Philip Cross - National Post Comment today......

There seems to be more than the usual disconnect between the business community and economists in Canada these days. Open any business page or stock market report and they are positively gushing with stories about our natural resources: oil prices hitting near record highs, new plans for pipelines on what seem a daily basis, a revival of mining development on an epic scale, and land prices on the Prairies at stratospheric levels.

The trend is so pronounced, even governments have sat up and taken notice. Western Canada has long tied its economic development to natural resources. Newfoundland lifted itself out of “have not” status by adopting this strategy, starting with offshore oil and gas and more recently mining in its interior. In their latest budgets, the federal and Quebec governments have clearly embraced natural resource projects as the road to prosperity, however ill-conceived their attempts to subsidize a booming sector. While the Premier of Ontario equivocates about the possibility of “Dutch Disease” in its manufacturing sector, investments in energy and mining in the real world of Ontario now total twice as much as in its manufacturing sector.

However, most economists in Canada are quiet on the subject of the resource boom. Economists seem uncomfortable with the resurgence of the resource sector over the past decade, and you have to wonder why they would be. Want to boost productivity? No sector has higher output per hour worked than natural resources. Want well-paying jobs? Check the average hourly wage in mining of $36, nearly 60% more than in factories and almost triple what restaurants pay. Worried about the boom-bust cycle? Look at the massive busts in auto manufacturing or information and communication technology and the U.S. financial sector in the past decade, compared to which resources are a beacon of stability. Maybe the ambivalence to resources reflects a lack of understanding that the resulting strong currency raises living standards, not devaluation à la Zimbabwe.

Recently, a friend’s son graduated with a degree in mining engineering. His annual starting salary, including perks, is more than I ever earned in 36 years in government. Good on him: He took a risk and it paid off. I am sure when he was in high school in Ottawa around the year 2000, career counsellors were telling him to go into computers to prepare for a career at Nortel, and never mentioned mining. One of the beauties of the resurgence of the resource sector is how unplanned and unpredictable it was, which should discourage ideas about the usefulness for a government industrial strategy or a council of national champions.

The chattering classes in this country have always seemed embarrassed by our resource wealth. Perhaps it is the image of being a hinterland, or the legacy of foreign control in this sector that somehow made this sector seem “un-Canadian.” Maybe they simply watched Avatar too often, where evil mercenaries go on an intergalactic hunt for cheap resources guarded by bucolic natives.

But these biases about Canada being the prey for foreign exploiters of our resources no longer hold. Canadian companies spearheaded the development of the oil sands, with technology largely developed here, as noted in FP Comment in December by Michal C. Moore (BP until recently wouldn’t even acknowledge the existence of the oil sands in its annual estimates of global reserves). While Inco and Falconbridge were taken over by foreign firms, with more aggressive plans to expand their operations in Canada, did their Canadian managers just retire? No, they founded new companies such as Royal Nickel Corp., which is developing a multi-billion project in Quebec. Other Canadian companies are spearheading the development of iron ore, potash and gold, where Toronto-based Barrick Gold is the world leader.

Our collective shyness about our natural resource heritage is symbolized by the $10 bill. From 1971 to 1989, it had a picture of Polymer’s refinery complex in Sarnia, Ont. Actually, all our money used to have charming pictures of Canadians merrily extracting wealth from the sea, land and trees. Somehow, it seems more fitting to have pictures of economic activity on money, not some feeble attempt at politically correct social engineering featuring peacekeepers, female hockey players and Inuit art.

Let’s stop apologizing for our natural resources and put an oil sands plant on the back of the $10 bill.

Mark Carney, governor of the Bank of Canada, recently said “the scale of natural resources opportunities are huge.” Put your money where your mouth is, Mark, and put an oil sands plant on the back of the $10 bill.

Financial Post
Philip Cross is the former chief economic analyst at Statistics Canada.