There is a better way

The oil boom didn’t have to damage Canada’s manufacturing industries. Nor did the end of the oil boom have to be so painful.

In many places it’s recognized that there needs to be a strategy to develop key sectors of the economy. With that comes the idea that governments have a constructive role to play in building the economy.

That used to be the case in Canada. Successive Canadian governments worked with business and other groups to develop strategies to help develop manufacturing in Canada, starting with the National Policy of Sir John A. MacDonald. More recently the federal government used its clout as a large-scale purchaser of telecommunications equipment to help develop a high tech sector in Canada.

If we are going to repair the damage to our manufacturing sector and reduce the problems caused by boom-bust cycles in provinces like Alberta, we need to learn from what has worked in the past and what is working elsewhere.


Norway shows how to manage natural resources

Norway has been far more successful than any other country in managing its oil and gas resources. Unlike other countries, Norway found a way to minimize damage to other industries. The benefits are shared by all Norwegians. And Norway recognized that oil and gas are non-renewable resources and that it has to prepare for when those resources run out.

The big difference is in Norway the government didn’t just sit back and hope for the best. Because the Norwegian government played a major role, including owning much of the oil reserves, oil sales benefitted all citizens, including future generations. This means oil resources are providing a long term benefit to Norway. Norway keeps about 85% of its petroleum revenues.

Norway’s decision to put all oil and gas revenues into a savings fund – as opposed to using them to fund tax cuts – helped keep the impact of the oil and gas sector on other sectors to a minimum. The combination of a higher share of revenues and putting all oil revenues into a dedicated fund is that Norway will receive a long-term benefit from its oil and gas reserves. While Alberta’s Heritage Fund is only $17.4 billion, Norway’s equivalent has $1 trillion in assets.


Government intervention behind economic successes

Many of the largest corporations in the world owe their success to government intervention. Apple, Google and Intel all rely on technology developed by the US government. US government involvement in developing and promoting new technology was responsible for the internet or email. In Canada, government support played a key role in the development of insulin vaccines and canola.

Governments have been able to fund research and projects whose impact will not be felt for some time. That is much more difficult for the private sector.

In recent years, the private sector has become even more focused on the short-term. With decisions increasingly based on what will happen to a company’s share price in the next few months, it is harder for companies to invest heavily in projects that may take years to pay off. That means the long-term perspective governments can provide is needed more than ever.


Strategy needed to rebuild economy

Behind most economic success stories in recent history have been industrial strategies that set out how the economy could grow. Governments weren’t deciding which companies would group. However, they were identifying sectors where growth appeared possible and working to ensure companies in those sectors had the infrastructure, trained workforce, access to capital and other tools they needed to succeed.

The approach taken by governments implementing successful industrial strategies isn’t that different from the approach Canada took with the Own the Podium campaign to increase the number of medals Canada won at the 2010 Winter Olympics in Vancouver. Just as the federal government didn’t identify specific individuals to back, so government don’t pick specific companies. But as we saw at the 2010 Winter Olympics, providing tools needed to success helped ensure a significant number of potential winners were successful.


No shortage of ideas on what modern industrial strategy should look like

There is no shortage of ideas on how to strengthen existing industries or develop new ones.

In Alberta, for example, there have been proposals for a refinery so processing jobs stay in Canada. There are also proposals for green jobs including developing renewable energy and improving public transport. 

These options illustrate the need for two things – governments that recognize their responsibility to play a leadership role in building the economy and a process for making decisions about what our economy should look like.


Modern industrial strategy allows us to decide what kind of future we want

A modern industrial strategy is a way to start making decisions about what will happen over the next few decades, rather than crossing our fingers and hoping for the best. Just as important, it provides a way for people to have a say. For a modern industrial strategy to work, everyone needs to be at the table.

What an industrial strategy will look like will depend on what decisions get made. But it will provide a way to get everyone to start looking at what the decisions we’re making will mean for our children and grandchildren. And as we think about the kind of country we want them to inherit, a modern industrial strategy can ensure issues like climate change or inequality don’t get ignored when decisions are made.


Part 1

Part 2