Miller’s Musings (November 25, 1991)

When Professor Michael Porter released his summary report on the Canadian economy a few weeks ago, it caused a media stir. Most reports seemed to imply that Canada’s resource industries are somehow to blame for the country’s economic problems. While disturbing, this interpretation is hardly surprising, as Canada’s “dependence” on natural resources is a major theme of the report.

In decrying what he calls “the comfortable insularity of the old order,” Porter notes that “resources allowed Canadian firms to be profitable by exporting relatively unprocessed commodities rather than through upgrading” (as if “profit” was a dirty word). According to Porter, these same factors “often limited the demand for advanced technology.”

And Porter is not bullish on the outlook for the resource sectors, asserting that “the sustainability of these industries’ competitive advantage is in question.” I had heard that an early draft of the report indicated that Canada’s resources were actually a disadvantage. It was somewhat comforting, therefore, to read that “Exports of natural resource-based products are by no means undesirable — indeed, they have done much to make Canada wealthy.” This is the type of superficiality that is all too prevalent in Ottawa outside the Department of Energy, Mines and Resources Canada (EMR). Shortly before Porter’s report appeared, I was afraid Michael Wilson had been infected by the same virus when I read a speech of his which contained the phrase: “We can no longer depend on the abundance of our natural resources to provide our standard of living.”

Naturally, I protested. In writing to the minister, I pointed out that the resource sector, particularly mining, continues to be important to Canada’s future. It understands competitiveness and has been exposed to the full rigor of international competition for a long time. It has responded with innovation (becoming a high-tech industry) and productivity (mining productivity has doubled in the past decade while overall productivity in the Canadian economy has stagnated). I suggested that mining “could usefully be held up as a model, rather than given an official brushoff.” To the minister’s credit, I received a prompt reply. Here is an excerpt: “I regret that my comments . . . were seen as a slight of the resource sectors of the economy. This was not my intent. Our resource sectors have always been the most exposed to the forces of international competition and therefore had to be innovative in order to survive and thrive. The point that I was trying to make is that we cannot depend on our natural resources alone for our wealth. As you well know, many Canadians have a strong belief that our resources guarantee us a high standard of living. It is this attitude as much as anything that poses a danger to our future prosperity. In fact, the success of the mining sector is due more to the ingenuity of Canadians rather than the quality of the resource endowment. Ingenuity is what has made us prosperous and this is the quality that we must foster in all sectors of the economy.”

So at least the minister understands. I will return to the substance of Porter’s prescriptions in a later article.