North should exorcise the resource curse.

• Author: Robinson, Dave
• Position: Economically Speaking

Is this Canada or is it Northern Ontario? If it is Canada then we are in one of the richest and most industrialized countries in the world, and we can expect strong growth over the next 20 years. If we live in Northern Ontario, on the other hand, we are part of a resource-dependent region that is likely to get poorer. That is the message from the World Bank. In 2003 the bank published Natural Resources and Violent Conflict: Options and Actions. Most of the essays in the book are about rebel groups, government corruption, contraband diamonds and other boring topics. One essay is directly relevant for Northern Ontario. It is called "The Natural Resource Curse: How Wealth Can Make You Poor," by Michael Ross.

According to Ross, "Study after study has found that resource-dependent economies grow more slowly than resource-poor economies." Northern Ontario fits the pattern - it is resource-rich, resource-dependent, and growing much more slowly than the non-resource based parts of Canada.

The problem is called "the resource curse" and it has become a big issue in economic development. I reviewed 20 studies about the resource curse to find lessons we can apply here in the North. None of them discuss resource-based regions inside developed countries like Canada, so it takes a little imagination to see how this international literature applies to Northern Ontario.

Lesson 1: depending on mining can be deadly. Countries that rely on mineral exports tend to have high poverty rates.

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If Northern Ontario were a country it would come in at the top of the mineral-dependency list - above Botswana, which depends on minerals for 35 per cent of its exports. According to the World Bank, GDP per capita dropped a remarkable 2.3 percent per year for countries with more than 15 percent of mineral exports.

There is some good news. Not every country that relies on mineral exports sinks into poverty and violence. Norway used its oil boom to launch an economic revival. The Norwegians had a strategy designed to avoid the resource curse. It included a state-owned oil company, centralized wage-setting and heavy investment in education. Skills developed producing offshore-drilling rigs were carried over to other industries.

Lesson 2: concentrate on producing goods and services for forestry and mining. The skills and the products can be transferred to other industries.

Lesson 3: to get rich from your natural resources, become knowledge producers...