The 9 Habits of Highly Effective Resource Economies

Published: November 2012    |    By: Madelaine Drohan


Hewers of wood and drawers of water have had a bad image since Joshua cursed the Gibeonites and condemned them to those labours. Some of that biblical taint lingers in Canada. Fur, fish, wood, and minerals may have shaped this country, but for much of the 20th century, natural resources were largely regarded as part of the old economy, best left behind as Canada raced toward a glittery high-tech future.

That future did not arrive. Instead, the global commodity boom that began in 2003, fuelled by industrialization and urbanization in emerging economies, made the resource sectors important again. Last year, the top Canadian merchandise export to every one of its major trading partners was a natural resource. This unexpected revival of the resource economy is one reason governments in Canada have come late to the realization that they must be more deliberate and united in their approach to resource development if they are to spread the wealth, not just over regions but also over generations.

Although the current boom looks likely to continue for some time, it will inevitably turn into bust, taking with it the impetus to design Canadian resource policy for the long term. The result will be that when the next boom arrives, we will be equally unprepared. Producers of energy, minerals, and forest products are feeling the tug of global demand today. Agriculture and water will feel it tomorrow, as the global middle class rises to a mind-boggling 3.2 billion people in 2020 from 1.8 billion now. Resource development in the Arctic brings with it another set of challenges that demand a new approach.

This report identifies the basket of issues that should be addressed now if Canada is to have a proactive rather than reactive resource policy. The nine recommendations reflect the issues raised most often in more than 160 conversations held with representatives of government, industry, and academia in Canada, as well as in Australia, Chile, Finland, Norway, Sweden, and Britain. Norway is often held up as an exemplar, but no one country offers a model Canada could adopt in its entirety. Still, Canada’s resource peers offer lessons that too often are overlooked in our domestic debate, which is narrow, partisan, frequently uninformed, and almost entirely focused on the Alberta oilsands. “We’ve been handed the golden goose and we squabble over it,” says John Hancock, a counsellor at the World Trade Organization.

Those squabbles have ranged from inter-governmental spats over revenues to debates on whether high resource prices are good for Canada. In a September 2012 Executive Summary Canada’s resource peers offer lessons that too often are overlooked in our domestic debate, which is narrow, partisan, frequently uninformed, and almost entirely focused on the Alberta oilsands. 4 THE 9 Habits of Highly Effective resource Economies Lessons for Canada speech in Calgary, Mark Carney, governor of the Bank of Canada, emphatically stated that high commodity prices are “unambiguously good for Canada.” But he added some important advice that lies in with the content of this report: “Rather than debate their utility we should focus on how we can minimize the pain of the inevitable adjustment and maximize the benefits of our resource economy for all Canadians.”

The sky will not fall if Canada continues its current ad hoc approach to resource development policy in its broadest sense. But without strong leadership and collaboration we risk losing an opportunity to become a real resource superpower, one capable of responsible and efficient stewardship that Canadians can be proud of and other countries will want to emulate.

Governments must demonstrate that they are responsible stewards of public money. All levels of government in Canada with revenues from nonrenewable resources should stop treating them as income to be spent and start treating them as capital to be saved or invested.

Recommendation 1

‘How do we do more with what we’ve got?’ should be the focus of government policy on natural resources.

Recommendation 2

If Canada wants to stop being only a hewer of wood and drawer of water and add, extract, or build more value around its natural resources, it must do a better job of collaborative research involving government, academe, and industry.

Recommendation 3

Canada should bring in a national, revenue-neutral carbon tax. We should not wait for the United States to act, but move ahead with a plan that includes border measures to ensure that Canadian companies are not put at a competitive disadvantage.

Recommendation 4

Canada should mount a sustained effort to diversify its trade and investment, building on its success in the U.S. market to become a more global trader.

Recommendation 5

Resource companies operate in global industries. To be competitive, we need companies that are or can become global players.

Recommendation 6

Canada should bring coherence and focus to its resource-related aid and maximize its impact through collaboration with other resource-rich donors, such as Norway and Australia.

Recommendation 7

The overuse of temporary workers has negative long-term consequences and does not attack the root cause of skills shortages, many of which are domestic in origin.

Recommendation 8

Canada needs a national plan that will tie together efforts being made to develop its natural resources.

Recommendation 9

About the Project

Every year, the Canadian International Council (CIC) puts out a major research report on a foreign policy issue related to Canada’s future prosperity. This year, the CIC board decided the annual research report should focus on Canada’s rich natural resource endowment. The report builds on the CIC’s previous major publications, Open Canada: A Global Positioning Strategy for a Networked Age and Rights and Rents: Why Canada Must Harness Its Intellectual Property Resources, in examining the intersection of technological advancement and international opportunity.

The 9 Habits of Highly Effective Resource Economies: Lessons for Canada is the result of a research project that began with this question: How can Canada derive maximum benefit for the future of Canadians from this tremendous natural advantage? The question invites international comparative analysis, and indeed, there are lessons to be learned from how other resource-rich countries manage their natural assets and build economic value around them. There are also lessons to be learned at home about what works and what does not.

This investigation into resource-related and resource-generated policy involved more than 160 interviews with experts both in Canada and abroad, and extensive consultations with research institutes, policy-makers, multinational companies, and multilateral organizations. While the report’s recommendations are derived from the mining, energy, and forestry industries, the recommendations are generally applicable to all resource industries, including agriculture and water, and hold implications for policies affecting a range of public and private spheres.

About the Author

Madelaine Drohan is the Canada correspondent for The Economist. For the last 40 years, she has covered business and politics in Canada, Europe, Africa and Asia. In 2016, she became a senior fellow at the Graduate School of Public and International Affairs at the University of Ottawa. In 2015-2016 she was the Prime Ministers of Canada fellow at the Public Policy Forum.

Her book, Making a Killing: How and why corporations use armed force to do business, was published in 2003 by Random House of Canada and in 2004 by The Lyons Press in the United States. It won the Ottawa Book Award and was short-listed for the National Business Book of the Year Award in 2004.

When possible, she conducts journalism workshops for media in Africa and Southeast Asia, with a special focus on business and investigative journalism.

She was awarded a Reuters Fellowship at Oxford University in 1998, and the Hyman Solomon Award for Excellence in Public Policy Journalism in 2001. She was a 2004-2005 Media Fellow at the Chumir Foundation for Ethics in Leadership and the 2004-2005 Journalist in Residence at Carleton University.

She has sat as a volunteer director on the boards of the North-South Institute, Transparency International Canada and Partnership Africa Canada, where she was also president. She lives in Ottawa.