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No recovery for Northern Ontario in 1992.

What will 1992 bring? It's a puzzle. So many things are changing. Most are changing at the same time, and most are changing radically.

The only certainty is that 1992 will be a year of change and discontinuity. But that is a coward's way out of answering the question. NOB editor Mark Sandford asked me to be brave.

There isn't much good economic news. You know what happens to bad news messengers! But here goes.

* Transportation, newsprint, pulp and paper and mining will not recover in 1992.

* Veneer and particleboard plants will have a slow down.

* The provincial and federal governments will be in crisis.

* There will be major changes in some unions.

* Community economic development will be different.

St. Lawrence Seaway shipping will continue to decline. Changing global grain markets, transportation technologies and supply lines will drive the change.

European and American competition will push Canadian grain suppliers to cut costs. Shippers will seek less expensive, all-season alternatives to the St. Lawrence Seaway.

Tests on options such as shipping through Seattle or down the Mississippi will continue.

The first all-season, long-haul unit trains will likely run between the Prairies and Atlantic ports this year. There will be no significant stops in between.

From a practical, not political, point of view, can you think why these alternatives to the Seaway will not work? I can't. But think about the impact on business and employment at the Port of Thunder Bay, the Soo locks and all along the Seaway.

The political reaction will be severe. But when change is driven by technology and global forces, no matter what party is in power, governments can only slow down the change and soften the impact.

We are witnessing the beginning of the end of the Seaway as a major transportation route. It was a 19th Century dream. It became a 1950s reality just as change forces drove trade in new directions. Except for individual efforts by people such as MP Iain Angus, don't expect action from government.

What about mining in 1992?

Car and appliance makers have reduced production. As a result, Nippon Steel, the world's largest steel maker, cut production by 20 per cent. Mineral producers compete in a global market. Do you think Canadian mines will be immune to Nippon Steel's experience? I don't.

Mineral markets may turn in late 1993. Even then, costs of compliance to government regulations and uncertainty about environmental rules will keep investors wary.

With the end of the USSR and instability in Eastern Europe, gold prices may improve. The threat of a flood of gold from the USSR will not happen. The USSR's reserves are 25 per cent of the previous estimates.

And the forest products industry? Not good. The old cyclic theories are outdated.

Newsprint production will not return to 1980s' levels. Printing technologies that use thinner sheets will continue to reduce paper needed to carry the same information. Advertising revenues will continue to plunge.

Electronic technologies will replace many common paper uses. Receive-only portable facsimiles are an example. They will go on sale during the early part of this year. The units have 40 pages of memory that can be read from a screen.

Two blows to our competitive position are the costs of electricity and wood fibre. Ontario Hydro rate jumps will push energy cost to that of our major competitors.

Meanwhile, American recyclers are closer to the waste paper supply, and advancing technology is making quality paper from what were once quick-growing weed trees.

Sawmills will rationalize. That is the bureaucratic way of saying that old, wrong-sized, or poorly managed mills will shut down. Even new, well-managed operations will not be immune to competition from other forest users.

The North American lumber, veneer and board markets will not bounce back soon. Some upscale houses and summer cottages will be built, but the boom is over. Meanwhile, competition from wood substitutes is heating up.

Technological change will decimate employment in the woods and mills.

The demand for environmental protection will make forest sector investment unattractive. Investors will be able earn a better return by leaving their money in banks.

Forest industry restructuring will register deeply in the public consciousness in 1992. People will recognize that the industry no longer operates on five-year cycles. People will realize that the current changes are pervasive and permanent.

That change happened to steel in the 1980s. Until 1980, steel industry employees believed they had a job for life.

Governments will be under extreme pressure to find ways to guarantee job security. Can governments solve the problem? Not likely.

Because of declining tax revenues, huge deficits and public debt, no new government money will be available. At best, governments will make incremental improvements on or replace existing programs. The path to the future will be no clearer to politicians and officials than it is to the rest of us. They will only be reactive.

Disaffected voters will look to new political groups for solutions. The energies of the three old-line parties will focus inward as they struggle for survival.

Recently in Dryden, Thunder Bay Manitouwadge and Quetico Centre I asked large groups to identify five community issues that must be solved by 1995. Then I asked if the federal and provincial governments could resolve the issues. Not a single person said yes. They said, "We will have to do it ourselves."

Both the governments of Ontario and Canada will be in trouble with their traditional constituencies. The Conservatives will not be able to do much about the deficit and debt. The NDP will not be able to fulfil its social and union commitments.

Like governments, unions are also at a crossroad. As industries restructure, schisms will occur in unions. Local members will be ready to make concessions, but union executive officers will be reluctant to set precedents. Some leaders will want to work collaboratively with management, others will continue adversarial relations.

Changing societal values about participation, empowerment, self-management and partnerships are influencing union members and their leaders, too. Unions organized to deal with the old bureaucracies will find it difficult to respond to the new structures.

Some unions will focus their energies differently. To get the security their members want, they will take to the bargaining table demanding long-term business strategies, continuous improvement of both the processes and the products, and investment in the best technologies.

The change, however, will not be easy. Union representatives will not find much strategic thinking on the management side of the table.

It will require an entirely different mind set for both union and company leaders. Strategic issues have always been the prerogative of management. Safety in the work place once was, too. Now it's everyone's business. The need for thinking that is squarely focused on the future is now everyone's business.

Community-based economic development will change. Instead of the fruitless search for new industry, economic developers will focus on three areas.

The first will be to strengthen existing local businesses by helping them get and use the latest techniques and technologies.

The second will be add-ons. Many communities are too small to support some stand-alone businesses. Economic developers will identify service gaps and help existing businesses add the service.

There will also be more clustering or bundling together of several services to form one viable business. Dryden's Wilson Stationery and Office Supplies does this effectively now.

The third will be the attractiveness of the community as a place to live. People will stay in or come to a desirable community.

The US presidential election may throw off many of my predictions. The Republicans are in trouble over their attention to domestic issues. They will have to make pre-election efforts to demonstrate they are worthy of the voters' nod. Priming the US economy may have an impact on Canada in the short-term, but if the well needs rebuilding, priming the pump won't help much.

That's how I see 1992. I hope I am wrong.
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Author:McIntosh, Cliff
Publication:Northern Ontario Business
Date:Jan 1, 1992
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