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Slip sliding away: where is Manitoba's anemic economy going?

Winnipeg is a city whose past was created from the needs of others. Unless its business mix changes Manitoba will suffer economy disparity on the same scale as the Maritimes we're told, because our strengths of the past, such as agriculture and light manufacturing on a mass scale, will no longer feed the future.

Winnipeg, the heart beat of the province, sprang up when farms required a large labor force. Dozens of small towns were needed to supply that large prairie population and it was Winnipeg's role to service those small towns. Wholesalers, manufacturers and financial institutions grew up because Winnipeg was a railway hub and the centre of action.

Mechanization slowly changed the face of rural Manitoba manpower. Fewer people were needed in the fields; personal cars and trucks meant little towns were less important as new distribution methods removed the need for regional warehouses. The highly respected economist, Ruben Bellan, says, "The technology of a century ago favoured the location of Winnipeg. We've been trying to redefine ourselves ever since."

All of the adjustments, accommodations, increases and decreases have created a softening of the economy to generate wealth and we are several steps behind the national economy. The statistics tell the tale. Provincial gross domestic product has grown 13 per cent since 1979. Considering the national GDP has grown 17 per cent, our failure to keep pace is bothersome. In fact, as a percentage of the national GDP, Manitoba's output has shrunk from 3.7 per cent fifteen years ago to 3.45 per cent today. Paul Phillips teaches economics at the University of Manitoba and in his opinion the decline will continue, especially with the recent death of the Conawapa hydro dam project -- a result of the cancelled power deal with Ontario.

Phillips says, "Throughout the '70s, '80s and today, for the current government, hydro was the centrepiece of economic development policy. We have seen the rise and fall of hydro power as the engine of growth."

The drop in provincial gross domestic product per person has been even more dramatic. In 1991 it stood at $21,335 for every Manitoban, 1.9 per cent lower than in 1987.

The province is also seeing a drop in the amount of money spent by business. In 1991, with the recession starting to entrench, Manitoba companies spent 19 per cent less on fixed capital and 32 per cent less on machinery and equipment than in 1979. Evidently businesses are not renewing or updating what they have - in fact, they are letting it slip behind.

For those who examine the statistical entrails and try to divine the future, such numbers are serious, especially when coupled with the corporate profit picture for the province which recorded a drop of 53 per cent in 1991 over 1979.

Business isn't the only group making less. According to Statistics Canada, Manitobans are taking home 10 per cent less today than we did 15 years ago. Reduced to a weekly level, the figures are easier to understand. As of October 1992, Statistics Canada shows the average gross weekly industrial aggregate income including overtime in Manitoba was less than $492.29 -- $92.80 per week less that the Ontario average of $585.09. Factoring in Toronto's real estate prices things tend to look better. The average house price in October 1992 for Toronto, according to Royal LePage, was $211,572 compared to $79,000 in Winnipeg. Another area comparison is St. James at $100,000 compared to Hamilton Centre at $115,500. Our yearly average individual income for 1991 was $19,276, which is $2,400 less than the Western Canada regional average of $21,697 and almost $3,300 less than the national total of $22,560. And our personal disposable income is going down as well. In 1991 it was $15,383 -- almost four per cent less than 1987 while at the same time our taxes are going up -- 18 per cent more in 1991 than in '87. For Jim Treller, manager of economics for Employment and Immigration Canada, such numbers flicker across his computer screen every day as he studies the labour market in Winnipeg. Says Treller, "Manufacturing jobs that used to pay quite a bit of money to low skill individuals have died. We've seen the shrinking of more traditional sectors and even noticed the downsizing of the manufacturing sector."

Before the last recession, in 1981, there were about 68,000 manufacturing jobs in Manitoba. Treller says there are currently about 57,000, and according to his estimates those numbers will not reach 68,000 again until the end of the decade. Figures from Statistics Canada show that manufacturing shipments out of Manitoba have dropped almost 20 per cent in the last five years. Treller sums up the age we are living in as "challenging and stressful at the same time."

The president of the Winnipeg Chamber of Commerce, Sandy Hopkins, has the job of being the sunshine man for business in Winnipeg. It is the chamber's job to look negatives square in the eye and back them down. Says Hopkins, "We can turn this around." He says there is no doubt about the challenge facing Manitoba. But he is emphatic about the business community's ability to pull together to stop the slide.

Jim Orzechowski is a member of the Winnipeg 2000 Leaders Committee, whose ranks have been thinned lately as a result of transfers. Orzechowski, a managing principal with Smith Carter Architects Engineers Inc., says stopping economic decline in a traditional economy is not easy. He says solutions to problems that have accrued over many years are not that easy to turn around.

Treller worries about what he calls "plateaus of unemployment." By this he means the average number of people each year who cannot find work and are seeking assistance. He says the trend is a bad one. During the 1960s there were an average of 10,000 new unemployment cases each year in Manitoba. During the 1970s that rose to 20,000 per year, the 1980s up to 35,000 per year and so far, during the 1990s the rate averages 42,000 per year. "These increasing plateaus of unemployment will never go away," says Treller.

While the number of people working is going down, some things are going up -- way up. The interest on the public debt has jumped 130 per cent; the federal government is collecting 76 per cent more tax from our pay cheques and 44 per cent more in indirect taxes since 1979. The feds are spending 57 per cent more now than in the late '70s. Business bankruptcies in Manitoba are up 200 per cent in the past five years.

Economist Phillips is not optimistic. "There's a lot of uncertainty about the future structural soundness of the Manitoba economy," he warns. Phillips' greatest concern is that the same thing will happen to Manitoba as happened to the Maritimes in the 19th century. He calls it "maritimization." Once the Atlantic provinces joined Canada, says Phillips, a proud and prosperous region was soon sucked dry. The banks moved to Montreal to be close to industry, the railways were deregulated and then, when the recession of the 1890s hit, Montreal bought out all the Maritime industries, shut them down and moved the orders to Central Canada. Phillips sees the same trends developing in Manitoba, especially following the Free Trade Agreement and the pending North American Free Trade Agreement. He adds that with mega-projects (like Conawapa) a thing of the past, Manitoba's best source of wealth may be its energy supply. The value of electric power may rise in the future because of environmental pressures and Manitoba could sell its excess at a premium.

Two key statistics seem to back up Phillips' claim. Over the past few years wealth certainly has not been coming from the retail or mining sectors. Retail sales have dropped every year for the past five -- the decline from 1990 to 1991 (the most recent stats available) was 11.2 per cent. Mineral production in the province has plunged 41 per cent since 1988 because of soft world markets.

Says Phillips, "I am quite afraid that given the trends we have now we will become a ghost town."

The New Economy

Attitude is a competitive edge

The harsh reality of the slide of Manitoba's economy hasn't gone unnoticed. In the hallowed halls of the Legislature there is action. A special cabinet committee called the Economic Development Board, consisting of six cabinet ministers and chaired by Premier Gary Filmon, has been at work for the past 12 months trying to make it easier for business to come to Manitoba. What progress they have made has not yet been assessed. There have been questions asked about the fruits of their activities.

Supported by a special secretariat of five project officers, the Economic Development Board streamlines the steps required by free enterprisers.

Mike Bessey is the secretary to the board. Bessey recognizes that "one-day wonders" -- a term he uses to describe new business enterprises -- get lost on the nightly news. Bessey wants to remind everyone that the five largest business deals in North America were signed between 1985 and 1989, and things have slipped all over since then. He says there was a North American sickness caused by speculative and inflationary deals not based on value. That's all changed and we're into a post-inflationary period. Into this environment comes the Manitoba economy.

Bessey says judging the future of the Manitoba economy on the past performance of established businesses is an incorrect view. He likes to look at what's being done now. Says Bessey, "Our board is going well because of Manitoba's strengths. The new economy is underway here."

Examples: Ayerst will spent $100 million on birth control hormone research and development plant in Brandon because of the skills of agricultural sector to provide good forage and veterinarian talent for pregnant mares which provide the urine. Monsanto will open a $5 million dry chemical fertilizer plant near Winkler; Canada Post will open a 100-job long distance call centre in Winnipeg; Unitel, a long distance company, will open a 400-job call centre, and a three other deals are pending in the same technology sector.

How is this done? "Leg work," says Bessey. "There is a network of former Manitobans all over the world and we get leads." And who follows it up?

"The premier, he is usually the first one to make the introduction," he says. Needless to say the premier is not just shooting hoops, he's right in the game.

The secretariat takes over after The Boss talks, cutting through all the bureaucracy that can span five departments, to fast track the deal.

When dealing with IGT, of Las Vegas, on a video lottery terminal plant to open here bringing 30 jobs, such action is required. "They were impressed with the diversity of talent here," says Bessey.

Then there is the Crocus fund, which Bessey and the Manitoba Federation of Labor hammered out to give money to help employee-owned funds. And Standard Aero's Winnipeg operation has been given such a high rating of skills that the plant will now be the head office for five other plants in North America, according to BTR, the British owner.

All this, says Bessey, is the fundamental bridging between the old and new economy.

"Attitude is a competitive advantage in this world," he says, "Feeding people fear pills is counter-productive. We (Manitobans) can be the best in the world."
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Author:Ryan, Bramwell
Publication:Manitoba Business
Date:Apr 1, 1993
Words:1917
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