only 21Billion in total.

The ratio is determined and .... monies are transferred from Feds to Province

Such that Ontario has received Federal Transfers 2 or 3 times in over 100 years.

Therefore kickbacks could look like ths

Ontario 3x

Quebec 10x

NS .4x

NFLD 0

Alberta 0

BC 2x

etc.

In Previous years it would be Ontario and ALB or Ontario and BC as the benchmark.

So if one buys into the false myth of Provinces footing the tab... Ontario has given and given and given significantly more over the past 100 years and I can't recall anyone complaining in Ontario or even mentioning it.

Why, because Ontario wasn't footing the bill to the other Provinces in Transfers.

That said, there was a time during the Martin Era when A Province like Ontario would pay 1.00 in taxes and Get 50cents back on their portion of the health transfers. That was the start of the federal government shirking their responsibility in the Canada Health Act.

But that is a different story...

Edited June 1, 2012 by madmax

Canuckistani · June 1, 2012

That is an interesting exposition that I've never seen before. Do you have a link for it? I may want to use that on another forum.

Claudius · June 1, 2012

My understanding of transfer payments is that it is essentially Provinces getting their own money back, consider it a Federal Tax Break to the Provinces. Money is Transferred from the Federal Coffers to the Provincial, NOT from Alberta to another Province.

Yep that's how it works, but I didn't say from Alberta to another province, (and we havent' factored in Federal industrial taxes which do not come back to the province), I merely pointed out that Alberta has no say in where those transfer payments end up, which is what your example illustrates.

...however of course not getting a tax kickback for decades does kind of mean that at the end of the day the province in question loses money rather gains or keeps it.

Following your example, what if the "have" provinces who continually put in, never really get anything back? Alberta has benefited from transfer payments 3 times to the tune of about $90million. This contrasts with continually paying in for a couple decades now. Alberta may find itself in economic trouble sometime in the future but I sincerely doubt they'll ever get double-digit billions to help them out.

Edited June 1, 2012 by Claudius

Smallc · June 1, 2012

Alberta is above average when it comes to average fiscal capacity (far above). As long as that continues, they won't qualify. It is right though to say that transfer payments help with so called Dutch disease. Provinces not doing as well economically get their fiscal capacity bumped up. This allows all of us to benefit when one province does extremely well. At different times throughout our history, different provinces have needed the boost. Going forward, the same will be true, I'm sure.

madmax · June 1, 2012

Alberta has benefited from transfer payments 3 times to the tune of about $90million. This contrasts with continually paying in for a couple decades now. Alberta may find itself in economic trouble sometime in the future but I sincerely doubt they'll ever get double-digit billions to help them out.

1) All people pay federal taxes and no , I have no say in what federal tax monies I put towards the government are given in subsidies, pork, perks and benefits to Alberta, let alone Ontario, Quebec, NFLD, NS...etc... So, while we are talking about kickbacks, its nothing in comparision to the overall federal spending.

2) Alberta has been a "Have not Province until 1947, then again from 1957 to 1965.

3) In 2009 Alberta IIRC was inline to become a have not, Under Ed Stelmach

4) BC could suprass Alberta by 2020 in Gas Production.

5) Alot can happen in 100 years and has. 2 decades is small potato's

Ontario has been a have not Approx 3 times in 100 years IIRC... I think there was a few close calls and a time when they choose to refuse it.

6) Are you suggesting Alberta receives NOTHING from the Federal government.... or a piece of the taxes I pay into...

madmax · June 1, 2012

Alberta is above average when it comes to average fiscal capacity (far above). As long as that continues, they won't qualify. It is right though to say that transfer payments help with so called Dutch disease. Provinces not doing as well economically get their fiscal capacity bumped up. This allows all of us to benefit when one province does extremely well. At different times throughout our history, different provinces have needed the boost. Going forward, the same will be true, I'm sure.

There is some merit to the statement.

The concern is the affect Dutch Disease does to amplify the problem of 1) the high dollar or 2) driving down the economy of another.

However that is if the problem is a natural market occurance vs some extra federal contribution to an overheated sector causing the dollar to be artifically high just as when our dollar was 62cents and artifically low.

Smallc · June 1, 2012

It seems that it's a natural occurrence. The world is hungry for energy. We have it.

punked · June 1, 2012

It seems that it's a natural occurrence. The world is hungry for energy. We have it.

Yah with oil losing around 20% of its market value in a month the world is just craving the stuff. There lies the problem violent swings in the energy market can take Canada from a booming nation to a starving one if we have no other sectors. Heck in 10 years the US wont need any of our natural gas so that boom is gone killing provinces like NS and BC that depended on it. We need a diverse economy to get through the booms and busts of all sectors if we rely on one we are gonna wake up one morning and 20% of us will be unemployed. That is the scary part. The boom is the great part about Dutch disease the bust is hell.

Just seriously think about it for 10 minutes.

Edited June 1, 2012 by punked

Smallc · June 1, 2012

Canada has one of the most diverse economies in the world...and oil is still at a very high price. If you think one sector taking up 20% of the economy shows that we lack diversity....Seriously, if you come out from behind TM, you might actually see some truth.

What will happen with natural gas, also, is not known by any of us.

Edited June 1, 2012 by Smallc

punked · June 1, 2012

Canada has one of the most diverse economies in the world...and oil is still at a very high price. If you think one sector taking up 20% of the economy shows that we lack diversity....Seriously, if you come out from behind TM, you might actually see some truth.

What will happen with natural gas, also, is not known by any of us.

Give me a break on the world Market Oil is pretty high but when we talk about Alberta Oil is to cheap. It costs a lot of money to refine Tar and Albert has to sell it on the cheap because the oil is Land locked.

Natural gas has gone from 13 dollars to 2 over the last 5 years and will be heading lower because America has found a way to tap into its Shall reserves which are the largest reserves in the world. Again America is our market because they are close so when they have all they need we wont be able to give the stuff a way. Why can't you see the writing on the wall? The days of High Natural Gas prices are done. America will tap their Shall for cheap cheap energy and it is going to have far reaching effects over the next 10 years. Natural gas is the start but it will move into other sectors like Hydro, and even oil.

I agree our economy is diverse but if we start selling one type of job out for another it becomes less diverse such is the problem with Dutch Disease. THAT IS THE POINT. Again no one is saying is we should not expand out energy sector it is just when that hurts the diversity of the rest of the economy it comes with real risks.

Edited June 1, 2012 by punked

Smallc · June 1, 2012

No, you're missing the point. Work is already underway to move both BC natural gas and Prairie oil to new markets. Over the last decade, Canada has become less dependent on the US. And most of all, no one is putting one area of the economy ahead of others. This growth is organic. Some areas will go down, and some will rise.

punked · June 1, 2012

No, you're missing the point. Work is already underway to move both BC natural gas and Prairie oil to new markets. Over the last decade, Canada has become less dependent on the US. And most of all, no one is putting one area of the economy ahead of others. This growth is organic. Some areas will go down, and some will rise.

Only while prices dictate those things to be done. Yep we are expanding. Whats that China's resource boom has gone bust? Whats that a 25 billion dollar expansion for pot ash has been shelved? We have to grow in a managed way or we risk being caught putting all our eggs into one basket. That is all I am saying that is all anyone is saying and the Conservatives are putting their fingers in their ears yelling "I can't hear you....FREEEEEE MARKETSSSSS". Which is fine but could hurt the country in a very real way.

Smallc · June 1, 2012

You keep posting, but it isnt in any way related to what I've said. You keep putting out worst case scenarios, ignoring any positive information on the horizon. The reality is, business will grow the economy, not the government. Business will invest where there is a market, and they won't where there isn't. Right now, there is investment going on in a variety of sectors, not just oil and gas. If oil and gas slow down, that's fine, because our diverse economy will have some other part come to the fore. There isn't really any bad news here, other than overall slow growth world wide.

punked · June 1, 2012

You keep posting, but it isnt in any way related to what I've said. You keep putting out worst case scenarios, ignoring any positive information on the horizon. The reality is, business will grow the economy, not the government. Business will invest where there is a market, and they won't where there isn't. Right now, there is investment going on in a variety of sectors, not just oil and gas. If oil and gas slow down, that's fine, because our diverse economy will have some other part come to the fore. There isn't really any bad news here, other than overall slow growth world wide.

Come on you know better then that. We are stuck in a liquidity (not really us but the US, Europe, and even some of Asia) and in that time Business doesn't grow anything. Might be why we saw a 0.1 per cent in March. Wow business is doing great there isn't it? You need to catch up and see the writing on the wall we all do. The US had terrible Job growth, Europe is only staying afloat on the Stimulus countries (Sweden, Austria. Etc), the Austerity ones (Britain) are sinking that market super fast and our own government is cutting cutting all at the wrong time. Double Dip and during a recession the Energy market takes a beating and takes it hard.

I don't think I being dramatic we pulled back to fast and to hard (as a world) and its starting to hit the fan. Now is time to stop it not at 8-9% unemployment.

Edited June 1, 2012 by punked

Smallc · June 1, 2012

You're being far too gloomy. The growth works out to 2% for the year....not great, but acceptable.

punked · June 2, 2012

You're being far too gloomy. The growth works out to 2% for the year....not great, but acceptable.

But it has been falling and falling along with the US and Europe. The writing is on the wall seriously growth is slowing and dropping. Double dip is coming which is what many many economist have said would happen if we pulled the stimulus back to fast. Which is what we did. We pulled back like we had a much bigger stimulus then we did, the private sector is not picking up the slack in the market so it needs to stop. I really don't think I am being gloomy Smallc look at the world. India is stalled, China is stalled, Europe is shrinking the US is probably shrinking. We aren't an island and our government has decided to pull way back. The hurt is coming if we don't head it off.