North should exorcise the resource curse.

Is this Canada or is it Northern Ontario? If it is Canada then we are in one of the richest and most industrialized countries in the world, and we can expect strong growth over the next 20 years. If we live in Northern Ontario, on the other hand, we are part of a resource-dependent region that is likely to get poorer. That is the message from the World Bank. In 2003 the bank published Natural Resources and Violent Conflict: Options and Actions. Most of the essays in the book are about rebel groups, government corruption, contraband diamonds and other boring topics. One essay is directly relevant for Northern Ontario. It is called "The Natural Resource Curse: How Wealth Can Make You Poor," by Michael Ross.

According to Ross, "Study after study has found that resource-dependent economies grow more slowly than resource-poor economies." Northern Ontario fits the pattern - it is resource-rich, resource-dependent, and growing much more slowly than the non-resource based parts of Canada.

The problem is called "the resource curse" and it has become a big issue in economic development. I reviewed 20 studies about the resource curse to find lessons we can apply here in the North. None of them discuss resource-based regions inside developed countries like Canada, so it takes a little imagination to see how this international literature applies to Northern Ontario.

Lesson 1: depending on mining can be deadly. Countries that rely on mineral exports tend to have high poverty rates.

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If Northern Ontario were a country it would come in at the top of the mineral-dependency list - above Botswana, which depends on minerals for 35 per cent of its exports. According to the World Bank, GDP per capita dropped a remarkable 2.3 percent per year for countries with more than 15 percent of mineral exports.

There is some good news. Not every country that relies on mineral exports sinks into poverty and violence. Norway used its oil boom to launch an economic revival. The Norwegians had a strategy designed to avoid the resource curse. It included a state-owned oil company, centralized wage-setting and heavy investment in education. Skills developed producing offshore-drilling rigs were carried over to other industries.

Lesson 2: concentrate on producing goods and services for forestry and mining. The skills and the products can be transferred to other industries.

Lesson 3: to get rich from your natural resources, become knowledge producers. Lesson three comes from a brilliant paper, called Exorcising the Resource Course: Minerals as a Knowledge Industry, Past and Present, by two Stanford economic historians. According to authors Wright and Czelusta, the United States grew rapidly even though it was a major mineral producer. In 1913 it was the world dominant producer of almost every industrial mineral.

It wasn't resource abundance that drove American success. The U.S. became the leading copper producer despite the fact that Chile had larger deposits and richer ores. American industry outpaced Chile for half a century by developing methods to exploit lower grades of ore. American companies also dominated oil production for most of the twentieth century. The secret of the American success was heavy investment in technology, in education and in science. The United States Geological Survey, established in 1879, was the most productive government science project of the nineteenth century. By the late 1800s, the U.S. was the world leader in mining engineering and metallurgy because it had the best exploration methods, mining techniques and extractive metallurgy in the world.

Northern Ontario does suffer from the resource curse. History shows the solution lies in education and research. We need to become knowledge producers in our core industries.

But education and research are provincial and federal responsibilities. Unfortunately for us, Canada as a whole doesn't suffer from the resource curse. Neither does Ontario. Declining population and slow growth in Northern Ontario aren't big problems for the rest of Canada. The senior levels of government are not strongly motivated to deal with our resource curse.

If we want Paul Martin and Dalton McGuinty to play exorcist, northern leaders have to get every northern MP and MPP to chant "Northern Ontario is cursed with resources - help us develop the technology to turn them into blessings."

Dr. David Robinson, PhD, is an associate professor of economics at Laurentian University

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