EDITORIAL PAGE (July 29, 1991)

In Watson Lake, Yukon, mining is not the dirty word it seems to be in some of the more isolated ivory towers of this country. The community of 1,800 is happy to be the base for a new lead-zinc mine expected to generate a payroll of up to $10 million annually.

But many people are a trifle unsure of just what mine this is. The official name, Sa Dena Hes, usually brings blank stares. Better known is Mt. Hundere, the name under which the project was developed.

The new name comes from the language of the Kaska Dene nation, the aboriginal people who inhabit the area, and roughly means “old timers’ mountain.” The project partners, Curragh Resources and Hillsborough Resources, felt the new name better reflects the heritage of the area.

The name change is symbolic, but a 3-year option held by the Kaska Dene to buy a 5% interest in the project at a set but undisclosed price is more tangible evidence of the importance the project partners place in local participation. Perhaps this is also evidence of how areas subject to land-claim disputes can be developed for the benefit of all. Sa Dena Hes. We wish it a long and prosperous life.

When Bank of Canada Governor John Crow reiterates his reasoning for maintaining a tight money policy, he almost makes a convincing case. In essence, the battle to contain inflation to 2% by the end of 1995 is a battle to develop “sound money,” says Crow.

Earlier this year, he told the Investment Dealers Association of Canada, “The purpose of pursuing price stability is of course to establish a solid foundation for sustained growth and prosperity in the economy.” And he plans to stay this course, regardless of how rough it might be on those very industries that provide the engine for economic growth: “The more this is accepted and reflected in behavior throughout the economy, the smoother the process of required adjustment will be.”

Perhaps he looks at the currencies of Germany and Japan and sees his ideal of “sound money.” His target, after all, is nothing different from the very rates of inflation experienced by those two nations. If they can do it, so can we.

But there are fundamental differences that, if ignored, will result in much worse than some simple “adjustment.” Industries that form the foundation for Canada’s economy are at risk of losing their already slim competitive edge, and that advantage might never be regained.

Keith Hendrick, chairman of the Mining Association of Canada and chairman of Noranda Minerals, points out that Canada’s high interest rates are the result of government deficits over the past 25 years. “This tight money policy has penalized capital-intensive industries such as the metals and minerals sector. Needed investments for new technology and for maintaining productive capacity are rendered more expensive and the resulting squeeze on cash flow reduces funds available for exploration and development.”

Yes, the battle against inflation is worthwhile, but the Bank of Canada’s policy should not sacrifice domestic industries for the sake of emulating monetary models in Germany or Japan. We need a sound currency, but the means to reach that goal must be tempered with the need to support our fundamental export-based industries.

The Bank of Canada would do well to re-examine its dogmatic approach to containing inflation and to consider a more flexible approach that would be less devastating to mining and other resource-based industries.