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Sean Speer: Ontario desperately needs to get back to growth

Commentary

An end-of-year news release caused a major economic story to go mostly unreported late last year. The federal government’s announcement of its major fiscal transfers to the provinces and territories for 2023-24 revealed that the Province of Ontario will receive an equalization payment for the eleventh time since the program’s launch in 1957 and the first time in five years. 

There are extenuating circumstances at play. The interaction between high inflation and the equalization program’s design (which sees its funding envelope grow in parallel with nominal GDP growth) automatically led to an increase in the program’s overall spending and an equalization entitlement for Ontario. University of Calgary economist and regular Hub contributor Trevor Tombe has written a first-rate explainer on the policy peculiarities that produced such an outcome.

But it would be wrong to totally dismiss the news as an arithmetic aberration. Just because Ontario’s fiscal capacity exceeds the national average is hardly a sign of a dynamic and robust economy. It’s notable for instance that even before accounting for resource-based revenues, the province’s fiscal capacity lags that of Alberta and British Columbia.

This trend towards a middling economy didn’t happen overnight. As co-authors and I outlined in a 2020 policy paper, Ontario’s rate of economic growth has been in secular decline for decades. Over this entire century, its annual average growth is barely 2 percent. 

Slow growth isn’t without consequence. It’s become a cumulative drag on Ontarians’ living standards including relative to its U.S. neighbours. The province’s GDP per capita (which is a good barometer of its standard of living) exceeded that of its neighbouring states like Michigan, Ohio, and Pennsylvania when I was born 40 years ago. Today Ontarians are poorer than their American peers from Warroad, Minnesota to Buffalo, New York. 

There’s a case that Ontario has in effect become the “sick man” of North America. And there’s reason to think it’s actually bound to get sicker.

RBC Economics projects that Ontario’s real GDP growth will be the worst among the provinces in 2023 and second worst in 2024. In fact, RBC anticipates that Ontario’s economy is the only one across the country that will actually contract over the coming 12 months. 

One would think that such a distinction would jolt Ontario policymakers into a pro-growth policy agenda. The province’s economy needs “shock therapy.” But it probably wouldn’t get it. 

The Ford government first came to office in 2018 with bold promises of an “open-for-business” agenda that has never quite materialized. That doesn’t mean there haven’t been any positive policy developments. Examples include: early regulatory reforms; tax reductions (including accelerated depreciation on capital investment as well as lowering business property taxes, and employer health taxes); significant investments in public infrastructure; some interesting developments on intellectual property; and Labour Minister Monte McNaughton’s ambitious agenda in the labour, skills training, and immigration portfolio.

But it’s fair to say that in overall terms the government’s record is underwhelming. Its early ambitions have mostly narrowed to an odd mix of populist economics, left-wing accommodation on COVID-19, education, and public spending, and a tendency to find itself in political controversy without the accompanying conservative reforms to show for it.

The province now finds itself at a crossroads. It’s stuck in a slow-growth cycle of sclerosis and stagnation. It’s no longer enough for the government to focus on frivolous issues. It needs to recommit itself to growth.

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The good news is that Queen’s Park already has something of a blueprint for a renewed focus on a pro-growth agenda. It just has to deliver on its own outstanding policy commitment to develop, implement, and monitor a long-term growth agenda for the province. As the 2021 provincial budget set out (italics added): 

The government will take further steps to create a more competitive environment for job creators through a plan for long‐term economic growth, informed by business leaders and entrepreneurs, workers and labour representatives, community organizations, experts and most importantly, the people of Ontario. Ontario will outline a long‐term growth plan that: 

  • articulates a clear vision for attaining higher rates of economic and productivity growth that will ultimately lead to a more prosperous provincial economy for all the people of Ontario;
  • undertakes an in‐depth analysis of the province’s competitive strengths and challenges;
  • provides goals to work towards over a five to 10‐year timeframe; and 
  • identifies initiatives that will achieve those goals.

Research tells us that such a clear, coherent, and transparent long-term growth strategy can tilt policymaking in a more pro-growth direction and mitigate some of the political economy pressures towards short-termism and special-interest policymaking. It can anchor the government’s policy agenda and enable greater alignment across ministries and policy areas.

Bringing expression to long-term growth ought to be the top priority in the lead-up to this year’s provincial budget. It’s hard to overstate how important it is that the Ford government reorients its attention to economic growth. A sustained period of economic underperformance will shift this year’s formulaic dip into equalization-receiving status into a new norm. Ontario is at risk of permanently becoming a “have-not” province.

The province’s only path back to economic health is through higher rates of productivity. There’s no other way around it. That means reckoning with its unhealthy dependence on the real estate sector, its wrong-headed emphasis on GDP growth in and of itself than rather than rising GDP per capita, and its geographical concentration of economic activity. It means in short getting back to broad-based growth.

The Ford government’s forthcoming budget therefore is a crucial moment for the province’s economic future and its own policymaking legacy. Will we get a long-term growth strategy or a smattering of “business-as-usual” policies? One should hope for the former but anticipate the latter.

Malcolm Jolley: Five New Year’s resolutions for writing about wine

Commentary

I am sure I recently heard a news report on the CBC that explained Canadians (or possibly Americans) had stopped making New Year’s resolutions because we (they) had become wise to the fact that they are rarely realized. I cannot find the source, and the memory may well be false. Or it might be a projection, since I am hard-pressed to remember when I last made a genuine resolution to do something differently as the calendar turned. This changes now!

The school holidays in Ontario mean that, as I write at the turn of the year, we are still taking it easy, family-style, until the 9th of January. I fancy myself like René Descartes exiled in wintry Holland: I am staying with in-laws in the damp and drizzly Grey County countryside and prone to self-reflection. My cogito ergo sum moment is to resolve to do better in this column, and I have the following five ideas about how to do it.

More people

The French came up with the idea of terroir, that a wine had what the American wine writer Matt Kramer called “somewhereness”. This worked well for the French, whose somewheres included Bordeaux, Burgundy, and Champagne, and has been copied by all the other somewheres where wine is made. But surely, the most important thing about any somewhere is the people there.

Contrary to the Natural Wine Taliban (TradeMark pending), wine does not make itself, and the story of the people who make the wine is the real story of the wine. It’s easy to forget this and get caught up in geography, climate, grape variety, cellar equipment, or whatever else and forget about the minds that make the decisions about what ends up in the glass. I resolve to do better at this and bring The Hub readers more interesting stories about interesting people making interesting wines. Maybe it means less how and more why.

More books

The best “work” I had this year was reading Andrew Jefford’s book, Drinking with the Valkyries. If Revenue Canada asks you, I bought the book to write the Hub column about it a few weeks ago; you know, for professional reasons. That it was an absolute pleasure to read, and write about, is simply a happy coincidence… Though in all seriousness, Jefford’s writing reminded me how much my thinking about wine has been shaped on the shoulders of giants like him, and Kramer, Lynch, Olney, Robinson, and others.

There are giants in the making too, writing now and shaping how I think about wine just as much. An overlooked privilege of wine writing is, I think, that those who practice it are forced to intermingle at tastings and press trips. It’s a pleasure to meet the author of a book (in this case about wine) and discover the person who wrote it is as interesting, if not more, than what he or she wrote. I resolve to take advantage of these meetings, past, present, and future to tell Hub readers the stories of others who write about wine, and why.

More food

The story of wine, as it spread from the Southern Caucasus across the Mediterranean Basin and to the shores of the Atlantic, is the story of culture and food. Wine is food, say the French, and they mean it. In North American culture, wine is a drink too, which is fine, but a sip is always better with a nibble, even if it’s just an olive or a potato chip.

I resolve to try harder and more frequently to place wines in their context at the table, especially a Canadian table at whatever time of year we happen to be in. While wine is a pleasure unto itself, it’s also an enhancer of other pleasures, not least gastronomic. The Italians say one never grows old at the table. I will try and remember that wine’s foremost place is there.

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More New World

I am grateful for the liberty my editors at The Hub grant me with regard to the subject of these columns. But, with freedom comes the danger of complacency. Looking back, I see my bias, and great love, for the wines of Western Europe. I will confess to a particular fondness for the wines of Italy, and could likely write 50 columns a year just on that subject. But I am not a hedgehog and wish to be much more of a fox.

The world of wine is vast and holds pleasures from all corners of the Earth between the 30th and 50th latitudes. In my old job, my advertising clients were wine importers who represented wineries from across the globe. I resolve to get back in touch with them, and also to follow my own nose, to find out what’s interesting in the Antipodes and South America. Watch out for a report from Argentina, where I plan to be in February.

More Canada

I know we are also in Le Nouveau Monde, but as Thomas Bachelder says, Canadian wines are a bit “Trans-Atlantic”, because of our cooler climate (however hot it gets in the Okanagan). I am with Heather Reisman: my wine world definitely needs more Canada. 2022 was my year of re-engagement with the geography of wine, but most of that happened in Europe. It’s only late in the last year that I began to think about getting back to Niagara and seeing what’s happened on the ground in the last three years. And then, there is Beautiful British Columbia, which is making some of the most exciting wines in the North American West. Stay tuned.

What else? If you would to see more of something or other in these columns this year, please get in with me through The Hub at editorial@thehub.ca.