Canada’s Resource Curse: Too Much of a Good Thing

39 Pages Posted: 19 Jul 2010 Last revised: 7 Jun 2011

Daniel Drache

York University

Date Written: December 1, 2009

Abstract

Canada has been both blessed and cursed by its vast resource wealth. Immense resource riches sends the wrong message to the political class that thinking and planning for tomorrow is unnecessary when record high global prices drive economic development at a frenetic pace. Short-termism, the loss of manufacturing competitiveness (‘the dutch disease’) and long term rent seeking behaviour from the corporate sector become, by default, the low policy standard. The paper contends that Canada is not a simple offshoot of Anglo-American, hyper-commercial capitalism but is subject to the recurring dynamics of social Canada and for this reason the Northern market model of capitalism needs its own theoretical articulation. Its distinguishing characteristic is that there is a large and growing role for mixed goods and non-negotiable goods in comparison to the United States even when the proactive role of the Canadian state had its wings clipped to a degree that stunned many observers. The paper also examines the uncoupling of Canadian and American economies driven in part by the global resource boom. The downside of the new staples export strategy is that hundreds of thousands of jobs have disappeared from Ontario and Quebec. Ontario, once the rich have province of Confederation, is now a poor cousin eligible for equalization payments. Unlike earlier waves of deindustrialization, there is little prospect for recovering many of these better paying positions. Without a focused government strategy, the future for Canada’s factory economy is grim. The final section addresses the dynamics of growing income polarization and its lessons for the future. With a global slowdown or worse on the horizon Canada’s unique combination of mixed goods and orthodox market-based policies is likely to be unsustainable in its current form. For countries with a similar endowment the Northern model is unexportable.

Keywords: resource capitalism, Dutch Disease, economic dependency, mixed goods, public goods, social market, Canada, the Northern Model, varieties of capitalism

Suggested Citation

Drache, Daniel, Canada’s Resource Curse: Too Much of a Good Thing (December 1, 2009). Available at SSRN: https://ssrn.com/abstract=1645409 or http://dx.doi.org/10.2139/ssrn.1645409

Daniel Drache (Contact Author)

York University ( email )

4700 Keele Street
Robarts Centre for Canadian Studies
Toronto, Ontario, M3J 1P3
Canada
416.736.5415 (Phone)
416.736.5739 (Fax)

HOME PAGE: http://www.yorku.ca/drache

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