Northern Economist 2.0
Thursday 5 January 2017
Cap and Trade in Northern Ontario
Ontario has brought in its new cap and trade system as of January 1st. Northern Ontario is generally an energy intensive place in terms of its transportation needs as well as its industrial activity so one would expect some impact on costs. Business groups led by assorted Chambers of Commerce apparently would like to see the program delayed. In terms of the general impact on Ontario, I have a short piece here while Margaret Wente has another here. While dealing with climate change and saving the environment are important, doing it in a manner that causes more economic harm than good is not optimal policy but then Ontario has been raising the cost of doing business in the province for years and criticisms appear to be so much water off a duck's back. As for the specific effects on northern Ontario, you can check out this story on CBC regarding northeastern Ontario. Despite the optimism conveyed in this story there is a sense that there will not be a great deal of carbon emission reduction as a result. As for the northwest, another CBC story that also conveys a sense of opportunity despite the rise in costs that are anticipated given our colder winters and longer driving distances. It concludes with a quote from Chris Ragan at McGill that the impact will take a much larger bite out of lower income households.
Wednesday 4 January 2017
Why No Research Chair in Economics at Northern Ontario’s Universities?
Northern Ontario’s universities are proud of their research
intensiveness and success. Indeed, over the last decade they have made an
impressive effort to acquire the flagships of research intensity – the academic
research chair. Research chairs
highlight and foster a specific area of research importance by dedicating
specific resources to support the chair holder’s research. Along with budgets for research, these
chairs allow a professor to concentrate on research by reducing their teaching
load.
Many of the research chairs currently at northern Ontario
three largest universities - Laurentian, Lakehead, and Nipissing are funded by
the federal government via the Canada Research Chairs program. There are also other chairs that have
been funded with partnerships with other agencies and funding groups as well as
internal university resources. As
noted in a previous post there appear to be 17 such positions currently held at
Laurentian University, 16 at Lakehead University, 4 at Nipissing and one at
Algoma. Moreover, these
research chairs cover a wide range of topics stretching from applied
evolutionary ecology to indigenous health and aerial robotics.
However, there is a curious omission when it comes to these
many important topics – anything specifically to do with economics. Indeed, three important economic sub-fields
given northern Ontario’s economy are nowhere in sight: regional economics,
transportation economics and natural resource economics. Such an oversight is troubling
especially given the constant use by universities of the words “economic
development” or “economic impact” as background context whenever major research
projects or research chairs are announced.
Sunday 1 January 2017
Looking Ahead to 2017
Economic historians
will view the year 2016 as marking the end of the second great era of
globalization that began in the late 1970s and picked up speed after the fall
of the Berlin Wall. The year 2017
will usher in continuing significant economic and political change, tumult and
adjustment. The three seminal
signal events of 2016 - the Brexit vote, the election victory of Donald Trump
and the Italian referendum –herald the new era. Global economics and politics will be marked by
restraint of trade, reduced mobility, populist politics, more extremism and
continuing slow economic growth as a result.
The first great
globalization from 1870 to 1914 was marked by the spread of liberal economic
and political institutions, industrialization and rapid technological change
especially in transportation and communication. The prosperity of the pre-1914
era was marked by the centrality of Europe both economically and politically
and combined free markets and trade to create a world economy with liberal
legal and constitutional institutions in its primary economies and the British
pound as the international currency. Moreover, it was an age of free movement
not only for commodities but also in terms of labor with mass migration from
the old world to the new.
However, the pace of
rapid change and economic integration created strains in a world of nationalism
and imperial governments and the result was World War I. The years from 1914 to 1945 marked the
start of several traumatic decades in international economic and political
history that included revolutions, the rise of communism and fascism, two world
wars and the Great Depression.
A
dominant feature of the period from 1914 to 1945 was reaction to a series of
major international economic and political shocks. We are embarking on a similar period – hopefully minus the
specter of global armed conflict.
Despite the 2009 Great Recession, the world economy has
grown dramatically over the last thirty years. The prosperity of the world economy that has been driven by
free markets, technological change and the global institutions led by post
World War II America and the US dollar as the international currency has given
way to an era of multi-polar economics and politics. The rise of China and
Russia led by its business oligarchs has been aided by the liberal economic
order, which has helped grow their economies and trade. Indeed, autocratic oligarchs do well in
a world of liberal economic and democratic rules that govern everyone's
behavior but their own. Russian and Chinese business oligarchs buying property
in Europe or North America to safeguard their wealth from their own capricious
government action is the most obvious example of such behavior.
The people of the United States have now put in place their
own set of oligarchs to counter a world that seems to be increasingly at odds
with their own interests. Along with Donald Trump’s own economic status, the
composition of his incoming cabinet leans toward ex-generals and billionaires –
not much different from say how countries are run in the Middle East, never
mind Russia or China. However, once everyone behaves like the oligarchs, growth
of the economic pie will suffer.
Less liberal regimes in the rest of the world whose economies have
benefited from the economic environment maintained by the framework of American
diplomacy and power will definitely get more than they bargained for as trade
barriers rise. American
policy will become even more inward looking and more explicitly
self-interested.
The economic and technological progress of the last three
decades owes much to the economic policies of the post 1970s – liberal policies
ultimately rooted in the European Age of Enlightenment and the political
movements of the early nineteenth century. These liberal economic ideas include rule of law, free
speech, representative democracy, majority rule but respect for minority
positions, property and human rights, and the exchange of goods, capital and
labor in free markets. The result
was more trade agreements, deregulation and some effort at more efficient government.
While the results of liberal economic policies can be
imperfect and the benefits of trade and globalization unevenly spread, it
remains that a retreat into populism and tariff barriers will make us poorer in
the long run. It will take time
and tumult to illustrate the poverty of the road that the world is embarking
on. It will also take new ideas
and policies on the part of free market and liberal economic advocates on how
to better distribute the benefits of economic growth and deal with the labor
market trauma of technological and economic change that has stoked populism.
Wednesday 28 December 2016
Research Chair Infrastructure in Northern Ontario Universities: A Quick Inventory
The end of the year is a good time for taking stock and research infrastructure is something worth considering. The economic future in northern Ontario will be in services
and the knowledge economy will feature heavily in this sector. Creation of new knowledge and its application
in the servicing of population needs as well as servicing the traditional transportation
and resource sectors will be the future.
Northern Ontario universities are on the front line when it comes to
research and the knowledge economy and they have been successful in boosting
their research activity. One measure of
research success is their ability to attract funding for and then recruit
research chairs.
The role of a research chair is to boost research activity
in a specific field or specialty by providing a faculty member with concrete resources
to conduct their research as well as provide teaching release that enables them
to focus more on their research. A
research chair can often be financed by the public sector: for example, Canada Research Chairs. They can also be from private donors as the
result of fund raising activity by universities or by universities investing their
own budgetary resources.
In the case of federal Canada Research Chairs (CRC), there
are two types: Tier 1 Chairs, tenable for seven years and renewable, are for
outstanding researchers acknowledged by their peers as world leaders in their
fields. For each Tier 1 Chair, the university receives $200,000 annually for
seven years. Tier 2 chairs, tenable for five years and renewable once, are for
exceptional emerging researchers, acknowledged by their peers as having the
potential to lead in their field. For each Tier 2 chair, the institution receives
$100,000 annually for five years.
A list of research chairs at northern Ontario universities
was compiled from the Canada Research Chair web site as well as university
research pages and is presented at the end of this post. Research chairs in northern Ontario
universities are primarily dominated by CRCs.
There are 24 CRCs currently listed as being held at northern Ontario
universities: 1 at Algoma, 10 at Lakehead, 9 at Laurentian and 4 at
Nipissing. Northern Ontario accounts for
just under 2 percent of Canada’s population and holds just over 1 percent of
CRCs. As well, most of the CRCs held at
northern Ontario universities are generally more junior Tier 2 Chairs.
Along with these 24 CRCs, there appear to be another 14
assorted research chairs listed on university websites as currently being held. These are funded internally (for example a
Lakehead University Research Chair), by the Ontario government (Ontario Research
Chairs) or other funding agencies or resources (for example, Fednor or the
Northern Ontario Heritage Fund). These
additional research chairs bring the total in northern Ontario up to 38.
What is conspicuous by their absence in this list of northern
Ontario research chairs is private donor financed named chairs in which an
endowment is donated to finance a named research chair in perpetuity. This is something that is more common at
much older, more established and more research-intensive universities. All these northern
Ontario chairs ultimately rely on short-term financing, which once expired ends
the chair meaning there is fragility to the current research chair
infrastructure at these universities.
A challenge for northern Ontario’s research future is for its
universities to engage in efforts to attract larger endowments to fund more
permanent research chairs. This is of
course a great challenge for any university in the current fund raising environment. In general, the weaker economy in northern
Ontario poses unique challenges that are reinforced by the absence of corporate
headquarters in the region. There are
two other more specific challenges.
First, it is often easier to raise money for things rather
than human resources. Donors can see the
outcome from a new building or piece of scientific equipment but it is more of
a challenge but not impossible to sell a research chair. Very often, private donors with a passion in
a certain area of study will look for an opportunity to fund their
passion. Finding and building such
relationships is a long-term investment of development office resources.
Second, given current conservative rates of return – circa 4
percent – it would take an endowment of four million dollars to generate
$160,000 in income. The salary, benefits
and research funding such an amount can support at best means a relatively junior
hire. It goes without saying that the fund-raising required to attract a more
senior scholar near the top of their field is much more substantial.
Knowledge intensive economic activity will be the front edge
of economic activity in northern Ontario.
The challenge for northern Ontario universities is to grow their investment
in research activity with research chairs representing key anchor points in
their research infrastructure. Part of
this growth must involve greater efforts to attract private donor funding to
support those research chairs.
RESEARCH CHAIR INVENTORY FOR
NORTHERN ONTARIO UNIVERSITIES
Algoma
University
Canada Research Chairs
Antunes, Pedro
Tier 2, Natural Sciences and Engineering, Plant and Tree
Biology
Lakehead
University
Canada Research Chairs
Chen, Aicheng
Tier 2, Natural
Sciences and Engineering, Analytical Chemistry
Fatehi, Pedram
Tier 2, Natural
Sciences and Engineering, Chemical
Engineering
Greenwood, David
Tier 2, Social Sciences
and Humanities, Education
Levkoe, Charles
Tier 2, Social Sciences
and Humanities, Geography
Mushquash, Christopher
Tier 2, Social Sciences
and Humanities, Health Psychology
Rakshit, Sudip
Tier 1, Natural Sciences
and Engineering, Chemical Engineering
Rennie, Michael D.
Tier 2, Natural
Sciences and Engineering, Evolution and
Ecology
Reznik, Alla
Tier 2, Natural
Sciences and Engineering, Physics
Sameshima, Pauline
Tier 2, Social Sciences and Humanities, Education
Tocheri, Matthew W.
Tier 2, Social Sciences
and Humanities, Anthropology
Other Research Chairs
Dr. Peter Hollings, Geology, Lakehead University Research
Chair in Geochemistry and Ore Deposits (2017-2019)
Dr. Sandra Jeppesen, Lakehead University Research Chair in
Transformative Media and Social Movements (2017-2019)
Dr. Kristin Burnett, Department of Indigenous Learning:
Lakehead University Research Chair in Indigenous Health and Well-Being
(2014-2017)
Dr. Doug Morris, Department of Biology,
Research Chair in Northern Studies
Dr. Mitchell S. Albert, Department of Chemistry, Thunder Bay
Regional Research Institute, Chair in Molecular Imaging and Advanced
diagnostics
Dr. Lew Christopher, Director of the Biorefining Research
Institute and Senior Ontario Research Chair
Laurentian
University
Canada Research Chairs
Basiliko, Nathan
Tier 2, Natural
Sciences and Engineering, Soil Science
Crozier, Gillian
Tier 2, Social Sciences
and Humanities, Philosophy
Gunn, John
Tier 1, Natural Sciences
and Engineering, Evolution and Ecology
Kraus, Christine
Tier 2, Natural
Sciences and Engineering, Astronomy and
Astrophysics
Merritt, Thomas
Tier 2, Natural Sciences and Engineering, Molecular Biology
Schinke, Robert
Tier 2, Social Sciences
and Humanities, Other in SSH
Schulte-Hostedde, Albrecht
Tier 2, Natural
Sciences and Engineering, Evolution and
Ecology
Walker, Jennifer
Tier 2, Health Health Services Research – General
Ye, Zhibin
Tier 2, Natural Sciences and Engineering, Chemical Engineering
Other Research Chairs
Dr. Doug Boreham
Radiation and Health
Dr. Greg Ross
FedNor Algae and Environment
Dr. Michael Lesher
Mineral Exploration
Dr. Nadia Mykytzuk
NOHFC - Biomining, Bioremediation and Science Communication
Dr. Nancy Young
(No Specification)
Dr. Serge Miville
Franco-Ontarian History
Dr. Sheldon Tobe
HSF/NOSM Chair in Aboriginal and Rural Health
Dr. Tammy Eger
Occupational Health and Safety
Nipissing
University
Canada Research Chairs
Bruner, Mark
Tier 2, Social Sciences
and Humanities, Psychosocial Behavioural Research - General
Greer, Kirsten
Tier 2, Social Sciences
and Humanities, Geography
James, April
Tier 2, Natural
Sciences and Engineering Hydrology
Zarifa, David
Tier 2, Social Sciences
and Humanities, Sociology
Monday 19 December 2016
Maclean’s Charts 2017 and Some Implications for Northern Ontario’s Economy in 2017
Jason Kirby at MacLean’s Magazine has been putting together
year-end chart extravaganzas for the last few years and his 2017 list of charts to watch has 75 contributions.
They are of course designed to help make sense of the Canadian economy
in the year ahead but they also are useful in understanding regional economic
performance.
There are contributions dealing with trends in population
aging, business investment, government debt, employment, housing markets, wage
growth, export performance, trade, service sector growth, electricity prices,
stock markets, environment, and manufacturing. Indeed, my own contribution to this year’s chart collection was
a simple one showing Canada’s manufacturing to GDP ratio and the exchange rate
since 1950. My point? A low dollar
may not help Canadian manufacturing and by extension what remains of the
manufacturing sector in northern Ontario.
As I note in the write-up: “A high Canadian dollar is often blamed
for Canada’s manufacturing malaise and with its recent depreciation there is
hope that a renaissance will be sparked in Canadian manufacturing. The
long-term evidence suggests otherwise. While Canada’s manufacturing output per
capita has grown in the long term, manufacturing’s share of national output has
fallen quite steadily from 27 per cent in 1950 to 11 per cent today. Our dollar
in terms of its exchange rate with the U.S. dollar (our major trading partner)
was relatively stable from 1950 to the late 1970s, and then began depreciating
from the mid 1970s to the early 2000s. It then appreciated again during
the commodity boom of the 21st century and has been depreciating
recently. Fluctuations in our currency’s value (relative to the U.S. dollar)
may have some short-term effects on manufacturing production. The period
from the late 1970s to the early 1990s does seem to have seen some
stabilization of the share of manufacturing in our GDP. However, Canada’s manufacturing
decline is rooted in long-term economic factors such as productivity
growth—which slowed substantially after 2000—and the trend of developed
economies around the world toward service production.”
In the case of northern Ontario, there has been some
movement in our forest sector recently with a pick-up in sawmill and pulp
sector activity. However, despite
a lower dollar, we should not expect a massive resurgence in this sector. The fact remains that the sector was
hit not only by a higher Canadian dollar during the forest sector crisis but
also the effects of environmental priorities, higher electricity prices, weak
business capital investment in an aging capital stock, and new and more
productive competitors around the world.
As some of the other Maclean's charts show, electricity prices in Ontario are still an issue and business investment in Canada is still weak. Given the permanent shutdown of so much manufacturing capacity in Canada, a lower dollar now is
not going to automatically re-ignite production in manufacturing, let along the forest products sector in northern Ontario. The future of the northern Ontario economy, like the rest of Canada, is going to rely on services.
Sunday 18 December 2016
Recognition for Economic Blogging
Some news worth sharing. As you know, I have been involved for a number of years now as a contributor to the economics blog Worthwhile Canadian Initiative along with my colleagues Stephen Gordon, Nick Rowe and Frances Woolley. I have always considered our mix of macro, finance, health, social policy and economic policy posts to be Canada's premier economics blog. However, we also make a mark internationally. Recently, Feedspot has announced that Worthwhile Canadian Initiative is one of its top 100 Economics Blogs! We have also made the list of top 100 Economics Blogs for 2016 done by Intelligent Economist. Moreover, global consulting firm Focus Economics has informed us that recognition is coming our way with their list of top economics blogs coming out in January 2017. Congratulations to my colleagues on WCI and looking forward to another year of great posts in 2017.
Friday 16 December 2016
Northern Ontario Employment Growth Lagging...And With Regional Differences
A new Fraser Institute report on recent economic and employment growth in Ontario noted
that it has been disproportionately concentrated in the Golden Horseshoe and Ottawa regions. Meanwhile, southwestern, eastern and northern Ontario have lagged when it comes to employment growth. Indeed, as the accompanying figure from the report below shows: “Average annual net employment growth has been negative in Eastern and Northern Ontario between 2010 and 2015. Average employment growth in Southwestern Ontario during this time has been positive, but only barely (0.4% annually)”.
What is
surprising is how relatively little attention the report received in northern
Ontario from media outlets and local community economic and business leaders
given the usual preoccupation with the northern Ontario economy. The results of the report are more important
than one might expect because the negative aggregate employment performance of
northern Ontario is being driven largely by northwestern Ontario. The two largest urban economies in northern
Ontario are representative of this differential performance.
Figure 2
presents monthly seasonally adjusted employment for Thunder Bay (with fitted linear
trend) for the period 2001 to 2016 while Figure 3 does the same for Greater
Sudbury (Data source: Statistics Canada). Over the long term, the two
cities have travelled different roads with employment growing in Greater
Sudbury while it has shrunk over time in Thunder Bay. While employment growth
has slowed in Sudbury since 2010 while the decline appears to have flattened out in Thunder Bay, the long-term performance relative to Thunder
Bay still stands out. The long-term effects of the forest sector crisis in Thunder Bay appear to have been a permanent downsizing of the employment base.
Of course, one might want to counter with the argument that unemployment rates in Thunder Bay and indeed the northwest are quite low but this is misleading. The fact is that the labour force has been shrinking along with employment over the last decade in Thunder Bay hence improving the unemployment rate. A shrinking employment base is not generally a cause for celebration even if it comes with falling unemployment rates. More on this in posts to come.
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