To find the front lines of the global commodities boom, drive an hour east from Saskatoon on the Yellowhead Highway to the world’s largest potash mine in Lanigan, Sask.
Two huge, dome-covered warehouses, each about the size of a football field, stand on the mine site, eerily empty except for a few dusty sweepings of potash on the floors.
“A decade ago there would have been a mountain of potash in here,” says Will Brandsema, the general manager of AMEC engineering, whose firm recently completed a $400-million expansion of the mine for the Potash Corporation of Saskatchewan.
Today, worldwide demand for the pinkish, chalk-like mineral is so great that the Potash Corp. can’t keep its warehouses full.
In the past four years, the price of potash — the basic ingredient of fertilizer — has soared to nearly $1,000 per tonne from roughly $100, largely because of rising populations in China and India and their sudden appetite for high-value, fertilizer-grown food.
Thanks to a quirk of geologic good fortune, Saskatchewan is filled with potash and now produces more than a quarter of the world’s supply. What was for years an unremarkable export has suddenly become one of the most treasured commodities on Earth that alongside surging sales of oil, uranium and even grain is suddenly making Saskatchewan the economic envy of the nation.
Three thousand kilometres away, another once-poor province accustomed to life on the economic fringes of Canada is also reaping a windfall from its natural resources. Skyrocketing oil prices are fuelling an extraordinary economic turnaround in Newfoundland and Labrador, where a fourth offshore oil project will soon be in development. Petrodollars are transforming St. John’s from a down-at-the-heels provincial capital into a bustling energy city brimming with stylish restaurants, affluent condo developments, and a sense of euphoria not seen there since cod were first discovered on the Grand Banks.
“The Newfoundland and Saskatchewan economies have gone from stagnant to stellar,” declared Statistics Canada in its May Economic Observer. “These two provinces have moved beyond old stereotypes and stepped into a new era of prosperity.”
Both provinces led the country last year in the growth of provincial exports, in the rate of housing starts, and in GDP growth — the only provinces along with Alberta whose per capita GDP was above the national average.
In June, a report by the TD Bank Financial Group called Saskatchewan “Canada’s commodity superstore,” and said if the province was a country it would rank fifth in the world among OECD nations in terms of GDP per capita, trailing only Luxembourg, Norway, the United States and Ireland (Alberta would come second if ranked on the same list).
As for Newfoundland and Labrador, over the past decade its per capita GDP has gone from $10,000 below the national average to $10,000 above: the fastest, 10-year turnaround of any province in Canadian history.
Both provinces also reaped a bonanza last year off commodity royalties. Newfoundland posted a record $1.4-billion budget surplus; Saskatchewan announced a $641-million surplus plus a $1-billion infrastructure spending spree.
While Saskatchewan and Newfoundland enjoy their economic renaissance, recession stalks other regions of Canada, in particular the industrial heartland of Ontario, where many manufacturers are struggling with high energy costs and a high dollar, and the North American auto makers — once Canada’s economic engine — are shedding jobs and shutting factories. John Pollock, the chairman of Electrohome Ltd. in Kitchener — who is winding up the affairs of a once-proud consumer electronics maker forced to the sidelines by overseas competition — predicts Ontario is entering a period of perhaps a decade or more, in which it will no longer drive the country’s economy.
“There’s going to be a period of transition that’s going to be tough,” he says. “Ontario has supported the rest of the country, provinces like Saskatchewan and Newfoundland, for years. Maybe it’s time for a shift.”
Saskatchewan left the ranks of equalization receiving provinces in 2007 and Newfoundland and Labrador is expected to become a “have” province this year or next, a startling change considering that the cod fishery — once the foundation of the province’s economy — has not substantially reopened since its devastating closure by Ottawa in 1992.
What do such economic shifts mean for the country as a whole, and how will the rise of two weaker provinces, coupled with the manufacturing malaise in Ontario, affect the workings of Confederation?
First, many economists say it’s a mistake to underestimate the resilience and strength of the huge Ontario economy. They also say the surging energy economies of Alberta, Saskatchewan and Newfoundland and Labrador face their own challenges, including cyclical commodity prices, the social costs of rapid development, and serious labour shortages.
Canada is already facing a labour crunch that’s only going to worsen with time. In six years, says economist Brian Lee Crowley, president of the Atlantic Institute for Market Studies, there will be more people leaving Canada’s labour force than entering it. The new demand for workers in Saskatchewan and Newfoundland, especially in construction and engineering, can only exacerbate the problem.
The rampant growth of Canada’s resource-rich economies is also expected to force changes to the federal equalization program.
Changes to equalization, not to mention a realignment of “have” and “have-not” provinces, could also prompt a new wave of regional beefs and resentments — the bane of Confederation.
Premier Dalton McGuinty is already complaining about how much Ontario taxpayers contribute to national transfer programs, a system Ontario governments once supported in better economic times.
Oil itself could become a flashpoint that divides the country. Public demands in Ontario or British Columbia for a national carbon tax would now raise the ire of more than just one oil-producing province.
Meanwhile, Saskatchewan and Newfoundland, which typically wield little weight in national discussions, could use their new economic clout to campaign for a truly effective Senate, with real power to represent regional interests.
“There is some realignment of economic power occurring which will influence the national political debate,” says former Newfoundland premier Brian Peckford, who now works as a business consultant in British Columbia. “Premiers’ meetings, for example, won’t be dominated by only a few big provinces. Smaller provinces like Saskatchewan and Newfoundland won’t have to shout and demand to be heard. We’ll get noticed simply by being there.”