Economic Anchors of the 21st Century
The Canadian economy has managed to diversify throughout its 153-year history although it’s no secret that several industries have carried the bulk of the weight over the past half century. While it’s true the country has dipped its toe into a wide variety of enterprise industries there have always been a few main staples that have borne the brunt of the economic growth.
The natural resources industry is one of those primary economic anchors that has helped to develop the standard of living we enjoy in this country. While many minerals such as gold, silver, copper and nickel continue to be important trading commodities the oil industry has taken a beating like no other time in history. The advent of alternative energy sources and the overall greening sentiment that continues to expand around the world has taken its toll on the industry. It’s now gotten to the point where it’s quite conceivable that the oil industry will never again hit the plateau it once reached.
The question is: what business industries are ready now – or have the potential – to fill the gap that is being left by the drooping oil industry and become the main economic anchors as a means of supporting the necessary programs and services provided by the federal government? Ottawa and the provinces have come to greatly depend upon oil and natural gas as the primary financial supports to retain and improve upon programs and services for Canadians.
There are about 37.5 million people living in Canada, and with a gross domestic product (GDP) of $1.75 trillion, making ours the 10th-largest economy in the world. The big four industries that spearhead most of the tax base for the government are: oil and gas; energy; manufacturing and tourism.
The price of oil began declining in value in 2014 for a variety of reasons, including the United States wanting to become energy self-sufficient along with OPEC nations and Russia unable to agree to terms moving forward, which ultimately resulted in a glut of oil being pumped into the international markets. The value of oil has never recovered despite the best attempts at OPEC to consolidate and move in one direction.
Alberta, Saskatchewan, British Columbia, Nova Scotia, New Brunswick and Newfoundland stand to lose the most by the decline in fortune of oil. Alberta has been hardest hit. One only needs to look at the number of vacancies in downtown Calgary where oil and gas headquarters once resided.
The western provinces are also home to oil-related industries. From exploration to petrochemicals to plastics, Canada earns a lot of money from oil – or at least it did at one time. The money coming in is still substantial, but it’s nowhere near what it was at its peak, and therein is the problem.
During peak production Canada was exporting about 3.7 million of the 4.6 million barrels of crude oil it produced, with the bulk of those exports going to the United States through various pipelines. That brings up another sore matter for those within the industry – the stalled pipeline projects due to a seemingly endless number of court injunctions.
When it comes to natural resources, Canada is blessed with a wide array of commodities in support of the oil and gas sector. The western provinces are particularly rich in coal deposits, much of which is exported to Asia. Saskatchewan has potash while Quebec is known for its uranium.
Renewable energy continues to expand with the likes of hydroelectricity. Hydro plants exist in nine provinces. Some provinces such as Quebec produce an abundance of energy to the point it has the ability to export to New York and Massachusetts.
Bricks and mortar retail stores had already been taking it hard on the chin with the advent of delivery services for such companies as Amazon and eBay. The global pandemic only served to magnify the problem. Now that social distancing policies are in place – and may well be for some time to come – it begs the question as to how well retail stores will be able to adapt.
Retail sales across the country plummeted by more than 26% in April due to the effects of the COVID-19 pandemic and the associated lockdowns and social distancing. According to figures released by Statistics Canada there was a 26.4% decline to $34.7 billion in April, and a cumulative 34% since physical distancing measures were implemented in mid-March.
If there is a bright side, StatsCan says early estimates point to a 19% increase in retail sales in May, although final figures won’t be known for several weeks as data is accumulated.
In terms of volume, retail sales were off 25% in April after an 8% decline in March for a combined 31% overall since the onset of the global pandemic was first acknowledged in mid-March.
Government also accounts for a significant number of jobs in Canada, especially in the areas of healthcare and education. Necessary health care is provided free of charge by the government. As a major employer in each province, the government ensures a steady income for about 290,000 Canadians.
Beleaguered theatre chain operator Cineplex lost a staggering $178.4 million in the company’s first quarter. The Toronto-based enterprise blames the COVID-19 pandemic for the vast majority of the losses.
However, there are some who believe theatre chains may eventually suffer the same fate as video stores — which were usurped by online streaming services. More and more people are definitely catching their movie fix at home nowadays and trying to entice them off the couches and into a theatre seat gets harder as more online options become available with each passing day.
Cineplex has 1,687 screens at 164 locations across Canada. They have been dark since the coronavirus lockdown went into effect on March 16.
Cineworld of Great Britain had planned on acquiring Cineplex for $2.8 billion but the deal was called off over alleged breaches by the latter. The specifics have never been made public. Now, Cineplex is planning to sue for damages.
Cirque du Soleil filed for creditor protection while it develops a plan to restart its business. The company has sought court protection from creditors under the Companies’ Creditors Arrangement Act in Quebec Superior Court.
Cirque du Soleil has been forced to lay off 3,480 employees who had previously been furloughed in March. The aerobatics company was founded in 1984 in Montreal and performs shows around the world, and is notably has been a major entertainment act in Las Vegas.
Virtually every sports league and all recreational facilities also face a tough test. Very often, people are within close proximity to one another. The incentive for major league sports to get back to playing has a lot to do with economic reasons, whether that’s admitted or not. Each of the top four major sports leagues in North America all have multi-billion dollar broadcasting agreements. That revenue cannot be collected without competition.
The NHL made the decision to hold all of its games in Toronto and Edmonton, with the latter to play host to both conference finals and the Stanley Cup finals. The NBA is planning a resumption with 22 teams all playing out of Orlando, Florida while baseball has decided it can squeeze in a truncated 60-game season. Of most surprise is that the city of Toronto, the province of Ontario and the Canadian government are allowing the Toronto Blue Jays to practice and play at Rogers Centre. That means a whole lot of border crossing not only for the Blue Jays but every team that plays them in Toronto.
21st Century Sectors
Advanced manufacturing will no doubt be one of the cornerstones for the economy over the next two decades and beyond. The sector currently accounts for $175 billion of our annual GDP, which is more than 10% of the overall total. Of note, companies export about $360 billion annually, representing almost 70% of all of the country’s merchandising exports.
Nearly two million people are employed within manufacturing and it’s essential to not only keep, but expand upon that base with the population continuing to expand. But that target has been made much more difficult with the loss of thousands of jobs, notably in the automotive sector. Many of the former assembly-line jobs have now been taken by computerized robotics. Advanced manufacturing means less manual labour jobs, although it will still require a skilled workforce that includes designers, engineers, programmers, researchers, technicians and trained tradespeople.
New technologies pose both a barrier and new opportunities – depending on how it’s looked upon. If Canada is to remain a vibrant, innovative and competitive contributor to our economy, business and government will need to work together. The time to get people engaged is early in the high school years.
Many companies such as IBM, Siemens, Microsoft, Apple and Oracle are just a few examples of companies that quickly recognized the need for innovation. Perhaps the most noticeable change will be seen in colleges and universities where courses continue to be added and/or modified in order to best prepare graduating students for the future workplace environment.
Meanwhile, the Canadian dollar has been in the doldrums for an extended period of time, valued at about 70 cents U.S. for some time now. It means paying more for imports, but the weaker Canadian dollar does work in the country’s favour for exporting products, such as automobiles, machinery, food and aerospace and rail manufacturing.
It is essential that Ontario is able to maintain the presence it has in the automotive industry without further losses, namely at General Motors, Ford and Chrysler. Quebec is home to Bombardier, a world leader in building aircraft, trains and buses that are sold to international markets. And then there is tourism, which accounts for a sizeable portion of each province’s GDP.
Agriculture is a base sector that has been a constant for Canada and it’s vitally important that it receives the government assistance it requires in order to remain viable. Canadian farms grow fruits, grain and vegetables, along with raising cattle for dairy and meat. Crops can also be transformed into such popular products as beer, wine and whiskey. Canada is also a major supplier of honey and of maple syrup.
Despite fishing being the sole economic resource for many coastal communities, the fishery industry is not well-known to most Canadians. The fishing industry directly employs 80,000 people and many thousands more indirectly and adds about $6.8 billion to the economy.
In addition to the development of artificial intelligence and advanced manufacturing the field of biotechnology also has the potential to transform worldwide manufacturing, communications, health care, transportation, and beyond. Data analytics, cybersecurity, healthcare – especially for the elderly – and renewable energy are all expected to be main staples of the future. Commercial, industrial and residential construction and design will continue to expand, because there continues to be the requirement for infrastructure to accommodate a growing population. to The debate rages on as to how big the cannabis industry will be, because so much of it relies heavily on government regulation. Will those regulations become more liberal or will there be a clampdown? It’s an answer nobody can provide with absolute certainty at this juncture.
According to a McKinsey Global Institute Report, the estimate is that 375 million jobs in a wide variety of industries will vanish by 2030 – becoming obsolete. The speed at which change is occurring has never moved as rapidly as it is now. For that reason it’s impossible to tell what will be the primary economic drivers in the future, so an educated guess is the next best option. One thing is for certain, it’s going to continue to evolve at an incredibly fast pace.