Northern Economist 2.0

Saturday, 9 November 2013

Follow My Postings on Worthwhile Canadian Initiative

Thank you for your interest in Northern Economist 2.0.  I recently finished a sabbatical and have been directing my research activity more into my interests in economic history, health economics and public policy issues which leaves less time for analysis of the northern Ontario economy.  I have also been doing some public policy research on public finance issues with the Fraser Institute.  A visit to my Google Scholar page will provide you with background on the work I have been doing in areas like health expenditure determinants, wealth inequality and public policy in general.  You are also welcome to visit my department web page at Lakehead University where I post materials related to my presentations.  If you are interested in continuing to read my blog material on economic policy and analysis with a focus on Canadian public policy issues, please visit my postings on Worthwhile Canadian Initiative.  As well, my old Northern Economist postings are still currently available here.  All the best. Livio.

Friday, 31 August 2012

Northern Policy Institute Finally Announced!


Today, the Northern Policy Institute was finally announced by the Ontario government simultaneously at Laurentian and Lakehead Universities with the news that the institute will be jointly housed at Lakehead and Laurentian with a 10 member board overseeing the operation and with the search currently underway for a CEO.  This is a process that has been a long time in the making starting from the original North Superior Planning Board Report in 2007 on a policy institute for Northwestern Ontario and then the morphing of the concept into a pan-northern institute through the 2008 Rosehart Report and then the 2011 Northern Ontario Growth Plan.  The idea of  a policy institute definitely caught the interest of the provincial government given that during this long interim it provided 5 million dollars to University of Toronto to fund the Mowat Centre in 2010 - a public policy institute to research issues from an Ontario perspective.

According to the press release:

The institute, an independent, not-for-profit organization, will monitor the implementation of the Growth Plan for Northern Ontario and make provincial policy recommendations for the region. It will work with northern municipalities, post-secondary institutions, research groups, Aboriginal organizations, francophone groups and industry to set priorities and directions for northern development.

This is very good news for Northern Ontario as it provides the recognition that there needs to be research and policy analysis on economic, social and business issues in the North.   The Presidents of both Lakehead and Laurentian are to be commended for their work leading up to today’s announcements as are many of the local community leaders and politicians who devoted time to what at many times seemed to be a byzantine task with no end in sight.

Having followed the Northern Ontario economy and regional economic development policy for over twenty years and researching and commenting on issues affecting the region, it is reassuring personally for me to know that in a sense it will be possible to pass on the torch and finally move on confident in the knowledge that there will finally be the commitment of resources for the study of Northern Ontario issues.  Despite popular perception (even at the university where I work), as an academic economist, research and public commentary on northern Ontario or the Thunder Bay economy was never my main area of academic interest.  My fields are public finance and economic history and “northern” work took much time away from those endeavors.  While I enjoyed interacting with the local media and was always treated very well and fairly by all, this activity also took a great deal of time in the sense that it often meant completely interrupting your train of thought.  Over the last while, I have been devoting more time to interests in health economics and economic history and less to the North and so the actual operationalization of the institute comes at a good time.

I was born and raised in Northern Ontario and as an academic I made the sustained effort to apply my skills and knowledge to local and regional public policy because I felt it was important to give something back to the community and there was so little analysis of northern Ontario issues.  Over the years, many have thanked me for this work via conversations and personal notes whether it was for columns in the Chronicle-Journal, interviews on TBT or CBC Radio and most recently for my blogging on Northern Economist.  Of course, in the process I also  irritated a great many people.  I do not apologize for that.  Politicians and society’s leaders need to realize that true university academics are passionate and committed researchers who speak their minds and not cheerleaders to be trotted out as a pretty backdrop at a moments notice for the pet issue of the day.  Those politicians who think academics should simply provide blanket endorsements for government actions and policies reveal just how little respect they have for knowledge and education and the people employed in those fields. 

As for the future of the Northern Policy Institute (NPI), I would be remiss as an academic in not offering a final frank and honest assessment.  It is a great idea and concept but the fact that its role will be to “monitor the implementation of the Growth Plan for Northern Ontario” in essence undermines both its independence and its effectiveness as an advocate for the region.  Of course, these are just the words of a press release and the reality will be in implementation but the board of the NPI needs ensure that the institute sets its own research and policy agenda in terms of collecting data on economic, social and business issues that reflect the region’s priorities.   If it is simply a mouthpiece to support the latest government policy initiative in the North, then what is the point?

That’s all folks!

For additional blog postings on public policy and economics, visit my material on Worthwhile Canadian Initiative.  You will be able to continue to access Northern Economist 2.0 postings on this blog as well as my previous material at the old Northern Economist site for the next while.

Sunday, 26 August 2012

Google Trends: Plan Nord Versus Northern Ontario Growth Plan


Google Trends is a quick and popular way to assess the importance of ideas, events and trends by looking at the results of people’s web searches.  If the searches for something are trending up, it is suggestive that it is growing in importance.  One way of assessing the impact of northern economic development in Ontario at least as a concept that has seized the imagination is to conduct a Google Trends search. In particular, it is interesting to see what the impact of two northern development plans has been – The Northern Ontario Growth Plan and the Quebec Plan Nord.   I put in “northern Ontario growth plan” and “plan nord” for trends in the “region” Canada over the period all years (2004 to 2012) into Google Trends and downloaded the results.  I then graphed the results for the 2011 to 2012 period (See Figure)


The Northern Ontario Growth Plan was released in March 2011 while the Plan Nord was released a little later in May of the same year.  The Google Trends plot is not the number of searches but rather an index of the number of searches for a term to the average number of searches for the term over the time period.  For example, if there is a value in the graph of 5; this means that traffic is 5 times the average for the time period. As a result, it is a relative measure showing whether something is trending up or down.  The results were intriguing in that they reveal enough activity to show a rising trend in the wake of the release of the Plan Nord.  However, there was so little interest in the Northern Growth Plan that it did not generate enough activity to even register a trend.

This is not the same as saying the Plan Nord will be a success and the Northern Growth Plan will not.  What it is saying is that the Plan Nord seems to have generated a lot more interest on the web whereas the Northern Ontario Growth Plan has not.  The fact that the Plan Nord has generated so much interest could simply be better marketing but that in itself would tell you something about how the Quebec government values its northern development plan.  Or, it could be that people are more interested in Quebec’s northern development than Ontario’s.  However, it one truly believes that large groups of people on average are very forward looking and very smart, it also means they may see more potential in the Quebec Plan than the Ontario Plan.  Whatever way you look at it, it would appear that the Northern Ontario Growth Plan does not look very credible.  Google Trends has spoken.

Friday, 24 August 2012

Civic Reflections on a Summer Day


Well, it is still summer and the living is easy which is a much nicer way to view life when you get up in the morning than House Stark’s motto Winter is Coming though inevitably winter will be here soon enough.  Summer walks are definitely a great way to reacquaint yourself with your neighborhood and over the last few days I’ve been up and down the Junot Street corridor off of which I live to observe the state of developments.

As many in the neighborhood know, the City of Thunder Bay is planning to reconstruct the Golf Links Road/Junot Avenue corridor between the Harbour Expressway and Walkover Street.  The road will be widened to four lanes and there are plans to improve sidewalks and bike paths as well as municipal servicing.  Indeed, some new sidewalks are going in as I write.  This is also all related to plans for additional density development as the area continues to grow as a central residential and commercial area.  An open house was held in April to solicit input on land use in the area with suggestions ranging from the proposed new events centre to industrial use to a mining innovation centre.

Of course, development proposals and actual development are already underway – sort of. Condominium construction appears to be stalled at the Thunder Bay Golf Club on Junot aside from a rather large pile of dirt.  Hotel construction on Junot is proceeding well with the Days Inn there completing yet another lengthening.  One wonders if the plan is to make it into the world’s longest hotel as a tourist attraction.




The controversial new EMS Station is now open and still causing controversy given the new 75,000 dollar sculpture that was recently unveiled.  Of course, that piece of art is quite the bargain compared to the waterfront beacons, which ran nearly one million dollars.  The EMS art piece is much smaller and does not have whispers emanate from its base.  Indeed, being so small is probably why all the trees and brush were cleared from the other side of the street prior to installation – to afford the houses there a better view of both the new EMS station as well as its new art work.



The desire to develop this part of the City has been present for some time given the past attempt to put in a new Tim Horton’s/Hotel complex in the same area that sparked enormous neighborhood opposition.  Wooded land in the city does not generate tax revenue as well as residential, commercial or industrial land.  As a result, the wooded area across from the EMS station was apparently sold off for residential building lots with at least one municipal councilor on the evening news saying how it was a prime residential area.  That was of course quite amusing given that the original location of the EMS was further up the street where the residents of the prime residential area there chased it off.  In some respects, this is actually a clever strategy as once the EMS station is built, only people who want to live across from it will actually build there – with the exception of the homeowners who used to have trees as a buffer.

Given the ideal location of this land, we can no doubt expect many of our local politicians and notables to erect their homes there.  Perhaps we can be innovative and erect a new public centre in the spirit of our 55 Plus Centre – the Politician Plus Centre where current and past local politicians can go hang out and engage in creative discussions and activities or perhaps rent cheap accommodation in a prime neighborhood as a reward for their years of service.

However, winter is coming and with winter will come a reengagement with issues and debate for City Council.  While it is fun to debate bike lanes and tanning salons in the summer, I suppose they will need to deal with questions like what actually caused the water treatment plant to fail during last spring’s flooding.  Perhaps, we will also find out what is going to happen with the plans for the events centre or if we will indeed see hotel and condominium construction begin on the waterfront this year.   If we do not get answers, I suppose we can all go to the waterfront and ask for guidance from the whispering beacons.

Friday, 10 August 2012

Bureaucratic Entropy in Thunder Bay


There are constant comments in Thunder Bay that there are too many municipal workers and that the numbers have grown faster than the city itself.  In a 1979 article in the Urban Affairs Quarterly titled “Economy of Scale or Bureaucratic Entropy? Implications for Metropolitan Governmental Reorganization”, Hutcheson and Prather examine the relationship between the number of city employees and city population.  This study was done given the fashion of the time to implement metropolitan and regional city governments that consolidated jurisdictions that often was justified by the argument that more efficiency and economy in service delivery would result.  According to the authors:

“If efficiency can be defined as serving more residents with fewer employees, economies of scale might be demonstrated by a relative decrease in the size of bureaucracies as city size increases.” (Hutcheson & Prather, 167).

However, the authors find that not to be the case.  Increases in the number of employees appear to have outstripped the growth in population in the wake of amalgamations and metropolitan reforms.  The new institutions appear to have generated a dynamic in which has resulted in less rather than more efficiency.  They call this bureaucratic entropy.  Essentially, the new institutions create a kind of disorder, which decreases the efficiency with which manpower is converted into service outputs.  Or as they write:

“Or more simply put, it could be easier to ‘goldbrick’ in a larger bureaucracy.  Thus increasing city size may mean proportionately larger bureacracies, and perhaps diseconomies of scale.” (Hutcheson & Prather, 168).

Well, it would appear that bureaucratic entropy is alive and well in Thunder Bay at the municipal level.  The accompanying figure shows full-time equivalent employment numbers for the City of Thunder Bay for the period 2001 to 2011.  In 2001, FTE employment was 1,632.0 whereas by 2011 it had risen by 25 percent to reach 2032.7 (my estimate based on the 2012 operating budget breakdown).  Over the same period, the CMA population of Thunder Bay went from 121,986 to 121,597 – essentially, a stable population.



So is this bureaucratic entropy?  Did the creation of monopoly municipal government at the Lakehead after amalgamation in the place of the former competitive municipal structure of twin cities put in place a bureaucratic structure that does not keep costs in check?  That may be part of the explanation.  Another explanation lies in the mix of city services, the demand for new services as well as changes in their quality.  Municipal governments are expected to do more than they did in 1970 particularly in the areas of health and environment. Tied to all of this is the fact that in Ontario, municipalities are creatures of the provinces and there is often the downloading of functions that necessitate new employment.

A better question is the following.  Has municipal employment in Thunder Bay been growing faster than Canada as a whole?  Compare the following – from 2001 to 2011, municipal employment in Thunder Bay grows by 25 percent while population remains stable.  For Canada as a whole during this period, the number of municipal employees grew by 24 percent but population grew by 11 percent.  While municipal employment in Canada has been growing faster than population – perhaps an indicator of some bureaucratic entropy – the growth is more pronounced in Thunder Bay. 

Friday, 3 August 2012

Resolute Responds



Today’s Chronicle Journal had a one-page ad by Resolute Forest Products written in response to a Chronicle Journal editorial on July 18th entitled “Innovation But When”.   In the response, Resolute maintains that the editorial implies that there has been no capital investment or pro-active action taken by any Canadian or North American company relative to the forest products industry.  Resolute then proceeds to list the major capital projects it has recently announced: a 54 million dollar investment for improvements to a wood waste boiler and steam turbine installation at the Resolute Thunder Bay mill, an 8 million dollar upgrade of its sawmill complex, a 30 million dollar investment in the idled Ignace mill and another 20 million dollars at the newsprint mill in Iroquois Falls.

Resolute is justifiably miffed at being lumped in with a large chunk of the forest industry that did not invest sufficiently in its mills and met the perfect economic forestry storm of the early 21st century with aging infrastructure and equipment. Resolute is indeed an example of a proactive and engaged forest products company and its investments are key to the survival and prosperity of the forest products industry in Thunder Bay and the Northwest.  There is also its relationship with CRIBE (Centre for Research and Innovation in the Bio-Economy) and FP Innovations, which will look at innovative ways of using forest biomass.

In Thunder Bay, Resolute is the only survivor of that economic storm with a mill complex that dates back to the 1920s.  The Resolute mill is the latest corporate incarnation of the Great Lakes Paper Company, which over time has been Great Lakes Forest Products, Canadian Pacific Forest Products, Avenor, and Abitibi-Bowater. A hallmark of the original Great Lakes Paper was that it was locally owned and an example of local Lakehead entrepreneurship.  Having our own locally owned head office meant substantial control over investment decisions and white-collar employment that deepened our local labour and professional opportunities.  Indeed, the fact that this is the only pulp mill that ultimately survived out of the four mills in Thunder Bay is a testament to the original good decision making in plant and equipment that made the company viable for resale and continued production in the long run.

Resolute is also correct in maintaining that it had to deal with economic events largely out of its control such as the appreciation of the Canadian dollar or the decline in demand for newsprint driven by the technological change of the computer age.  Indeed, taking out a one-page newspaper ad is a wonderful example of supplier- induced demand. However, Resolute has developed a selective historical memory and conveniently omits the effect of provincial government policies on the forest sector crisis.  Indeed, it was not too long ago that the North cried out in protest against provincial wood allocation and electricity price policies.  Moreover, there was the exceedingly slow response of the provincial government in realizing the extent of the crisis and finally offering some relief in areas such as electricity prices. 

Finally, it should be noted that even active management and being proactive cannot always save you from the realities of the market especially when combined with slow or ineffective government policy assistance or indeed detrimental trade policies such as the softwood lumber dispute.  Witness what has happened to the Buchanan mills even with all their energetic responses and efforts.  It is an important lesson we should not forget.

Wednesday, 1 August 2012

The North's Economy and Births: Bad Times Lead to Fewer Babies

The link between the economy and the number of births is an important one in both demographic and economic analysis.  One view maintains that a poor economy breeds uncertainty about the future and in turn results in families postponing children and therefore a reduction in both the number of total births as well as the birth rate.  Another view maintains that a poor economy reduces the opportunity cost of having children – that is, if you do not have a job, why not use the time to start a family – and the result would be a higher birth rate.  A lot of recent evidence from the current recession suggests that a poor economy results in fewer births. For example, the Economist Magazine recently chronicled a recent drop in fertility rates amongst European countries hit hard by the recession.

Figure 1 

 

In Ontario, a comparison of Ontario with its North – the chronic poor economic performer – also suggests that a more buoyant economy results in more births (Figure 1).  Using birth data from Statistics Canada, it appears that after a period of decline in the 1990s, total births in Ontario have been rising since 2000.  Between 2000 and 2010, total births in Ontario rose by 13 percent.  Meanwhile, between 2000 and 2010, the total number of births in Northwestern Ontario declined by 9 percent while the number in the relatively more prosperous Northeast (which had robust mining activity and a less severe forest sector downturn) actually grew by about one-half of one percent. 

Figure 2

 

If one looks at total births in Northern Ontario by region (Figure 2), many regions have stayed relatively flat in terms of the total number of births, some have declined and one in particular – Greater Sudbury and Nipissing – have seen increases over the last decade.  Indeed, much of the growth in the number of births that has occurred in the Northeast has been over the last five years reversing the declines of the late 1990s.  Between 2005 and 2010 (Figure 3), with the exception of Manitoulin, all the regions of Northeastern Ontario have posted increases in the number of births with the largest percent age increases being in Nipissing and Greater Sudbury.  Meanwhile, the Northwest has seen declines in the number of births in Rainy River and Thunder Bay and an increase only in the Kenora District.

Figure 3

 

Based on the total number of births as an indicator of economic opportunity and optimism, it would appear that over the period 2005 to 2010, the economy performed reasonably well in much of Northeastern Ontario relative to the Northwest.  In the Northeast, the Timiskaming and Manitoulin regions seem the most depressed while in the Northwest, Rainy River is in particularly poor shape especially relative to the Kenora region.  Nevertheless, the economy of the Northwest has begun to move beyond the forest sector downturn.  Given the improvements in the economy as a result of growing mining activity in the Northwest that have been occurring over the last two years, one thing we can expect in the future in Northwestern Ontario is an uptick in the number of births. Who knows, maybe in Thunder Bay they may actually find they need more schools after the slew they closed over the last decade.