Thank you very much.
The Institut de recherche et d'informations socio-économiques is an economics research institute that has imposed itself over the years as an important actor in policy debates in Quebec. Its approach is characterized by fact-based policy discussions that assume a progressive stance.
As an associate researcher at IRIS, economist and professor at UQAM, I want to share some recent research on the limits of extractivism as the main driver of Canadian economic policy.
My presentation reflects the economic case for an alternative policy framework, which in most aspects does not break with any current orthodox ideas on how the Canadian economy should evolve or be managed. I simply here highlight the importance in this setting of investment in driving sustainable and strong economic growth and make the case for economic policy adapted to an era of ecological stress and transition.
Today one in five investment dollars in Canada—I'm talking private investment dollars—is directed toward the petroleum and hydrocarbon-related extractive industries. This is up from only 5% in the 1990s. It's not just that oil investments have grown in absolute size, they also have replaced other forms of private investment.
This sea change in investment is mirrored by other structural changes, such as the composition of our exports, the dynamics of our labour markets, and product markets, as our economy adjusts to the long oil sands boom.
I will not argue here why this could be problematic on environmental grounds, but will focus on the economic risks that these developments imply, and how they affect the number and types of jobs Canadians can expect to have in the near future.
If industrialism characterized Canadian economic policy up until the late nineties, I think we can define our current approach as one based on extractivism. Such a distinction has nothing to do with traditional differences between interventionist versus non-interventionist policies, or free trade and protectionism. It cuts across these differences.
Extractivism is an economic policy that sees the resource sector as the principal motor of an economy. Its objective is to induce an ever-increasing flow of extractive and untransformed raw commodities that are bound for export markets. The economic challenge is not only accessing the resource and extracting it but also transporting it across the continent to get it to world markets.
Extractivism furthermore aims to link other economic sectors such as the service sector, finance, commerce, and manufacturing to primary sector growth.
Extractivism aims also to change the way labour markets and settlement patterns function, so they can also link to the needs of the primary sector growth. It influences monetary policy, environmental policy, as we've seen in Canada, and policies in the field of science.
I wish to highlight three limits that I think have a direct impact on the number and types of jobs Canadians can expect to have in the future if we pursue the policy of oil extractivism.
The first is heightened dependence on international trade cycles and commodity booms. As we have witnessed in the past weeks, the oil sands industry is extremely sensitive to changes in conditions in international markets, especially growth perspectives in Asian economies, such as China and India. The impact of softer demand is complex, but directly ties into the way other sectors have been linked to oil sands, particularly labour and product markets, so that current levels of employment and production are tied to the growth dynamics of the oil sector.
But most importantly for the future, how a slowdown impacts investment patterns is even more important now that the oil represents 20% of all private investment. Extractivist policies do not seek to mitigate this fragility, they amplify it.
I'm not saying that the oil sector destroys jobs or stifles growth. On the contrary, the growing dependence of growth and investment in Canada on one sole economic sector, oil, implies heightened sensitivity to the specific fragilities of this sector. Diversity could counter this tendency, but extractivist policies do not support economic diversification.
The second limit is the so-called carbon bubble. It is the risk that productive and financial assets, that are tied to these oil sands booms, could actually have inflated values and that in the medium term these values could face sudden and violent devaluation.