Staples, deindustrialization, and foreign investment: Canada's economic journey back to the future

Studies in Political Economy

Volumn , Issue 82, 2008, Pages 7-34

  Stanford, Jim ^a  

^a Canadian Auto Workers   (Canada)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 58649087809     PISSN: 07078552     EISSN: None     Source Type: Journal    
DOI: 10.1080/19187033.2008.11675062     Document Type: Article

References (28)

1. Harold Innis, The Fur Trade in Canada: An Introduction to Canadian Economic History, revised ed. (Toronto: University of Toronto Press, 1956).
2. Mel Watkins, "A Staple Theory of Economic Development," Canadian Journal of Economics and Political Science 29/2 (1963), pp. 49-73;
3. Task Force on the Structure of Canadian Industry, Foreign Ownership and the Structure of Canadian Industry (Ottawa: Privy Council, 1968);
4. Kari Levitt, Silent Surrender: The Multinational Corporation in Canada (Toronto: Macmillan, 1970).
5. See, for example, S. Clarkson, Uncle Sam and Us: Globalization, Neoconservatism, and the Canadian State (Toronto: University of Toronto Press, 2002),
6. and R. Grinspun and Y. Shamsie, (eds.), Whose Canada?: Continental Integration, Fortress North America, and the Corporate Agenda (Kingston: McGill-Queen's University Press, 2007).
7. Mel Watkins himself provides a summary statement of the staples approach in current economic issues in "Staples Redux," Studies in Political Economy 79 (2007), pp. 213-226.
8. These writers argue that the staples model overstates the limitations imposed by Canada's resource orientation and reliance on foreign investment. For example, see Paul Kellogg, "Kari Levitt and the Long Detour of Canadian Political Economy," Studies in Political Economy 76 (2006), pp. 31-60,
9. and W.K. Carroll, Corporate Power in a Globalizing World: A Study in Elite Social Organization (Oxford: Oxford University Press, 2004). Other critics have challenged the staples theory for diverting attention away from what they see as the more central struggle against capitalism within Canada;
10. see, for example, J. Klassen, "Hollowing Out? Myth and Reality," Relay 22 (2008), pp. 8-11.
11. The Bank of Canada maintains an index of global commodity prices for Canadian resource exports. According to this index, average global prices for Canadian-produced resources increased by 117 percent between 1999 (when resource prices were at a low point) and 2007; average energy prices increased 250 percent.
12. Author's calculations from Statistics Canada data, CANSIM Table 187-0001. For a more detailed sectoral and regional decomposition of the tremendous rise in Canadian business profits, see J. Stanford, "Picking Winners": The Distorting Effects of Federal Corporate Tax Cuts (Ottawa: Canadian Centre for Policy Alternatives, 2008).
13. Author's calculations from Statistics Canada data, CANSIM Table 376-0004.
14. The Organization for Economic Cooperation and Development (OECD Main Economic Indicators) estimates the purchasing power parity level of the Canadian dollar at approximately 82 cents (US). This is the level at which average consumer prices are equalized internationally (and hence there is no incentive for cross-border shopping in either direction).
15. The exception was the 1990-91 period, when uniquely harsh Canadian monetary policy temporarily drove the dollar to more than 90 cents US.
16. Author's calculations from Statiscics Canada data, CANSIM Table 282-0007.
17. Author's calculations from Statistics Canada data, CANSIM Table 427-0001.
18. Of course, GDP per capita is not an accurate measure of mass prosperity, since it does not take account of the distribution of GDP across factors of production or between individuals, the value of leisure time, and other determinants of the quality of life.
19. Author's calculations from Environment Canada, National Greenhouse Gas Inventory Report 2006 (Ottawa, 2008).
20. The term "value-added" activitics is used here to refer to industries that aim to enhance and diversify higher-level secondary and tertiary production through the additional processing and secondary manufacturing of resources; the development of more sophisticated supply industries to feed into resource production activities; the development of other higher-technology manufacturing industries; and the expansion of tradable services industries. All of these higherlevel activities help Canada to both reduce its reliance on raw resource extraction and to maximize the domestic economic spin-offs from resource sectors.
21. Only about two percent of Canadian services production is exported, and this proportion has actually declined slightly in recent years.
22. World Trade Organization, International Trade Statistics (Geneva, 2007).
23. According to data prepared by the Centre for the Study of Living Standards (), average hourly productivity in the Canadian business sector grew steadily as a share of US productivity levels from the end of World War II until 1984 (a peak of 91 percent of US productivity). It then fell steadily until 2006 (most recent data), when it equalled 74 percent of US productivity.
24. The Canadian Auto Workers launched a major "Manufacturing Matters" campaign in 2007 and 2008 that involved research materials, membership education initiatives, lobbying, and political action.
25. See for further information.
26. The basic federal rate was 28 percent in 2000. It was cut to 21 percent by the former Liberal government, and the current Conservative government now plans to cut it to 15 percent by 2012. That represents by far the largest proportional reduction in Canadian tax rates engineered during this period (far deeper than cuts in personal income taxes and sales taxes). The reductions still to come will reduce federal revenues by an estimated $14 billion per year.
27. See Stanford, Picking Winners, for more discussion and critique of the structural and regional impacts of these corporate tax reductions.
28. See for details.