Canada's Ability to Upgrade in the 21st Century with Respect to the Staple Theory

Canada's Ability to Upgrade in the 21st Century with Respect to the Staple Theory

Gibril Sallah - 100283064

Abstract

Canada is a extremely resourceful country and one of the largest exporters of natural resources worldwide. With the increase in technology and the increase in the depletion of natural resources and uncertain demand fluctuations in the economic world, natural resource based economies will need to find solutions to upgrading their economies with or without staple product dependency. This essay will investigate the staple theory and whether or not it is recommendable for Canada to depend on its staple for further economic development. Reasons to why or why not Canada should rely on its natural resources will be analysed and a conclusion provided.

1. Introduction

Canada is indeed a blessed land with a diverse and highly multicultural society and a vast treasure of natural resources. Mother nature has particularly endowed Canada's soil with a wide range of highly demanded natural resources in the world market thereby giving it a competitive edge over other countries; The World Bank rated Canada fourth among 92 countries in the world in 1997 with respect to its stock of natural resources(subsoil assets and timber

Resources)falling behind only to oil giants Saudia Arabia, Norway and Venezuela(see fig 1.1).[1]. Canada also boasts a large variety of minerals and is a large exporter both forestry related and subsoil assets a such as uranium, potash, gold, oil, softwood lumber, and even platinum to mention a few(see fig 1.2 & 1.3).[1]. Further more, it is worthy to note that Canada's huge pool of energy resources and their respective exports have resulted in Canada being a large producer and net exporter

of oil, natural gas, coal, uranium and electricity. In 1997 only, the total value of energy production was $77.1 billion dollars, with net exports of about $18.3 billion.(see fig1.4).[1]. Primary industries which involve on subsoil extraction such as mining also contribute largely to the Canadian economy; in 1999 alone Canada mined minerals and exported $22.9 billion to the USA and a total of $6.5 billion to other trading partners.(see fig 1.5).[1]. As we have observed, we can undoubtedly conclude that Canada is a wealthy nation with regards to its natural resources.

2. Staple Theory

The Staple Theory or theory of Natural Resources was developed by two brilliant Canadian historians namely Harold Innis and W.A. Mackintosh. It was developed as a tool to investigate the role of natural resources in the economic development process of the Canadian economy. The basic and fundamental concept of the Staple theory is that export of natural resources(staples), from Canada to more advanced economies has a thorough affect on the economy which in turn affect the social and political frameworks within Canada; simply put, the staple theory is a theory of export-led growth based on staple products[2]. Staples are basically any valuable and exportable natural resources(land and subsoil assets requiring very little processing) which can bring in income for an economy. Staple generated economic growth is created by the direct investment in the extraction of the staple and the "spread effects" or economic reaction effects; forward linkages involving processing of the staple prior to export; backward linkages involving the production of inputs such as resource machinery and transportation infrastructure that are required to extract the staple; final-demand linkages involving the production of consumer goods and services to meet the regional needs of those who are employed in the staple industry; and fiscal linkages involving the expenditure of rents and profits generated by resource production.[5]. The question for concern however is can canada foresee a comparative advantage in its staples to enhance and stimulate economic growth?This shall be investigated further within the essay.

3. Reasons Canada Can Rely on the "Staple Theory" to Upgrade

The Canadian natural resources sector contributes hugely to the nations Gross Domestic Product. The GDP is an economic indicator which measures the standard of living in a country. With Canada's huge resources pool it is not surprising to know that its natural resources accounted for 13.0 per cent of Canada's GDP and 6.3 per cent of employment in 2000.[3]. As we can observe Canada's natural resource industries bring in much needed foreign investment which in turn spreads(spread effects) further national development by employing people and the appreciation of the Canadian currency; the highly productive nature of natural resource industries and their above average productivity growth means that the natural resource sector contributes disproportionately to the economy therefore the expansion of the natural resource sector is highly desirable.[3]. There has been an above average productivity growth in natural resource industries in Canada over the 1976-2000 period has reflected the increased qualifications of the workforce.[6]. Evidence of this is the proportion of workers in natural resources industries with post-secondary education has increased from less than 15 per cent in 1976 (the earliest year for which data are available on educational attainment from the Labour Force Survey) to over 40 per cent by 2000.[6]. Canada is lacking behind in innovation and intellectual capital and with more people with academic opportunities the brighter is future both socially and economically, hence, it is advisable that the economy be dependent on staple products to a certain level and not 100%.

4. Reasons Canada Cannot Rely on the "Staple