Canada West Foundation Blog

By: Roslyn Kunin

A new list of the world’s most livable cities has just been released by the Economist Intelligence Unit (EIU). With three cities in the top 10 (Vancouver, Toronto and Calgary) and four in the top 20 (Montreal, ranked 16th) Canadians can be proud. Proportionally, western Canada can be even more proud. And Vancouver, the highest on the list for Canada, can be proudest of all, even if it is in the now familiar bronze position in world rankings.

Vancouver has a long history in the top ten of this list, often in the first position, but petty crime, traffic congestion and housing affordability have now pushed it down to third place.

But some readers may recall another headline just this past July saying that Vancouver was no longer in the top 10 of the world’s best cities. The confusion is due to the fact that the EIU’s list of “best” cities is different from its list of “most livable.” The list of cities examined for the “best” list is much shorter (70 compared to 140), and does not currently include Calgary or Vancouver. Toronto was the only Canadian city included in the best cities competition (it ranked eighth).

This points to the importance of understanding the methodology behind these lists.

For example, neither the livability index nor the best city index includes consideration of the opportunity to make a living. Since everyone who is not independently wealthy must take this into account, often before all other factors, when choosing where to live, this strikes me as a significant oversight.

This is the reason why Dacca in Bangladesh sees streams of incoming population in spite of the fact that it is at the very bottom of the livability list. Many Bangladeshis see Dacca as the place where they have the best economic prospects. And this strong in-migration no doubt contributes to reduced livability as congestion increases and infrastructure is strained.

Closer to home, Vancouver consistently outranks Calgary on the livability index, but does not appear to be keeping up when it comes to opportunities for making a living. Those who vote with their feet seem to be choosing Calgary. Over the last year in Vancouver, house prices, which have been largely unaffordable, have fallen 12%. This would not be consistent with a strong influx of population. Calgary, on the other hand, has seen house prices rise by 27% over the same time period.

Maybe we need an index that looks at making a living as well as enjoying living?

By: Michael Holden

Over the past few weeks, countless articles have been written about the question of whether or not Canada is suffering from Dutch Disease—an economic affliction by which large-scale development and export of natural resources drives up the value of the domestic currency and thus erodes the international competitiveness of the country’s manufacturing sector.

The issue first captured public attention during a brief but public spat between Alberta Premier Alison Redford and Ontario Premier Dalton McGuinty, but began to dominate headlines when NDP leader Thomas Mulcair took up the cause. The ensuing debate has been regionally divisive and largely unproductive. To the extent that it implies that growth in one part of Canada is coming at the expense of prosperity elsewhere, it is a recipe for disaster from a nation-building standpoint.

Is Canada a victim of Dutch Disease? While there is some debate on the matter, a number of recent studies suggest that there is at least some evidence to support the idea. But a review of the data shows that, even if oil sands activity is driving up the dollar and harming the export competitiveness of eastern manufacturers, it is only a small part of the problem.

To begin with, there should be no doubt that much of the Dutch Disease story rings true in Canada. Thanks to booming oil production and exports, the Canadian dollar has become, at least in part, a petro-currency. As Figure 1 shows, the Canada-US exchange rate began in the early 2000s to mirror movements in international oil prices. This is not to suggest that the price of oil is the only factor that influences the dollar, or that the same effect can be seen versus other currencies. Nevertheless, a clear relationship now exists between oil prices and the Canada-US exchange rate.

Similarly, there is also a clear relationship between the Canadian dollar and the relative health of the manufacturing sector in Ontario (Figure 2). Since the late 1970s, employment in manufacturing has tended to move in the opposite direction of the loonie. This trend is a natural result of Ontario’s heavy dependence on the US market. When the dollar goes up, manufactured goods from Ontario (and elsewhere in Canada) become more expensive in the US, so demand for those products falls and manufacturing activity north of the border slows as a result. When the dollar weakens, Canadian goods become relatively cheap, US demand for them increases and production activity increases. It is no coincidence that Ontario’s peak levels of employment in manufacturing were in the early 2000s, when the dollar was at historic lows.

But is that all there is to it? Are Ontario’s manufacturing woes the result of oil sands activity and is a lower dollar the solution to the problem?

To answer these questions, it is instructive to compare the performance of manufacturing in Canada with that of the US. Using 1990 as a starting point, Figure 3 shows that, at least from an employment perspective, Canada has outperformed the US over the past 20-plus years. Of course, the term “outperformed” is essentially damning with faint praise. In April 2012, Canadian employment in manufacturing was about 13% below 1990 levels while in the US it was nearly 33% lower.

Looking at such a long time horizon captures long-term trends, but it also glosses over the run-up in the Canadian dollar in recent years. From 2002 to 2011, the dollar rose from an average of 63.7 cents US to US$1.01. How did manufacturing employment in Canada and the US compare over that period? As it turns out, they were almost identical; employment levels in both countries dropped by 23%.

In other words, even though the Canadian dollar rose by 59% in nine years, the US manufacturing sector performed just as badly (in terms of employment levels) as the Canadian sector over that period.

Why? The reasons are complex and varied, but the two most obvious contributors are low-cost competition from China, Vietnam, Indonesia and other Asian markets; and the impact of the global financial and economic crisis. The former has been eroding the manufacturing base in North America, while the latter has undercut domestic demand for the goods produced here. The solutions to these challenges are not easy, but most agree that they are found in innovation, productivity gains and a rebound in consumer confidence.

Oil sands activity and high oil prices have undoubtedly contributed to a higher Canadian dollar. And this hasn’t made life any easier for Ontario manufacturers. But the dollar is clearly not the main problem and treating national economic activity as a zero-sum game, where growth in one region must come at the expense of growth in another, is not the solution.

By: Robbie Rolfe

The results of the Alberta provincial election that took place on April 23, 2012 generated a lot of commentary on the gap between what the polls were saying and what actually happened on election day. While this is an interesting puzzle, it is perhaps more important to look at another gap—namely, the chasm between votes cast and seats won.

There is a large differential between the percentage of the vote some parties received and the percentage of seats they won. The table below shows seat share minus vote share by region. A negative number indicates where a party had a smaller share of seats than votes while a positive number indicates where a party had a larger share of the seats than votes. When it comes to the first and second place parties (the Progressive Conservative and Wildrose parties), the differentials are quite large.



The Wildrose party had strong support across the province. Nevertheless, it came a close second or third in many ridings. To modify the cliché, close only counts in horseshoes and hand grenades, not in the single member plurality races we use to select our representatives in Alberta and across the country. So despite garnering more than a third of the popular vote in the province, the Wildrose party won only a fifth of the seats.

The Progressive Conservative party, on the other hand, won about 23 more seats than it would have if each party had received the same proportion of seats as its proportion of the popular vote. In many cases, the PCs won with a plurality (the most votes) rather than a majority.

Another way to measure the gap between vote share and seat share that typifies single member plurality systems is the least squares index, a common measure of proportionality used in political science. The scale runs from 0 to 100 with higher numbers indicating a less proportional result. This measure allows us to compare proportionality across elections. For the recent Alberta election, its value is about 22. To provide some context, that is a more disproportional result than any Canadian federal election since 1945. (This includes Brian Mulroney’s 1984 victory, where his party won 75% of the seats with 50% of the votes, while the Liberal and New Democratic parties’ seat shares were about half of their popular vote shares.)

Proportionality matters. Arguably, when the distribution of seats in the legislature does not accurately match the preferences of the voters expressed in the general election, it is less likely to pass laws reflecting the diverse preferences of the population. In other words, the single member plurality system we use in Canada tends to distort the representativeness of our legislatures.

To create a better match between votes and seats, we would need to implement some form of proportional representation. In these systems, seats are allocated based on a candidate or party’s share of the popular vote rather than on which candidate comes first in each riding. It may even have other positive effects (for example, it may increase the number of women and ethnic minority representatives in the legislature, two historically underrepresented groups).

Of course, a change of this sort will also have costs. For example, it will likely mean the end of majority government. In order to get a majority in a proportional representation system, one party will have to get very close to half the vote in order to get more than half the seats. This could be costly because majority governments are seen as stable, strong and able to implement their campaign promises. Voters can also identify responsibility easily and hold governments accountable when one party controls the levers of power. It is also easy for the electorate to turn majority governments out in a single member plurality system, as small movements in the popular vote can result in large changes in seats. (Some also argue that majority governments are better for economic performance, though there appears to be no statistically significant link in practice between the electoral system and economic performance. See, for example, Arend Lijphart’s 1999 book, which compares different democratic institutional types.)

Nevertheless, we can discuss and decide on a system that works for us. There are many options we can choose (we can even retain single member districts). We can minimize the costs and maximize the benefits.

We cannot do that, however, without talking about it—it is time to grapple with this elephant in our political living room.
 

By: Robert Roach

There are two main ways of addressing the fact that Canada is a collection of diverse regions.

The first is to embrace this fact as a fundamental strength and seek ways to work together and support one another. If we respect our differences and build on our similarities, a strong, united, dynamic and great nation is the result. Taking this path is not easy; it requires empathy, sacrifice, the ability to see beyond narrow perspectives, a willingness to compromise and an abiding commitment to the belief that Canada is strongest when all of its regions are thriving.

The second option is all too common and involves playing one region (or city or industry) of the country off of another for short-term gain, out of jealousy or because of ignorance. This approach sees the different parts of this great nation as competitors locked in a zero-sum game in which one region triumphs as the expense of the others. The result is bickering, missed opportunities, counterproductive animosity and a frayed national fabric. We can do better.

Politicians, business leaders, journalists, policy wonks and citizens from all parts of the country sometimes default to the second option. Most recently, Thomas Mulcair has said a number of things that focus on what divides Canada rather than what unites it. His remarks have been critiqued—and rightly so!—but we have to be careful not to let them become more fuel for the fire of division.

I have heard Albertans blame Quebec for Canada’s problems. I have heard people in Ontario berate life on the Prairies. I have heard people from Toronto tell tourists to avoid Calgary because it is ugly and full of rednecks. I have heard people in BC complain about EI recipients in the Maritimes. On top of these taunts and insults, there are old grudges against eastern banks, the oil sands is blamed for everything from the common cold to global warming and there are far too many Canadians who think breaking up the country is a good idea.

As we react to the recent wave of regional tension, it is worth considering that we are all better off working together as a country of strong regions rather than throwing stones at each other in an attempt to score points in a game with no real winner.

By: Robert Roach

The federal government recently announced a “Plan for Responsible Resource Development” that will streamline the federal regulatory review process. While this is a step in the right direction, a report from the Canada West Foundation being published on May 3 argues that the task at hand is much larger. Keeping Pace: Improving Environmental Decision-Making in Canada reveals an environmental decision-making process that, while one of the best in the world, is dogged by a number of significant shortcomings. These weaknesses include insufficient integration of scientific research; a lack of clarity regarding exactly what trade-offs between environmental protection and economic development are acceptable to the government of the day; and the ongoing need to ensure that the various government departments and agencies at the federal and provincial levels are cooperating as much as possible.

You can download this timely new report for free from the Canada West Foundation website on Thursday.

As reflected by the results of the 2011 census, the creation of new House of Commons Seats and the ongoing news about the westward titling of the economy, it is clear that the nature of the Federation is shifting. The latest research from the Canada West Foundation looks at the consequences for the region and the country, now that the West is truly “in”.

Taking Stock of the Federation by Dr. Roger Gibbins, President & CEO and Robert Roach, VP, Research, is the synthesis report from a roundtable held on February 9, 2012 in Calgary. This roundtable gathered sixteen participants who provided their insights on the contemporary political landscape, the likely direction of future change, and the potential for strains within the federation across the four western provinces.

“Each region in Canada is vitally important,” notes Dr. Gibbins. “While differences between the regions have evolved, they are still key variables in both Canada’s political environment and the economy. For the federation to work well, we must ensure that all regions— including the West—are heard, understood, and integrated into the whole.”

While participants expressed a general sense of optimism about the region’s future, they also highlighted some significant challenges western Canadians will face in securing a new position within Canada and the global economy. By addressing issues like market access, sustainable environmental management, labour shortages and a fiscally unbalanced federal state, we can ensure that the future remains bright.

Taking Stock of the Federation is part of Foundation’s The West in Canada initiative, which examines public policy innovation in the West, discusses and recommends ways to improve the Canadian federation, and analyzes regional economic, demographic and public opinion trends. Click here for your copy of the report.

Western Canada profits from its abundance of natural resources, however, in the changing global landscape, we need to take action to ensure our future prosperity. The latest research from the Canada West Foundation outlines the main contours of the contemporary energy world and takes stock of the trends shaping energy in western Canada.

State of the West: Energy – 2012 Western Canadian Energy Trends, by Senior Economist Michael Holden and Policy Analyst Robbie Rolfe, provides an overview of the provincial energy systems in western Canada, including the current state of energy production, consumption, and other associated activities and impacts. That information is framed in the context of the energy-related policy issues and challenges facing the four western provinces.

“Western Canada is characterized by a profound diversity of resources, consumption patterns, and economic and environmental impacts” said Michael Holden. “The energy picture in each province is unique, but their strengths are complementary. Through a more coordinated approach to energy policy, the western provinces can become more than the sum of their parts.”

Given the extent to which it permeates our daily lives, energy has come to dominate the economic, social, and political agenda in the region. State of the West: Energy provides a one-stop information resource on energy in western Canada, informing the debate surrounding energy policy in the West, and providing context to both where we are today and where we may go in the future.

State of the West: Energy – 2012 Western Canadian Energy Trends is part of the Foundation’s Powering Up for the Future initiative, which facilitates constructive debate on sustainable energy policy solutions for Canada and promotes the vital importance of western Canadian energy systems in the national, continental, and global economy. Click here to download a copy of the report.

By: Larissa Sommerfeld 

Alberta is now in the throes of the third week of the provincial election campaign. Given the critical importance of the province’s water resources to its economy and environment, it is worthwhile checking in to see how water policy is being addressed by the contending parties.

I’ve reviewed the platforms of the main parties and have highlighted their water policies below:

Alberta Party
The Alberta Party’s platform focuses on the five core ideas of healthcare, students, democracy, the economy and communities. It doesn’t specifically place environmental concerns front and centre. However, under the “economy” section, the Party commits to promoting a “positive brand image for our resource industries by insisting on best practices and a strong commitment to environmental stewardship.”

Evergreen Party
The Evergreens—a newer addition to Alberta’s political scene who have replaced the Alberta Greens—simply state in their party platform that “we will encourage conservation and reduction of water usage, and prevent the sale or export of water.”

Liberal Party
The Liberals do not mention water in their party platform at all. Rather, their key environmental policies focus on emissions and the monitoring of the oil and gas industry.

New Democratic Party
The NDP has some very specific water policy goals outlined in their platform including stopping the expansion of water markets and putting human and ecosystem needs first when it comes to water allocation. Regarding industry activity, the NDs support:

• Cleaning up tailings ponds, but at a cost to companies rather than taxpayers;
• Doubling the monitoring and enforcement activities of the Ministry of Environment and Water to “make sure the industry lives up to its environmental obligations under the law”; and
• Appointing an independent scientific panel to examine hydraulic fracturing.

Progressive Conservative Party
The PC Party does not have a comprehensive policy platform available on their website. In this case, we have to look at past policy to see where they might stand on water:

• Premier Redford renamed the Ministry of the Environment as the Ministry of Environment and Water last fall. According to Diana McQueen, the current Minister for Environment and Water, this was a “deliberate move to emphasize the priority that our government places on this resource.”
• The government has committed to increase funding to about $11 million for environmental monitoring; and
• An annual amount of $150 million has been committed to fund the Alberta Oil Sands Technology and Research Authority (AOSTRA) to support research that will help Alberta work toward meeting the Water for Life goals.

Wildrose Party
The Wildrose Party has a fairly robust environmental platform. Some of their commitments include creating a position for an Albertan environmental ombudsman and addressing water quantity issues in the south and water quality issues in the north. The Party is committed to finding ways to improve water storage by building more dams and/or reservoirs and states it will review and reform Alberta’s licensing system to “ensure that existing licenses are fully utilized while respecting the principle of first in time, first in right.” It also is supportive of new conservation technology that allows for the use of things such as grey water recycling and supportive of the movement toward a federal ban on bulk water exports to the US. Regarding industry, the Wildrose has stated it in its platform that it will:

• Work toward eliminating tailings ponds;
• Support water technology so that industrial use of water decreases; and
• Strictly enforce existing regulations on effluent-producing industries.

By: Robert Roach, VP, Research

In an article in today’s Globe and Mail, John Ibbitson argues that "One question will define national politics in our time: Are Western Canadians prepared to sacrifice for the sake of the nation, now that Ontario is less able to help?"

In addition to incorrectly implying that western Canadians chipping in to help the rest of the country is a new phenomenon, the question is the wrong one to ask.

The question Canadians should be focused on is how to ensure that the nation successfully adjusts to the evolving global economy. It is a mistake to start with a negative question that assumes the need for "sacrifice"—whatever that means—or puts pressure on the nation’s fault lines by immediately assuming that regional wealth redistribution is the solution to central Canada’s problems. This is the old way of thinking and this is not the time to bring it back.

The West knows what it is like to have its interests and economic prospects ignored and how damaging this is to the country and its potential. It will not, therefore, make the same mistake that central Canada has made in the past and be blithe to the blight of the other regions.

The West gets it—all regions benefit when all regions are heard and respected. The West will do its part, as it always has.

Ensuring Canada’s prosperity will happen naturally as the western economy continues to provide jobs and returns on investment. It will also happen at the political level through the equalization program, a strong tax base in the West that helps fill the national treasury, and by ongoing efforts by Canadians to ensure strong regional representation within the national government.

Ultimately, however, the economic recovery of Canada's industrial heartland will depend on the efforts of individual Canadians and their ability to harness the changes happening at a global level.

By: Shawna Stirrett

In November 2011 the Canada West Foundation in partnership with the National Round Table on the Environment and the Economy (NRT) conducted a series of roundtables about developing a low-carbon growth strategy for Canada with particular emphasis on the opportunities and risks facing the West.

You can read all about the main themes, policy recommendations, and overview issues in the report (click here to view) but, just for fun, here is a visual overview of the roundtables:

These word clouds were created from my notes, which were typed up during each of the sessions. Words that appeared more often in the conversation appear larger in the clouds and words that were less common are smaller. In a sense, these clouds give a visual overview of what ideas were most prevalent during the roundtables and which topic generated the most interest.

What is really fun is to see how the conversations—which were all structured around the same questions—varied from province to province.

For example, in Saskatoon, one of the main themes was on how to deal with carbon constraints in an environment of economic growth.

Those in Vancouver were most concerned about how carbon should be constrained, should it be a tax or cap and trade?

Calgary roundtable participants were pretty set on the need for a national framework around energy and emissions.

While in Winnipeg the discussion centered on how challenging it can be to put in place carbon policies when power is so cheap and emissions rates are so low in the province.

Of course these word clouds do not tell the whole story, but they do provide an interesting visual overview of what issues were important to roundtable participants and how the conversation varied across the region.

Click here to download a copy of Cautious Optimism: Western Perspectives on a Low-Carbon Economy.