Reviving Ontario's Economy

Last week I discussed how NDP leader’s Tom Mulcair (NDP – Outremont, QC) remarks about the Dutch Disease and the effect of the energy economy on manufacturing across Canada had a ring of truth to it. However, my point was that Ontario’s decline, particularly in the field of manufacturing, has to do with much greater issues in Ontario’s competitiveness. Finally, in closing last week I suggested I might come up with some recommendations that may address this issue. Without further ado, here is a brief list of ideas that Ontario could put in place to improve its economic standing.

Idea #1 – Subsidies and band-aid solutions will not fix Ontario’s competitive gap

For some reason the first instinct of governments is to offer unsustainable incentives to compete with lower-cost jurisdictions. I have two responses to that; Ontario cannot pay to build an economy by bribing business, and the province trying to compete for low-cost sectors will not work. Ontario must build upon its innate strengths. It is important to note that these strengths and advantages vary in different regions of the province, but I’m speaking in more of a general sense.

Idea #2 – Make Ontario a more efficient place to do business

Ideas 2 and 3 will be related, so bear with me. A number of months ago I wrote a blog post about the desperate need for Toronto and the GTA to get its traffic problems under control. Every year Toronto loses $6 billion in productivity due to congestion. When you include the GTA and the rest of Ontario I have to assume that number starts creeping up to $10 billion, though I admittedly have no research to back that up. If congestion could be cut by even 1%, that is a savings of $6 million to Toronto businesses.

Taras Grescoe recently published a book called Straphanger: Saving Our Cities from Ourselves and from the Automobile. In it he argues Toronto used to lead the way, and can again if it rededicates itself to public transit. Premier Dalton McGuinty should increase the scope of Metrolinx (a provincial agency that oversees transit in the Greater Toronto-Hamilton Area) and start coordinating the municipalities’/regions’ transit systems to provide more effective transportation. Road and freeway improvements may also have to be part of the equation. An efficient transportation network will make the GTHA even more attractive for business and investment.

Idea #3 – Trade and Access to Markets

Trade is always going to be a deeply uncomfortable issue in Ontario. Many feel that NAFTA created a giant sucking sound as jobs fled Canada for overseas territories. The federal government is currently pursuing trade deals with various different jurisdictions. Ontario and her businesses should be positioning themselves to compete and take advantage of these opportunities. Likewise, Ontario should be putting forward a friendly face for foreign investment. This does not mean kowtowing, we need not bribe businesses to make smart investments. Ontario is the heart of Canada with a large market, and the world’s largest economy is at our doorsteps.

Part in parcel of this is expanding the province’s connectedness to the world. This could mean more effective rail and freeway links to the United States, or a second major airport in the GTA, and perhaps opening up our medium-sized cities more to international markets.

Idea #4 – The Right Kind of Workforce

Businesses that open in Ontario are tapping into some of the most educated labour pools in the world. But are post-secondary institutions equipping young people with the skills needed in our modern economy? Margaret Wente published a great article summarizing the issue, here. Currently we subsidize education roughly equally. What if instead we adjusted tuition to reflect market demand? Blanket policies are almost always weak policies. If a student studying sociology had to pay $500 per year more so an engineering student could pay $500 less, I think that is probably good policy. In addition, the highly demanded skilled trades should be subsidized to meet the needs of the economy.

I also think our provincial public education system (K-12) needs a major overhaul, but I do not have the space to comment here.

Idea #5 – Wrestling with the Bubble

The Globe and Mail has been doing quite impressive reporting over the last few months (and probably years) warning about the housing bubble that is developing in Toronto and elsewhere in Ontario. The construction boom and rising house prices may have exceeded the capacity of Ontarians to purchase them. The ridiculously low borrowing rate will come to an end and a number of people will default on their mortgages. Instead of remaining silent on this matter Ontario’s leaders (mayors, MPPs, councillors and provincial government) should begin to warn the public, consult the banking sector, and prepare for the possible fallout. If steps can be taken to minimize the deflation of this bubble, the must be taken.

Idea #6 - A Great Place to Live, a Great Place to Grow...

Ontari-ari-ari-o! Quality of life is important. I believe citizens, residents, government and civil societies in Ontario need to push to make this a more pleasant place to live. It will attract a better workforce, enhance economic opportunities and improve quality of life. I have talked previously about the notion of public art, but add in improving those cookie-cutter suburbs, and developing dismal areas and you can turn communities from places people live, to places people love.

I do not think my list above provides any panaceas, but it may offer a starting place. I also tried to propose ideas that a cash-strapped Ontario could manage. This list is by no means exclusive and much more could be added. I hope this gets the ball rolling.