Opium dreams, de-industrialization
and the export of raw materials
by Peter Ewart
One of the problems with sucking on an opium pipe is that it renders you just about useless for anything else. So it has been in the United Kingdom with the love affair it has had with banking, financial services and other non-manufacturing industries over the last few decades.
For years, the mantra from economists and pundits in London’s high finance centre of Canary Wharf has been that manufacturing, the production and export of “things”, has no future in post-industrial U.K. Like a bubble, financial services grew and grew, and with it the bombast of the bankers and their shills. “The financial services economy”, “The knowledge economy”, “The service sector economy” - all were trumpeted as the way of the future for the country that once led the world in manufacturing.
Until, of course, the recent financial and credit crisis burst the bubble, leaving battered banks, empty office towers, thousands of layoffs, and a dazed and confused British elite in its wake. Now a new government has come to power, David Cameron’s Conservatives.
And what is the centerpiece of its new economic program? Lo and behold, it is to “resurrect” and “rejuvenate” Britain’s manufacturing base. At the core of the government’s thinking is that serious structural problems exist in the British economy, not the least of which has been the hollowing out of manufacturing, which has been going on for more than half a century.
But this “hollowing out of manufacturing” is not just a British phenomenon. Although starting the process much later than the U.K., Canada, in recent years, has lost hundreds of thousands of manufacturing jobs, and the U.S., millions.
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It is reasonable to expect that Canadian politicians and pundits should learn something from the British experience in abandoning manufacturing and embracing “financial services”. But is that the case?
Witness, for example, what is happening in Ontario. Like other provinces, Ontario has lost tens of thousands of manufacturing jobs, especially in the auto, steel and forestry sectors. So what has been the response of the Ontario government? In its 2010 Budget, it talks about how “Ontario’s economy has shifted from a domestic and manufacturing focus to one that is powered by services, especially business and financial services” and that Ontario is “well-positioned” to capitalize on the trend towards a more “knowledge-based” economy.
The budget even puts forward the prospect of Toronto becoming “one of the world’s elite financial centres”. In response, an “Ottawa Citizen” newspaper editorial has taken the idea further, ecstatically claiming that the city is on the verge of becoming “the new Zurich”.
Far from learning from a failed British experiment, the Ontario government and various newspaper pundits seem hell bent on repeating it.
But are provinces like British Columbia and Alberta much better in regards to the development of manufacturing?
Both provinces export an abundance of raw or relatively unprocessed materials, including oil, coal, wood, and minerals of various kinds. For too long, these governments have been sucking on the opium pipe of raw exports. It has always been the easy way. But there are long-term consequences.
One of the things that often gets lost in the controversy over whether pipelines should be built across British Columbia to export oil, is that for every barrel of oil that is shipped out - just like for every raw log and every railcar loaded with coal - jobs and manufacturing opportunities are lost forever.
Because it has such rich resources, Canada has, or should have, tremendous leverage in developing an advanced manufacturing base. Why isn’t this leverage utilized more? Furthermore, why are the “development of financial services” and “increased export of raw materials” put up as the pinnacles of achievement for the Canadian economy?
As Britain is finding out, in today’s world, giving up manufacturing will inevitably wreak a terrible cost on a national economy. The Chinese, of course, have been heading in the opposite direction, and the results show in its phenomenal industrial progress.
It is interesting to note that, in its long struggle for independence in the 19th and 20th centuries, one of the critical things that China did was smash up the opium pipes and opium dens of the extensive drug trade that was fostered and supported by the foreign colonial powers of that time. This, of course, was one of the factors that cleared the way for its emergence as an independent country, and more recently, a robust economy.
Perhaps, in Canada, we need to learn from both the British and Chinese experience. We, too, need to smash up our “opium pipes” of de-industrialization and export of raw materials, and set, as a key ongoing and overall aim, the development of an advanced manufacturing industrial economy that fully utilizes our wealth of resources.