NORTHERN ECONOMIST 2.0

Wednesday, 11 March 2020

The Future of Policing in Thunder Bay

It appears that high crime rates in Thunder Bay have provided a new impetus for both police infrastructure and operating expenditure growth. Along with this year’s large budgetary increase, there is now a consultant’s report on a new police station that according to one local media report has “raised eyebrows” at City Council. A French-language report for those with french language facility also provides a very nice overview of the matter.

The issue is two-fold. First, the report maintains that the current Balmoral Street police station is at the end of its useful life and needs to be replaced by a new and larger – double the size actually - central police station at a new location. The current facility is old and lacks key facilities like a shooting range, suitable public spaces, a forensics lab and training rooms. The price tag is for replacing a building that is approximately 30 years old is $52 million and that will be on top of all the other things City Council wants to do on the infrastructure side including a new turf facility.

Second, the report says more space is needed because the current force is likely to grow significantly over the next 20 years in terms of new staffing to meet modern policing styles and needs and the growth is expected to see employment rise from the current 309 to 400 – a 29 percent increase in staffing despite population projections that do not see Thunder Bay population growing much if at all in the immediate future.

This ask is a big deal. To start, the capital spending alone for a new station when the existing building is only about 30 years old begs the question as to why the current station cannot be renovated. True, the consultants say a new build is cheaper in the long run as renovating the existing station to meet needs will cost $64 million. However, we all know the history of cost estimates when it comes to public sector builds in Thunder Bay. Both of those numbers are estimates and that $52 million especially will grow considerably once construction begins. More importantly, if we are embarking on a major spending program for police services, why not take this as an opportunity to revisit the nature of policing entirely in terms of service location?

A new and bigger centralized station is really a very 1970s concept and characteristic of the post-amalgamation approach to public services in Thunder Bay – a shiny new building in a “central spot” when the population is in two clusters at opposite ends. If the public likes this, just ask them how much they really like having all the medical services in one spot that always requires a major drive to get to and is not conveniently accessible by public transit? The public might also like to ask if when it comes to health services, why Thunder Bay does not have something like an urgent care centre that could take pressure off the one emergency at TBRHSC - but I digress.

One wonders if putting all the policing assets in one locational basket is really that wise in the 21^st century. While we are a relatively small community, we are also remote and our population is quite spread out. Is having only one location for police, one central hospital, etc…really the way to go forward in a world increasingly marked by shocks and catastrophes that can cripple infrastructure? Even the shiny new “centralized” EMS HQ and station in Thunder Bay was ultimately supplemented with satellite facilities. Like I said, we are remote and it would take a long time for any type of help to get here in the event a major catastrophe happens.

If the decision is to go with new and larger police facilities, why not renovate the Balmoral complex and then put in another satellite facility – at some distance from the current location which is effectively already a north side location - that can serve as a training facility/forensics lab/community policing and supplementary policing facility. Officers travelling back and forth between the locations is simply another community patrol which would enhance service. Is there an exceptionally compelling reason why a forensics lab, training rooms and a shooting range all need to be together with the frontline policing services?

As for the new staffing, this is a potential slippery slope. The new policing methods noted in the report that will lead to increased staffing tend to rely not on front line officers but supplementary staff to handle many of the non-direct-crime fighting duties that officers need to do. This is supposed to free up front-line officers by not having them do routine administrative tasks and paperwork as well as “save money” by having these tasks done by cheaper civilian staff. However, in the end this is Thunder Bay and these workers will be municipal workers. How much economy in operations will really occur if the current number of front line officers grow only slightly but an additional 50-60 municipal employees are added over the next 20 years to the police service? This one needs a lot of thought given the impact on the operating budget.

So, this report is food for thought. Councillors are correct in asking tough questions.

Sunday, 8 March 2020

Amalgamation 50 Years Onwards: A Short Retrospective

Thunder Bay in 2020 is celebrating its 50^th anniversary this year as one city. Amalgamation united the twin cities of Port Arthur and Fort William and the adjacent townships of Neebing and McIntyre. While there was much community support for a union particularly among the city elites who wanted to see the inter city area developed, in the end resistance was such that it was the provincial government that essentially merged the cities into one. While memories have faded as demographics evolve, it remains that a shotgun wedding is probably not the best way to build long-term enthusiasm for a major institutional change.

The current celebrations appear to be somewhat muted all things considered given the economic and social issues that Thunder Bay has faced over the last decade. There is also the current state of the municipal government finances which obviously limits the scope of any project to commemorate the anniversary. A 50th anniversary celebration should see the unveiling of a major public square celebrating unity with commemorative sculptures or columns but given our current age of divisiveness deciding what actually to commemorate will be a non-starter. Moreover, 50 years is not even that long a time in the course of human events, especially given that urban centres at the Lakehead were in existence for nearly a century prior to amalgamation.

Port Arthur was incorporated as a town in 1884 and achieved status as a city in 1906 while Fort William was incorporated as a town in 1892 and achieved city status in 1907. The two cities had down towns that were only four miles apart and yet they were notorious rivals when it came to attracting industry or a government project not to mention with respect to sporting events. While this rivalry and lack of cooperation may have been in some respects counterproductive, it nevertheless was a source of competitive pressure that probably assisted economic growth and urban achievement.

Amalgamation instituted a monopoly municipal government at the Lakehead and the lack of competition and as a result reduced policy experimentation after 1970 was likely another factor in the growth slowdown since. Amalgamation also attempted to bury the existing urban identities - the area was widely known nationally and globally as "The Lakehead" - with “ThunderBayification” in attempts to rename things and in the short run robbed the community of a sense of identity, history and ultimately the celebration of urban centennials in 2006-07 marking the 100^th anniversary of the Lakehead cities.

Denying the past was also a factor for the delay in the city coming together as one and was reinforced by the balance of power approach to the new council which provided equal representation for both sides. As a result, the duplication of city services that amalgamation was supposed to eliminate continued with north and south downtown urban renewal projects as well as north and south side waterfront parks. Over time, there has finally come a realization that both urban areas could have unique roles with the north side becoming an entertainment/tourism area and the south side the seat of government functions including the city hall. Amsterdam and The Hague on Lake Superior so to speak. Yet, this process has taken so long that in the end both former downtown Fort William and Port Arthur have become less than they could have been given the expansion of the inter city area as a magnet for so much office and retail development.

Still, amalgamation had its benefits. The city now has several good north-south road traffic routes as well as an integrated public transit system and more and better municipal services and facilities but they have not come any cheaper. Indeed, the city has expanded away from its former compacted core areas with an urban sprawl that is increasingly higher cost in terms of required services. Coming together as one city has also seen the long-term development of cultural and community infrastructure with the auditorium and the planned new waterfront art gallery the best examples of this.

And being one unified location has helped in the integration of health care facilities which culminated in the building of the new centrally located hospital and improved health services for the city and region. Residents with longer memories have even been treated to the amusing spectacle of the former south downtown Fort William Clinic moving to Port Arthur to be part of a cluster of medical facilities. Yet, even the new hospital and centralization of health care services was a mixed blessing given it was undersized from day one in terms of bed capacity and that in the age of SARS and corona-virus, a remote city with two separate acute care hospitals rather than only one could have some benefits.

However, in terms of economic growth, population has been at a standstill since the 1970s and the loss of the industrial base has essentially resulted in the city’s economy becoming a ward of the state with over 30 percent of its employment in government and quasi-public sector activities. The main challenge for the next 50 years is not how to improve or expand Thunder Bay’s public services at the provincial, federal and municipal levels, but to make Thunder Bay more competitive as a location for economic development of private sector wealth generating activities.

Tuesday, 3 March 2020

My Latest on the Fraser Institute Blog

— March 3, 2020

The recent economic blows to economies around the world resulting from COVID-19, the disease caused by the new coronavirus, raise the spectre of a supply-side shock vaguely reminiscent of the oil price shocks of the 1970s.
Back then, we saw a global supply-side shock due to a quadrupling of oil prices in 1973 that set off a persistent pattern of lower growth of real GDP and productivity accompanied by rising inflation, high interest rates and higher unemployment. It was also marked by large deficits and debt accumulation that in Canada was not dealt with until the 1990s.
For Canada, this era of economic stagnation was in marked contrast to the previous boom era. For example, from 1945 to 1973, real GDP growth and the unemployment rate both averaged 4.5 per cent annually, the inflation rate averaged 3.4 per cent, and the Bank of Canada rate, 3.6 per cent.
From 1973 to 1996, Canadian real GDP growth averaged 3.1 per cent, unemployment averaged 8.9 per cent, inflation, 6.1 per cent and the bank rate, 9.4 per cent. The resulting fiscal tumult saw an enormous gap develop between federal revenue and spending, which saw the deficit rise from $2.2 billion in 1973 to a peak of $39 billion in 1992 before declining to $8.7 billion in 1996 in the wake of the federal program review, the 1995 budget and economic recovery.
Of course, right now the world is not experiencing a cost-side supply shock like that of the energy crisis. However, COVID-19 seems to be sparking a major shutdown of employment and production in the harder-affected countries such as China and Italy.
While demand for many activities is down, if aggregate supply shifts left (faster than aggregate demand shifts left), there will be both an output drop and rising price levels.
The threat of disease spread and associated periods of quarantine has also generated a demand for certain goods with store shelves emptying while supply chains are being disrupted. A reduction in supply of goods and services accompanied by a surge in demand can also lead to an increase in prices—a cost shock—that ultimately could even spark a new round of inflation.
Indeed, the policy response in such a situation becomes problematic. Lowering interest rates or boosting government fiscal stimulus could be all for naught if people aren’t buying. As the saying goes, you can lead a horse to water but you can’t make it drink—especially if it does not want to go outside.
Of course, it’s still early days and a bout of good news about COVID-19 containment, or perhaps the development of a rapid treatment or vaccine, can rapidly turn this situation around. Still, we are in new territory when it comes to the world economy being in a fluid and complicated situation no one appears to have foreseen.
While taking health precautions is important, remaining calm is also necessary given the economic impact of people’s decisions on a global economic scale. A supply-shock recession combined with shrinking aggregate demand would be a new one for the economics textbooks.

Thursday, 13 February 2020

Thunder Bay's Population Growing

Statistics Canada has just released its population estimates for sub-provincial areas as of July 1, 2019 and it appears that Thunder Bay's population - while one of the slowest growing of Canada's CMAs - is nevertheless growing. On July 1st 2019, Thunder Bay's Census Metropolitan Area reported 127,201 people which is an increase over the previous year of 0.7 percent. Of the 36 major CMAs, Thunder Bay ranked 32nd and its growth rate was larger than the other major northern Ontario city on the list - Sudbury - which came in at 0.4 percent. Population growth rates ranged from a high of 2.8 percent for Kitchener-Cambridge-Waterloo to a low of -0.1 percent for St. John's with the Canadian CMA average being 1.7 percent. The accompanying chart presents the population growth rate rankings for all of the CMAs. So, as far as things demographic go, this is pretty go news. Thunder Bay is not shrinking.

Sunday, 9 February 2020

A Very Brief Survey of Northern Ontario Economic History

I have been working on an article surveying the economic history of northern Ontario and thought a summary overview draft of where I am going with it would be a worthwhile post. The entire article is going to be much more detailed but this excerpt below provides a pretty good overview of the direction it is going. Enjoy.

A Very Brief Survey of Northern Ontario Economic History

Livio Di Matteo

Northern Ontario’s economy began in the 19^th century as a booming resource frontier as a result of favourable international market demand for natural resource commodities which were supplemented by government policy initiatives in transportation and protectionism. Export-led growth approaches to development suggest that such a growth process can ultimately expand population and market size leading to self-sustaining economic growth, but Northern Ontario never made that transition and in the latter part of the twentieth century and early twenty first century can be viewed as having undergone arrested development.

Northern Ontario is a vast region of over 800,000 square kilometers covering about 90 percent of Ontario’s land mass. While long the home of a substantial and well organized indigenous and First Nation population[1], industrial economic development of northern Ontario under European settlement began in the 19^th century as a booming natural resource frontier driven by rising international market demand for natural resource commodities – mainly forest and mineral products – combined with government policy initiatives in transportation infrastructure and economic protectionism via what was known as the Manufacturing Condition.

In defining the region, it is important to note that is geographically, geologically and biologically a distinct region traditionally defined as the area of Ontario north of the French River – Lake Nipissing – Mattawa River system. It is essentially Precambrian shield made up of some of the oldest rocks in North America and as a result of glaciation scraping its soil consists of shallow soils with some alluvial soil deposits in areas such as the Clay Belt regions and a mainly boreal forest ecology consisting largely of coniferous forest.[2]

In defining the region there is the question of borders as some include the Districts of Muskoka and Parry Sound in northern Ontario – as indeed they are for the purposes of federal and provincial regional development policies – while other might consider them not as the north but the ‘near’ north.[3] There is also the question of thinking about the north as a region given that it is a very diverse area that in many respects is not one north but ‘many’ norths.[4]

Geographically, there is the Northwest consisting of the Districts of Thunder Bay, Rainy River and Kenora while the other two-thirds of the region is the Northeast consisting of Cochrane, Timiskaming, Algoma, Sudbury, Nipissing and Manitoulin. There is also the vast sparely populated area north of 50 which in some respects does not fit into either the northeast or northwest except by government fiat. And of course, there is a rural remote north of small towns and Indigenous reserves as well as an urban north consisting of the five major cities – Thunder Bay, Sault Ste. Marie, Timmins, Sudbury and North Bay. And the Northeast is also marked by a strong francophone population component while the region as a whole has a large Indigenous population.

The themes of Northern Ontario’s economic development are three-fold: natural resources, transportation and government.[5] Northern Ontario’s economic development can easily be discussed within the framework of economic staples – products with a high natural resource content – given the importance of fur, lumber, pulp and paper and mineral products to the north’s economic history. As for transportation, this is a key theme given the importance of the Canadian Pacific (CPR) and Temiskaming and Northern Ontario Railway (TN & O) in providing access to northern Ontario resources in the 19^th and early 20^th centuries as well as providing the means for them to exit the region to world markets. Finally, government is important given the federal role in providing transportation infrastructure that accessed and served the North such as the CPR, the Trans-Canada Highway and the St. Lawrence Seaway as well as the Ontario government given its parallel regional development program in the 19^th century consisting of the building of the TN & O as well as the protectionist Manufacturing condition and its own agricultural land settlement policy.

Given the importance of natural resources to northern Ontario’s economy, the analytical framework best-suited to outlining the causal relationships of the development process is the Staples Approach or more generally, models of export led development. The Staples approach sees a region’s natural resource base as the most important determinant of both the pace as well as the patterns of economic growth with the classic exposition provided by Harold Adams Innis who viewed economic development as springing from the interplay between an industrial heartland and a resource reducing hinterland.[6] In the case of northern Ontario, it can be viewed as a resource hinterland not only to the industrial south but also the rest of the world economy given the international market for its mineral and forest products. More modern versions of the Staples Approach see economic development as the process of diversification around an export base with the degree of diversification a function of what are termed economic linkages. These linkages involve producing inputs for the resource export sector or investing in industries that use the output of the export sector as an input as well as the final demand for domestically produced consumer products.[7]

Figure 1 outlines the export led/Staples growth process with an increase in exports generating an increase in the regional economy’s output/income (Y). The presence of rising income and economic opportunity in the resource sector leads to population increase both via natural increase but also migration into the region. This leads to an increase in the labour force which feeds back into the generation of income. As well, the increase in income leads to an increase in regional saving which fuels investment as well as external investment flowing into the region to provide the capital stock needed to expand production of the resource export. This process continues in a circular fashion until both the income and population become large enough to provide a market for regionally produced goods and services on top of the export sector and it is this expansion of regional manufacturing production as well as services to meet local needs and substitute for imports that becomes the process of diversification. A failure to grow and develop beyond the initial export industries that powered development can be seen as incomplete or arrested development.[8]

Figure 1: A Model of Export-Led Growth

The economic history of northern Ontario can be divided into a number of stages. They are: 1) Pre-European Settlement to 1867, 2) Boom, Colonialism and European Settlement, 1867 to 1913, 3) Consolidation, Depression and War, 1914 to 1945, 5) Post-War boom, 1946 to 1969 and 6) Arrested Development: Economic Dependency and Decline, 1970 to the Present.

The economic development of northern Ontario followed a process of export-led growth fueled in particular by the export of mineral and forest products. International demand and private sector exploitation of the region’s resource abundance starting in the 19^th century was also accompanied by investment in transportation networks to bring resources out to market and government policies and initiatives designed to help facilitate development as well as take advantage of the public sector revenue potential of these resources. Within this framework then, the three major engines of northern Ontario economic development are natural resources, transportation and government.

During each of northern Ontario’s development periods outlined here, economic growth was most robust during eras where all three engines came together to provide the impetus for economic growth and employment creation. The most robust economic growth and development occurred during the eras from 1867 to 1913 and 1946 to 1969. Both of these eras coincided with good global economic conditions which fostered a demand for resource products and led to private capital investment in production facilities and transportation networks. Both of these eras also saw a large spending and policy role for government which facilitated development. The first era also saw northern Ontario as a major source of provincial government revenue.

Growth was poorer in the 1914 to 1945 as a result of erratic global markets, private sector weakness and the retreat of government involvement in northern development after the onset of the Great Depression and yet this was still an era of substantial population growth. Economic growth since 1970 in the region has essentially stagnated along with population growth as a result of long-term technological change which reduced the labour intensity of natural resource extraction in the region. While government did undertake more interventionist activity in an effort to arrest northern decline, it has failed to reverse the slow growth nature of the region given the absence of supporting private sector investment.

[1] By the 17^th century, the mainly Algonkian culture Anishnawbe and Cree indigenous population had developed a seasonal woodland economy and lifestyle centered on hunting and trading. See Bray and Epp (1984: 8).

[2] See Robinson (2016: 8-9) for a fuller description of the region. The glaciers of the various ice ages periodically scraped topsoil off in northern Ontario and deposited it further south ironically enough making nature responsible for the first set of “resource transfers” from Ontario’s north to the south. According to Louis Gentilcore (1972: 7-8): “The acid nature of the podzols, the slower breakdown of the vegetable matter, and the prevalence of peaty soils create problems in the utilization of the soils of northern Ontario for commercial agriculture.”

[3] The 2011 provincial Growth Plan for Northern Ontario (2011) for example includes Parry Sound.

[4] For one point of view, see Miller (1985).

[5] See Di Matteo (1991, 1999) for overview of these themes.

[6] Innis (1930/84).

[7] These are generally known as backward, forward and final demand linkages. See Watkins (1963).

[8] Part of this process of arrested development could also be referred to as a Staples Trap whereby an economy is not able to move beyond its initial export sector activities. For a discussion of the Staples Trap see Watkins (1963).

References

Bray, M. and E. Epp, eds. (1984) A Vast and Magnificent Land: An Illustrated History of Northern Ontario. Ontario Ministry of Northern Affairs.

Di Matteo, L. (1991) “The Economic Development of the Lakehead During the Wheat Boom Era: 1900-1914,” Ontario History, LXXXIII, 4, December, 297-316.

Di Matteo, L. (1999) “Fiscal Imbalance and Economic Development in Canadian History: Evidence from the Economic History of Ontario,” American Review of Canadian Studies, Summer, 287-327.

Innis, H.A. (1930/1984) The Fur Trade in Canada, Toronto: University of Toronto Press.

Miller, T. B. (1985) “Cabin Fever: The Province of Ontario and its Norths.” In D.C.D.C. MacDonald, ed., The Government and Politics of Ontario. 3rd ed. Scarborough:Nelson, Canada, 174-191.

Ontario (2011) Places to Grow: Growth Plan for Northern Ontario. Toronto: Ministry of Infrastructure and Ministry of Northern Development, Mines and Forestry.

Robinson, D. (2016) Revolution or Devolution?: How Northern Ontario Should Be Governed. Northern Policy Institute. Research Paper No. 9, April.

Watkins, M. (1963) “A Staple Theory of Economic Growth,” Canadian Journal of Economics and Political Science, 29, 141-158.

NORTHERN ECONOMIST 2.0