Well, it was one of those interesting coincidences.  Natural Resources Minister Joe Oliver
unveiled new figures generated by Natural Resources Canada that apparently
demonstrate that natural resources account for almost 20 percent of economic
activity in Canada.

According to the press release (I have not been able to
track down the actual study aside from another press release on methodology): “There are currently over 600 major Canadian
resource projects planned over the next 10 years or underway representing
approximately $650 billion in investments,” said Minister Oliver. “This is a
more accurate picture of resource related investments from a year ago, and
represents an unparalleled opportunity for Canada.”

Meanwhile, almost simultaneously on the other side of the
planet, the Australian Prime Minister Julia Gillard was countering the views of
her Resources Minister Martin Ferguson, who last month declared “the resources boom is over”.  However, Gillard also declared that the
resources boom – in particular Chinese demand for Australian resources – was “now passing” but that “Reports of the mining boom’s death have been
exaggerated”.  Even the head of
the Australian central bank has chimed in saying it was too soon to call an end
to the boom.

Mining projects in Australia have been slowing down
because of the depressed economic conditions in Europe and America as well as
slowing economic growth in China. 
An iron ore project had a deferral announced on the day Gillard made her
comments while the previous month a planned expansion of a copper and uranium
mine was halted.   There is a
lively debate in the Australian media over whether or not the resource boom is
indeed ending and whether or not this will end the remarkable Australian
economic boom.  Apparently, the
Australians have been enjoying their resource induced economic growth and
unlike Canada have not been fretting as much about Dutch Disease despite an
appreciation of their currency.

While it can be argued these new figures from Natural
Resources Canada are really designed to buttress the Federal government’s
western pipeline project and oil sands development, they are also useful ammunition against Dutch Disease proponents.  Of course, from the viewpoint of an economic historian such
as myself, having the government come out and present a case for the importance
of natural resources to Canada’s economy seems unnecessary.  After all, the Staples Thesis is a
Canadian contribution on how resource extraction makes contributions to direct
and indirect economic growth. 

In the nineteenth century, resource intensive production
(including agriculture) contributed a much larger share of the domestic economy
than today.  Yet, there has
been constant debate as to the relevance of resources to the Canadian
economy even amongst economic historians. 
A great article on the role of resources in Canadian economic growth is
Ian Keay’s “The Engine or the Caboose? Resource Industries and Twentieth
Century Canadian Economic Performance” 
in the March 2007 Journal of Economic History. 

Keay asks the counterfactual question: “What would
twentieth-century Canadian real GNP per capita have been in the absence of any
resource extraction or processing activity?” He finds:  “In the absence of resource-intensive
production, the counterfactual exercise indicates that real GNP per capita
would have grown at virtually the same rate that is observed in the actual
data: 2.07 percent versus 2.01 percent per year, respectively. The exercise
also reveals that the level of real GNP per capita would have been
substantially lower throughout the century in the absence of resource-intensive
production. The average ratio of counterfactual to observed real GNP per capita
is just 0.823. The resource intensity of Canadian economic activity during the
twentieth century, therefore, does not appear to have slowed domestic growth,
but it does appear to have made a fairly dramatic positive contribution to the level
of income enjoyed by the average Canadian.”

A ratio of 0.823 is pretty close to saying natural
resources contribute 20 percent to the economy.  It would appear that the 20 percent estimate has been pretty
much a constant for the last 100 years. 
Natural resource exploitation is important to our standard of living and
in its absence, not only our economy would not have grown any faster, but the
size of our economy would be smaller as would our per capita GNP.   

The denigration and criticism of the resource sector in Canada is partly rooted in the discomfort many of our thinkers and opinion leaders have with
the fact that so much of our activity is rooted in extraction as opposed to
the supposedly more sophisticated value added activities that are seen as the hallmark
of an advanced economy.  The rise
of the so-called new economy in the 1990s lead to repeated mantras about the
end of rocks and trees and the dawn of the information age as the new economic
driver. Yet, borrowing from Kenneth Carter in a different context, a buck is a
buck no matter where earned. 

Moreover, if one examines modern mining, agriculture and forestry, it
appears that modern natural resource exploitation is also quite capital and
knowledge intensive and no longer a bastion of unskilled labour. Of course a slowing international demand for resource and mineral products could
affect projected mining development in Canada – particularly in Ontario’s “Ring
of Fire” and northern Quebec.  If
there is a slowdown in the demand for resources and drop in commodity prices,
there definitely will be a negative economic impact on the Canadian economy.  In the absence of our resource sector, we will not effortlessly glide to a new
set of shopping and dining experiences fueled by new age value added industries.