The New Staple State: Political Economy and Public Policy Regimes in Canada’s Primary Industries

Embedded Interests: Establishing the Staples Economy

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Embedded Interests: Establishing the Staples Economy

The first 100 years of the government’s approach to mining (from about 1880-1980) might be characterized as a “conventional” effort to promote mineral development. (Clausen and McAllister, 2001) Industrial policy was very much tied to building Canada’s natural resources industries. In the first half of the 20th century, the federal government, actively involved in restructuring the economy, supported the growth of the mineral and other primary industries in numerous ways. Early mining departments were charged with the responsibility of promoting mining to serve the public interest. (Government of Canada, 2004) During the mid-20th century, Canada’s ‘boom and bust’ economy, subject to the vagaries of the international market place and uncertain prices, motivated the federal government to support its export-oriented industries and resource regions through various policy and economic measures. Canadian industrial strategies were heavily linked to building up the resource industries. One promotional effort of the era was John Deifenbaker’s “Road to Resources” initiative. Prime Minister from 1957-1963, Deifenbaker adopted a platform of opening up the north for development signalling a government actively involved in “staples-led” growth. (Leslie, 1987: 7)

Although the initiative has been criticized as being somewhat ineffective, (Leslie, 1987:7) it highlights governmental preoccupation with the importance of the resource sector to Canada during that era.

Canada became a world leader in the production of many minerals. By the early 1980s, Canada was selling almost 80 percent of its mineral products to 100 countries. (Wojciechowski and McAllister, 1985: 21) The industry was firmly embedded in the Canadian economy and society. The public interest was interpreted fairly narrowly based on principles associated with liberal democracy, economic development and private property rights. Decision-making might be best characterized as a top-down approach where industry and government were considered the key players in the mineral arena.

Throughout the century, labour unions struggled to achieve legitimacy. Part of the difficulty was its own fragmentation where unionized workers were affiliated with different unions such as the United Steelworkers and Automobile Workers, Canadian Union of Public Employees and the Public Service Alliance. In addition, Clement notes that unions have historically been trapped between two competing ends, “They are at one and the same time the most systematic and organized expression of [worker’s] resistance and through the commitments they make to companies when they enter into collective agreements, a containment of many forms of workers’ resistance. (Clement, 1981: 301)

For their part, government mining departments were expected to perform the dual role of promoting industrial development while regulating the activities of enterprises. Federal and provincial government promotion of the industry included direct investment or equity participation in many mining corporations. Governments also provided millions of dollars in direct grants that funded geoscience, technology, marketing or feasibility studies. Other assistance included infrastructure development, promotion of minerals in international trade meetings, and tax concessions. Although they played the role of promoters of resource development, governments also imposed corporate, income and mining taxes and regulated the industry through various pieces of legislation and regulations governing land access and tenure, transportation, mineral investment, health and safety, and increasingly, environmentally-related concerns (McAllister and Schneider, 1992). Federal and provincial mining departments saw their primary responsibility as one that would foster a stable investment environment while serving the public interest. In the late 1980s, the federal Mineral and Metals Policy of the Government of Canada, laid out a number of objectives that were geared toward assisting the industry including regional economic development policies and improving access to international markets. (Energy, Mines and Resources Canada, 1987: 4)

A decade later, however, government approaches to resource development began to change; in mining a new policy was introduced with a distinctly different tone and objectives. The government was now recognizing that the policies that had carried the mineral industry and Canada through more than a century of staple-led growth was out of step with the societal and political changes that had been taking place in Canadian political culture and economy. Most notably, the government had to respond to widely-held concerns about environmental degradation and the demands of a diverse mineral policy community. Introducing the new policy, the Minister of Natural Resources Canada signalled a shift in the traditional position stating, “Turning the concept of sustainable development into practice will require stakeholders to question their old assumptions, and to examine minerals- and metals-related issues in light of the integration of economic, environmental and social objectives.” (Natural Resources Canada, Minerals and Metals Sector, 1996, Forward)

Shifting Ground: Competing Interests

In the closing years of the 20th century, the mineral industry found itself facing a number of pressures that it saw as threatening its position as a valued component of the Canadian economy and society. These were not threats peculiar to the mineral industry; Canada’s staples-based economy, used as the foundation for nation-building, was now being questioned both in terms of its continuing economic contributions and its environmental impacts.

As noted by Hutton in Chapter 2, a new or post-staples economy might be characterized as one that includes severe pressures on the resource sectors, public concerns about adverse ecological impacts of the industrial activity, rapid shifts in the economy specifically toward the tertiary sector with industrial regional growth, and a decline of smaller resource communities. Significant international changes would also be present, including the economic integration of markets, networks and services.(adapted after Hutton, 1994: 1-2).

In the past quarter century, such characteristics certainly applied to Canada’s mineral industry. The industry reacted in various ways to fluctuating economic cycles, new competition, uncertainty in land access for exploration, and the indifference of a primarily urban public frequently more concerned with the industry’s environmental impacts than economic contributions. A decline in mining communities and lower levels of direct employment in mining operations contribute to the industry’s decreasing influence on public agendas. This raises the question about whether we are now experiencing a diversification of the Canadian economy accompanied by a diminishing mineral sector—a reflection of the emergence of a post-staples economy.

Competitive Pressures on the Resource Industry:

Industry representatives state that the “object of any mining enterprise is to produce a product that someone wants to buy, at a price that can satisfy all the stakeholders. A modern mine in Canada often requires an investment of $200 million or more (large mines might cost $1 billion) before producing any income”(Canadian Institute of Mining Metallurgy and Petroleum et al, 2004). These companies have a responsibility to their investors, lenders, and shareholders to make a reasonable rate of return. Before that can happen, a company must make a number of expenditures include paying wages for labour, suppliers for goods and services (which constitutes about one-half of a mine income), and taxes for government services. Money is also required for new exploration and development to ensure continued supply of mineral reserves (Canadian Institute of Mining Metalllurgy and Petroleum et al, 2004). A number of pieces of government legislation and regulations are in place to regulate the industry including governing access to land, health and safety guidelines, and environmental requirements.

Determining the economic viability of a deposit is a complex process where each step must be factored into the estimated costs of bringing a mine into production. Uncertainties include the reality that world prices are determined by supply and demand, the changing investment and regulatory climate in the host jurisdiction, and, increasingly, the local reception of the community to mining activities. To survive unpredictable events, an industry must adapt to survive. Such an occurrence hit the mineral industry when a recession in the early 1980s was followed by a subsequent recession in the early 1990s. The mineral industry responded with technological improvements to increase efficiency in the production of minerals. Most recently, the industry received a boost with recent developments in domestic mining such as the rich nickel, copper cobalt deposit in Voisey’s Bay, Labrador and the new diamond industry in northern Canada. Nevertheless, the overall rate of new discoveries has continued to decline, particularly “top-tier” discoveries (i.e. large, mineral-rich, accessible, economic deposits) and reserves are becoming depleted. This situation has continued to stimulate offshore exploration activities and raise questions about domestic exploration potential (Gouveia and Gingerich, 2003: 9). Some argue that Canada is still one of the top targets for exploration dollars as long as world prices are strong and there are continuous discoveries to maintain mineral reserves. (Cranstone, 2003: 3)

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