One of the more common ideas presented about the Canadian economy is that we have a resource-based economy and are liable to fluctuations in resource demand. This is seen, for example, in the recent comments by the Natural Resources Minister regarding the need to ensure that oil/gas and mining development projects should have their approval processes streamlined to ensure that these important components of our economy are developed more quickly.
Unfortunately, this is a misconception. Consider the GDP figures from 2001-2010 for industry sectors in Canada. The two sectors relating to resource production are:
- Agriculture, forestry, fishing and hunting
- Oil and gas and mining extraction
In 2002 dollars (reported in this way for comparative purposes over the 10-year period and I’m rounding to the nearest billion dollars), the contribution to GDP for agriculture, forestry, fishing and hunting was $26B in 2010, while that of oil and gas and mining extraction was $54B, for a combined resource-based contribution of $80B.
Now, please do not imply that I’m degrading $80B. If nothing else, it’s far better than a poke in the eye with a sharp stick. However, comparison with other industry sectors, this is a relatively small amount. For example, manufacturing alone contributed $160B to the GDP in 2010, twice the value of all resource-based industry sectors. The construction industry contributed $74B to the economy in 2010, almost the value of all resource-based industries combined. Of the GDP for just goods producing industries alone, natural resources account for only about 23%.
Where our economy receives its largest contributions come from the service sector. For example, educational services, at $62B is larger than either resource component, as is wholesale ($70B) and retail ($76B) trade, transportation and warehousing ($58B), professional, scientific and technical services ($61B), etc. In fact, the largest industry sector contribution to GDP comes from the financial industry, which has a total contribution of $257B, or more than three times the combined natural resources industries in 2010.
Keep in mind that the service sector does service something. It is safe to assume that, without the goods producing industries, we would not have a large a service industry as well. On the other hand, since industries other than natural resources represent 77% of the goods-producing economy, it is obvious that not all service sector components are dependent on resource production, either.
Are we a resource-based economy? Since natural resources contribute slightly more than 6% of the total Canadian economy, this is a claim that is no longer valid and has not been for some time. In 2001, natural resources represented 7% of the economy, so the actual contribution of resources to the Canadian economy actually declined. This is true in spite of the economic downturn in 2008 which tends to penalize industries related to the production of finished goods more than raw material generating industries.
Perhaps it’s time that the federal government consider its policy development around the largest components of our economy, rather than fixating on one smaller aspect. Policies that support manufacturing industries or encourage the financial industry would have a substantially greater benefit to the economy than making it easier to fast-track mining and oil and gas development projects. Unfortunately, dealing with facts is something our present government seems reticent to do…