Diversification or excellence.

Since the mid 1970s so-called experts have been telling us that economic diversification is the solution to the North's economic problems. In fact, diversification has been a trap and a failure.

Diversification is not a strategy; it is 100 different strategies. You can diversify by bringing in businesses that can't survive. You can diversify by getting government offices. Technically, you can even diversify by cutting production in a plant that dominates the local economy. You'll have fewer jobs, but the economy will be more balanced. Diversification is like motherhood--a nice idea that shouldn't be pushed on everyone.

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Diversification is on the agenda because Queen's Park has noticed a few problems in Northern Ontario. Perhaps the impending election has cleared the smoggy southern air and cabinet can suddenly see for miles and miles and miles. In any case, chemical engineer and Wilfrid Laurier University president Dr. Robert Rosehart has been appointed as the Northwestern Ontario Economic Facilitator. He is supposed to develop recommendations for the 2008 Provincial Budget.

Rosehart has already said that the ideas in a report he helped produce in 1986 still ring true. In particular, he wants to dust off the diversification approach.

Our region is heavily dependent on mining and forestry. Diversifying into other sectors seems to make sense. When forestry is in trouble we want something else to tide us over.

Sudbury's experience with its mining dependency is especially instructive. When mining was in trouble in the 1970s, people looked to new industries to replace the lost jobs. The last thing they wanted was to remain dependent on the industry that had let them down. But despite all the efforts to diversify away from mining, the city is doing well today because the mining industry is booming. It isn't because the mining companies are hiring thousands of workers, however. It is because the mining supply and service are hiring. There are now more jobs in the mining supply and service industries than in the mining industry itself. Sudbury is succeeding because the city has diversified into mining, not away from mining.

Consultants told the policy makers to stop depending on the basic resource industry. Michael Cowpland, who later founded the Canadian software giant Corel, even suggested focussing on microchip production. City leaders tried to follow the advice of the consultants. They focussed on everything, but the mining-related industries. But despite their efforts, Sudbury is becoming an international center for mining expertise. It is moving up the knowledge chain where it already had strengths.

There may be a lesson here--perhaps the northwest should concentrate on forestry, not diversify away from the forest sector. Perhaps is should stop depending on traditional forest companies and focus on getting as much wealth as possible out of the wood resources.

Sudbury did diversify, of course, and smart local politicians deserve a lot of credit for aggressively pursuing public sector plums, like the Tax Center and later the Northern Ontario Medical School. These public-sector businesses helped stabilize the economy, while mining was shedding jobs. The service sector expanded. Colleges and the University grew. A number of call centers and an animation business moved in. Most of the changes were the result of natural maturation and local boosterism. The service sector and post-secondary education were growing everywhere.

But it was not diversification away from mining that gave the local economy a new foundation. The economic backbone of the city was still mining.

For most of Northern Ontario, wood will be the starting point for future growth. The trick will be to add value to wood. That means diverting wood from low-value uses like pulp and two-by-fours. More important, it means adding more talent, more design and more imaginative management to the raw material. Value added, after all, is just the value of the labour we put in.

The real secret of a diversification strategy is to diversify the talent pool around our existing strengths. The biggest local asset is the wood. We need to diversify the talent.

A successful development strategy is one that develops the people.

Dave Robinson is an economist with the Institute for Northern Ontario Research at Laurentian University.

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