Propaganda and the hate industry are modern developments but one of our most serious problems dates back to the first days of settlement. That's because the nation we call Canada began as a colony, and we never developed beyond a colonial type of economy.
National economies have to be complete, because independent nations have to take care of all their own needs. In prehistoric times the people of England and Germany and Japan and other nations produced everything they needed to survive. As trade develops healthy economies import luxuries and specialty goods and sometimes raw materials, but imports and exports are always secondary to a national economy.
But colonial economies live on imports and exports. Colonies are established to produce the raw materials their imperial masters need, and to buy the finished goods their imperial masters want to sell. They are not intended to be self sustaining.
Before the white man came a Canadian native who needed an axe made one, or traded for one that was made in Canada. When a French or English settler needed an axe, he bought one that was made in France or England.
French and English settlers came to Canada to ship raw materials back to France and England, and they were not allowed make goods that would compete with imports. One of the first European hat-makers in Canada was one Joseph Huppe of Montreal, who tried to make beaver hats -- to compete with beaver hats made in France -- in the 1730's. Royal officials raided his shop, smashed his basins and dying and fulling vats, and took the rest of his equipment to the king's storehouse.
The thirteen colonies that formed the United States had a colonial economy while they were ruled by England, but they broke out of the pattern when the revolution cut their ties with the mother country. Trade with France would have made them dependent on France and they couldn't risk that. Starting almost from scratch, they had to build a self-sufficient economy.
Canada did not rebel and we had no urgent need to develop. Over the years we built some industry, first to support the railways that were built to hold the country for England and later to support England's war efforts, but the country was developed as a source of raw materials.
In colonial days an entrepreneur from England could come to Canada and take as much wealth as he could from the land, as fast as possible, then go back to England to spend his profits. The profits were very big because he was taking wealth that was already there. He didn't have to produce it and, because this was not his country, he didn't have to care how much damage he did taking it.
That's good for imperialists but as a Canadian I take a somewhat different view of Canadian resources. The most obvious fact is that these resources are mine -- if I speak of myself as a representative of the citizenry -- and it's not in my best interests to dig them out as fast as possible and ship them to some other country as cheap as possible.
If I don't cut the tree or dig the mine or pump the oil this year I can do it next year -- and next year the resource will be worth more than it is this year.
On the other hand if we produce resources as fast as we can for export we will run out some day, and in fact that is already happening.
Fishing was one of our first resource industries but foreign competition, and the destruction of the seal hunt, seems to have wiped out much of the east coast fishery. We never did have much of a west coast fishery because England gave about half of Canada's west coast to Russia in 1825, and the U.S.A. bought it from Russia in 1867. We once had potential for a huge inland fishery but it was never fully developed and much of the potential has been damaged by logging, paper mills, mining and other extraction industries.
The fur trade was probably the most sustainable resource industry we had but it was never big, and it has been mostly wiped out by activists. The loss of the inland fur trade affects only the few tens of thousands of Indians and Eskimo who now live on drugs, booze and welfare because their traditional trade goods no longer have value on the world market. The loss of the seal trade is more important because it was also a factor in the destruction of the Atlantic fishery, but again the people who suffer most are of no concern to most Canadians.
Logging was our first major resource industry and in some ways it was a natural because settlers had to clear the land to develop farms, roads and towns. Canadian loggers sold wood to England until cheaper lumber from the Baltic states drove us out of the English market. Since then we have sold wood mostly to the US, but some very high quality wood now goes to Japan.
Trees are a renewable resource but they don't grow very fast in Canada. Some companies re-plant as they cut but they still cut faster than the trees grow. The best forests in Canada were cut long ago and they will not grow again because the land is now covered with subdivisions and shopping centers, or paved for parking lots and super-highways.
Where the old forest remains it's mostly where the land is not much good, or the weather is not good for growing trees or crops. In some areas of Canada we may get only one generation of trees for several generations of loggers.
By contrast Australians grow trees quickly in plantations and African, southeast Asian and South American loggers work in tropical conditions where trees grow quickly.
Even American loggers should be able to sell cheaper than Canadians, because most of their forests are in kinder climates and on better land. They can't, because American loggers working in the States have to grow their own trees or buy them from their government for fair market value.
They claim that Canadian loggers, and American loggers who work in Canada, have an unfair advantage because our governments under-value the trees that are cut on public land.
Canadian logging makes good jobs for a few men and very good profits for some companies, but it's a short-term business. In the long run we just can't compete with countries that have better weather and better land and cheaper labor, and when our forests are destroyed we will lose the business.
Paper is another major Canadian business that depends on cheap trees. Like other resource industries it pays well for the few who work in it but it is very capital intensive, it causes a lot of pollution, and most of the profits go to investors who may or may not be Canadian.
Because they take huge capital investment paper mills are not local businesses. They are owned by businessmen who have no connection with the areas where the mills are located, and who don't worry much about the long-term needs of local people.
Fortunately the Canadian paper business has a limited future, because Brazilian paper mills now grow trees in plantations and mills in other countries are learning to recycle paper, and to make it from grasses rather than trees. If we are lucky most Canadian paper mills will go broke before the last of our forests is destroyed.
Mines make big money but they don't create wealth because the value is there before they dig it up. They don't make many jobs, relative to the size of the business, and relatively few people get to share in the cash returns. In many cases the few people who collect most of the profits live in other countries. Because the money they make is factored into the GNP Canadian mines contribute to the myth that Canada has a viable economy, but for many Canadians the most important products of the mining industry are blighted landscapes and toxic chemicals in rivers and holding ponds.
And mines are not a stable business. In 1959-60 I lived for about a year at Tilt Cove, on Newfoundland's Notre Dame Bay, where a copper mine was then in it's third or fourth incarnation.
It was discovered in the 1800's when an English surveyor noticed that a local fisherman was using a huge chunk of nearly-pure copper as an anchor. For a few years English schooners landed at the cove, filled their holds with copper, and sailed home.
When the pure copper was gone the operation shut down until rising prices and better technology made it worth while to come back. Then another English company opened a mine which dug ore, smelted it on the spot and shipped the copper back to England.
By the time I arrived the mine had been closed several times, and had finally been re-opened by a Canadian company that mined low-grade ore out of deep shafts and concentrated it in a huge mill before shipment. The Canadian company also mined the slag heaps left over from the previous mines, because the slag that previous miners had thrown away was now the richest ore in the area.
When I last visited the cove about 1980 the mine had been closed again and most of the buildings torn down. While the early miners came and went a fishing village occupied the cove but after the "modern" mine had dumped waste from the concentrate mill into the sea for more than ten years, there was no more fishing in the area.
Modern mines are not as rich as the mines we used to have and our markets are no longer guaranteed. If the mine at Tilt Cove had lasted long enough, it might have been bankrupted by the change from copper wire to glass fiber-optic telephone lines.
The first miners at Tilt Cove sold their copper on a protected market in England, but Canadian mines now have to sell on the world market. Some of the competition includes developing countries which have not yet worked out their best mines and where people will work for little more than slave wages. Some third world mines are financed by Canadian companies with profits from Canadian mines.
Many third-world countries have no environmental regulations and, in order to compete, Canadian resource industries have to take more and more chances with our environment. One example is the gold mining technique used in a new mine in the Yukon.
Gold that cannot by mined by normal means can be extracted profitably by the process known as heap leaching, in which ore is piled in a heap and "leached" with a deadly poisonous solution of cyanide
The ore is piled on a waterproof concrete pad to prevent the cyanide from soaking into the ground but the pad at the Galactic Resources Mine near Summitville, Colorado cracked. The mining company went broke and left the US Environmental Protection Agency a cleanup bill estimated at $155 million.
One mine began last year to use heap leaching near Dawson City. The mine will employ 140 people, and is expected to produce about $400 million worth of gold over eight years.
But it could be very expensive because concrete may crack in cold weather, and a crack in the concrete of this heap leaching pad could poison more than a thousand miles of a river that provides water and fish for tens of thousands of people and millions of animals.
If we actually needed gold the risk might be justified, but we don't need gold. We already have more gold in the world than we have real use for, and the new mines may even threaten the use of gold as symbolic money.
We value gold partly because it's hard to find but as the production of gold goes up the price of all gold -- including the gold that misers keep in vaults -- goes down. If heap leeching works as well as the promoters think it will, it might actually destroy the value of gold.
Hoarders like to pretend that gold will always keep it's value but that's just not so. In March of 1998 gold sold for less than $300 per ounce but 20 years ago it peaked at about $985 per ounce -- equal to about $1,600 in today's dollars. In our time the so called "hedge against inflation" is in fact a disastrously bad investment.
Oil is the newest resource industry and the most profitable. It may cost a million dollars or more -- perhaps much more -- to drill an oil well but a good well will produce tens or hundreds of millions of dollars in revenue with very little effort on the part of the owner, and with very little employment for others. Oil makes up 35% of our export surplus, but it produces relatively few jobs and most Canadians do not share in the profits.
Like mines, oil wells produce wealth but they do not create it. In fact oil taken from a well should be regarded as a withdrawal from the national savings account.
And perhaps we should consider the oil industry to be the enemy of mankind, because it promotes the use of oil in the face of evidence that greenhouse gases produced by burning fuels may be a growing world ecological disaster. Even now, Canada is in default on an international agreement to tax greenhouse gases because Canadian oilmen are afraid that a tax would not be good for their business. It's not supposed to be good for their business, of course, it's supposed to save the world.
But Canadian governments serve the oil industry, not the world, and they spend millions to subsidize premature oil projects -- like the Alberta Tar Sands and Hibernia -- in order to get them going before they are economically practical. If we did not develop them they would be worth more in the future, when prices will be so high that they would need no subsidy. With the help of the federal government, Canada will run out of oil before that happens.
We need resource industries to produce raw materials for use in Canada and if the price is right we could even export some, but it does not make sense to produce resources for export as a major part of the economy. The fact is that resources produced for export do not provide much benefit to the country as a whole. We would be much better off to keep them for our own use, or at least to use them to make finished goods, than to subsidize foreigners to take them away.
One way or another we will have to develop a new strategy soon, because our natural resources won't last. As oil runs out the industrialized countries will turn to renewable resources -- but what will we do? There will be a big business selling solar cells and wind turbines around the world, but unless we develop our own manufacturing industry we will not be able to compete in that market.
If we hope to maintain first-world status we must develop an industrial machine while we can, and that's not as easy as it sounds. Canada tried to develop an industrial economy about 100 years ago, after we lost the English and American lumber markets, but we didn't make it.
Our problem began about 1866 when the Baltic states offered lumber cheaper than Canada, and England began to buy from them. Canada was saved from bankruptcy partly by a reciprocity treaty with the US, hurriedly negotiated by Lord Elgin.
Reciprocity would have drawn us completely into the American orbit -- and perhaps into the union -- but for the American Civil War. England supported the south against the north and, in retaliation, the US canceled the reciprocity treaty in 1866.
That created another emergency, and Canada tried to develop an independent economy. Partly to fill the need and partly as an election ploy, Sir John A Macdonald's "national policy" of 1879 erected a tariff wall against American manufactured goods.
The idea was to give Canadian manufacturers a chance but it backfired because American manufacturers were too close, too strong, and too smart to be shut out. When we closed our borders with tariffs they set up branch plants in Canada, to make American goods for sale throughout the British Empire. That began an economic take-over and by the early 1920's the US held more investment in Canada than Britain did.
The American branch plants gave Canadians work but they stifled Canadian industry, partly because they were too big and too rich for Canadian manufacturers to compete with. If the American Widget Works has a branch plant in Canada, the Canadian Widget Company doesn't stand much chance in competition.
Economists talk about "economies of scale" and they're partly right, but only partly. Based in a bigger market American Widget already has an advantage over the Canadian Company, because it can spread its tooling and development and marketing costs over more widgets.
But if American Widget's office and plant are in Chicago Canadian Widget can beat them in Toronto because the local company can provide better service in the local market. That was more important in 1890 than it is now, of course.
But we're talking about the 1890's and when American Widget built a branch plant in Toronto, Canadian Widget lost a big advantage. Worse, the Canadian company had to compete with a branch plant that had no head office, tooling or development costs to cover, and could make widgets even cheaper than the American plant.
But the effect on the Canadian economy spread beyond Canadian Widget because the Canadian company used to keep a couple of machine shops busy making its tools and maintaining its machines, and it used to buy all its supplies in Canada. The Canadian branch plant of American Widget gets its tooling in the States, and if it buys supplies in Canada it buys from Canadian branches of the American company that American Widget buys from in the States. Some of those branches came to Canada to deal with branch plants and, with that business as a foundation, they went on to push Canadian suppliers out of business.
Branch plants provide some of the jobs that politicians promise and they produce good numbers for the GNP, but they block real industrial development.
Two world wars gave Canadian industry a second and third chance because we had to build an industrial base to make the arms that England needed, but both times the Canadian government blew it.
Three examples. In 1949 a Canadian subsidiary of a British company developed the world's first jet airliner, and soon afterwards a British company in England developed the second. In a worst-case scenario the Canadian plane could have been used in Canada, but the Canadian government decided that a Canadian airliner could not compete with a British airliner and the Canadian project was shut down.
As it happened the British Comet had an unfortunate habit of exploding at high altitude. If the Canadian plane had been in production it could have had a world market, but by that time the Canadian project had been shut down.
The shut-down was interesting. Three Avro jetliners were produced and they flew successfully for nearly ten years, but at the end of the decade the Boeing company produced an American jetliner. The three Canadian jetliners were destroyed, in their hangars, just in time to allow Boeing to introduce "the first jet airliner built in North America."
Nobody ever explained why the Canadian jetliners were destroyed, but the US government has accused Boeing of bribing officials of some foreign governments in order to sell planes.
No Canadian politician has ever accepted a bribe, of course, but until the mid 1980's Canadian tax laws allowed companies to claim bribes to politicians as a legitimate business expense.
And for one reason or another the Canadian aircraft industry has had an assortment of problems. In the 1950's it produced a fighter that many think was the best in the world, but again the project was abandoned. Claims about the fighter can never be proved because before the plane was fully tested the government canceled the project and had all the existing Arrow fighters, and the plans for them, destroyed. Again, the destruction of the completed planes and of the plans for them was never explained.
In the 1950's DeHavilland developed a world-beating bush plane called the Beaver, but it had an American engine and the Beaver died when the American manufacturer stopped making the engines. DeHavilland tried again with a turbine engine, but it was too expensive and the turbine-powered Beaver never did make it big time.
Canadian industry keeps stumbling along but for the past 30 years we have been going downhill and other nations have been developing. One problem, from the Canadian point of view, is that Asian countries have begun to develop, and that most of them have a couple of advantages over Canada.
One was that they could not afford American or European goods, and they had to make their own. Another was that while the Canadian economy was pure colonial most Asian countries had developed their own economies before Europeans arrived. Even the Asian countries that were ruled by Europeans maintained their native economies, which were able to make everything their people needed. As native economies, they also knew they had to train their own craftsmen.
But Canada did not. European settlers in Canada destroyed our native economy, and the colony they established bought most of the goods it required from England. In the first years of Canadian independence we had a constant flow of trained technicians and craftsmen coming as immigrants from Europe, and we didn't have to train many here.
But then came the 1960's and a series of changes. One was that the European economy boomed and European tradesmen saw no reason to emigrate. Another was that the Trudeau government closed consulates in Europe and opened others in third world countries, apparently in the hope that migrants from the third world would be more likely to support the government that allowed them to immigrate.
Unfortunately most of the third world countries where the new immigration offices were opened were former colonies which, like us, had never developed modern technical training. Many of the new immigrants were well educated but they were trained to be office clerks, not tradesmen, and they could not make up for our lack of technical training.
The shortage of trained craftsmen in Canada gives branch plants another advantage over local industry because they don't need many trained workers. Branch plants buy tooling from their owners but Canadian companies need trained machinists and tool-makers to operate. The shortage of skilled workers and other problems made it hard for Canadian manufacturers to compete. One by one they shut down, and Canadian stores filled up with imported goods that were once made in Canada.
As our industrial economy wound down the Trudeau government, and later others, tried to keep it afloat with an idea borrowed from economist John Maynard Keynes. As a cure for the depression that brought world industry to a halt in the 1930's, Keynes suggested that governments spend borrowed money on public works.
Government spending on public projects did not stop the depression but World War II did, and in the late 1960's Trudeau thought his government's spending could kick-start the economy into another economic boom equivalent to the war. If it did, growth in the economy would make it easy to pay off the debt. He was wrong because the investments he made were invalid.
Government spending on public works did not stop the depression because most public works are {cost} goods. National parks and monuments are nice to have, but they are not economic wealth and they do not produce economic wealth.
The arms we made for the war were {cost} goods too, but the factories and the tools that produced them were {benefit} goods. We wasted a lot of material in the war but we also built an industrial machine that survived the war and that could produce peacetime prosperity as easily as wartime arms. With the help of those factories real average incomes in Canada doubled in the 20 years from 1945 to 1965.
But we were still thinking like a colony and after the war our governments made no serious effort to keep our industry working. When the economy began to slip in the 1960's Trudeau tried to re-start it with government spending but he put the money into liberal arts education and feel-good social programs -- all of them producers of {cost} goods -- instead of backing industries that could produce {benefit} goods. Because the money was invested in industries that do not produce economic wealth, the economy never did get started.
In fact it declined, because as the government continued to pour more and more money into production of {cost} goods it passed the costs on to producers of {benefit} goods, and as producers of {benefit} goods were driven out of business our actual production of wealth declined.
But many Canadians didn't notice that because Trudeau's giveaways did increase the GNP, and we thought the GNP was a measure of the economy. Because the numbers looked good we didn't worry, and some people still don't worry about it.
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