LECTURE 12
THE PRIMARY SECTOR SINCE WORLD WAR II

This lecture builds on Topic VII, Part A in the printed Guide. Please read that material first. 

Click here for a condensed version of the on-campus PowerPoint lecture for this topic. You need audio and a plug-in capable of playing RealAudio files for this optional presentation. (Thumbnails of the PowerPoint screens with space for your own notes are included in the course print package distributed along with the Guide.)

The following notes summarize the required lecture material and provide links to relevant Web sites (the latter are recommended, but not required for test and examination purposes).
 

Introduction

Contrary to popular belief, the primary, "extractive" industries of Canada have declined steadily in relative importance as sources of employment and output. By the early 1990s barely 6 per cent of the labour force worked  in such industries.

While it is true that Canadian exports in the postwar period continued to have a substantial commodity component,  this was also in decline over the period, falling to between 30 and 40  per cent of all exports (depending on how "commodities" is defined) by the 1990s.

In this lecture we begin sketching the broad outlines of the structural changes in output and employment in Canada since the end of World War II. 

Recalling  the discussion of "growth" and "development" from the introductory lectures you will recognize that much of what we are talking about here relates to the latter, although the Canadian experience doesn't follow the classic pattern of an expanding manufacturing sector with a shrinking agricultural one very closely. 

Because the secondary (manufacturing and construction) industries retained about the same relative importance throughout the entire period, the expected and observed relative decline in the primary (resource-based) sector was accompanied by a relative expansion in the tertiary (service) sector.
 
 

Structural Change

  • relative decline of primary sector from over 20% of total employment to 6% 
  • secondary (manufacturing and construction) from 31% to 21% 
  • growth of tertiary from 48% to 73% (includes utilities)
The chart shows the broad pattern of structural change between the end of World War II and the 1990s. Click here for the breakdown of total output by industry sector.

Note how employment in the primary sector (comprising agriculture, mining, forestry) shrank from about 20 per cent to 6 per cent of total employment. 

Secondary sector employment (construction and manufacturing) also declined, falling from 31 to 21 per cent of the total. 

All the net job growth was in the tertiary or services sector, if the latter is defined to include the utilities industries such as transportation, electric power, communications and the like.

Were these trends favourable? 

Benefits:
Increased productivity and rising incomes per capita?
Optimizing use of scarce resources? (The "efficiency" criterion)

Costs:
Loss of traditional life styles (e.g. the virtues of rural life?)
Inferiority of "services" relative to "goods"?
 
 


Agriculture

  • share of GDP 
  • farm policy 
  • direct and indirect subsidies to agriculture 
  • the challenge of freer trade 
  • technical change 
  • trade 
  • international "subsidy competition"
In the 1940s agriculture contributed about 10 per cent of GDP and a similar percentage of work. Mechanization, new plant species, chemical fertilizers, pesticides and improved management techniques subsequently boosted farm productivity and led to a steady decline in the number of farmers. By the 1990s agricultural output accounted for less than 4 per cent of Canadian GDP and employment.

Government support of farm incomes was a major Canadian public policy objective throughout the period. Instruments employed included direct grants and subsidies, but most of the support was indirect through authorization of marketing boards (many of them possessing powers of price manipulation), and provision of freight subsidies, tax concessions, and trade protection.

Why? 
Ensuring a domestic supply of food?
Preserving the family farm?

The "farm problem":

Beginning in the 1960s, heavy domestic subsidies to support farming in the European Economic Community, disposal of the resulting surpluses in international markets, and retaliatory action by the US created a difficult competitive situation in which Canada became involved as a far from innocent bystander. 

A similar problem arose within Canada with conflicts among provinces over the allocation of market share to producers of poultry and dairy products.

The Fisheries

  • the unfolding of the "tragedy of the commons" 
  • the political economy of regional industrial policy 
  • the Atlantic cod fishery 
  • the Pacific salmon fishery
 By the 1940s the Canadian fishing industries of the east and west coasts were of only local importance as sources of income and employment. Like farming, support of the fisheries became an object of public policy, again because of regional political considerations and the same "preserving a way of life" rationale which led to public support of the family farm.

Fisheries policy was no less convoluted than agricultural policy and it also entailed similar international conflicts. 

The classic issue of renewable resource exploitation.
Foreign competition in ocean fisheries leads to Canadian programs to help Canadian operators compete.

Government subsidies to help operators buy bigger, more efficient boats and sophisticated fish finding equipment. 

Government aid to firms building fish processing plantsas part of regional development initiatives in the 1960s and '70s. 

Extension of Canadian territorial limits in 1970s to control  the intensifying competition to harvest fish stocks.

By the mid-1980s it was apparent that these policies had failed. Within a decade both the Atlantic and Pacific industries were in ruins.
 
 

Western Canadian Petroleum

  • post World War II oil boom in Alberta 
  • large foreign firms gain control of resource base 
  • issues of 
  • resource rents 
  • infrastructure investment 
  • market location
 By the late 1930s sufficient petroleum had already been found and developed in southern Alberta, mainly in the Turner Valley area, to make the province self-sufficient in fuel. 

But it was not until 1947-48, that the hoped for big discoveries were made by Imperial Oil at the Leduc and Redwater fields near Calgary, setting in motion the development of a large new western-Canadian resource industry. 

Small local firms were overwhelmed by 5 large multinationals: Imperial, Shell, Texaco, Gulf, and British Petroleum all tied into to an international system of petroleum production, transporting, refining and marketing. 

Such foreign investment was welcomed and accommodated by the Social Credit government of Ernest Manning which saw in the industry a potential means of diversifying and promoting industrial development in the provincial economy. 

Whether the province's oil and natural gas should be developed quickly to meet demand in export markets preserved to support future local development purposes became an issue in the 1960s. 

When a new Conservative government led by Peter Lougheed, a Calgary native with close family ties to local oil interests, came to office in 1971, it sought to increase the provincial share of resource rents and push oil and gas prices (regulated by the National Energy Board) toward world levels. 

This, and disputes over the location of petro-chemical refining helped precipitate intense conflict between the federal and provincial government in the years following the energy crisis of the mid 1970s.
 
 

OPEC and the NEP

  • the Pipeline Debate 
  • a National Energy Policy 
  • the OPEC "crisis" 
  • national and regional conflicts over resource use 
  • pricing 
  • exports 
  • energy self-sufficiency
Immediate markets for petroleum in the west were minuscule, so if output was to be developed rapidly it would have to be for export to other regions. The obvious markets were in the US northwest and in central Canada. Long-distance pipeline technology made both commercially feasible. 

Conflicts over the routing and financing of such a system of pipelines precipitated the political upheaval of the late 1950s which brought the Diefenbaker Conservatives to power in Ottawa. 

The Diefenbaker government developed a National Energy Policy which divided  the Canadian market into two sectors.  All markets to the west of the Ottawa River would be supplied by (relatively expensive) Alberta crude oil and those to the East by cheaper imported oil. 

With the energy crisis of the mid 1970s, this policy was relaxed to allow Alberta oil into the eastern Canadian market. The question was, "at what price"? (Alberta, of course, wanted the highest possible "world" price -- eastern consumers natuarlly wanted a lower "Canadian" price. 

The ensuing debate over energy policy divided the country. 

Efforts to expand domestic supplies led to creation of a national government-owned oil company, Petro-Canada, and massive federal government support for exploration and development -- including development of unconventional (surface bitumin deposits and sea-bed) petroleum sources.
 
 

The Athabasca Tar Sands

  • estimated 1.7 trillion barrels of bitumen 
  • refining process developed in 1948 
  • Great Canadian Oil Sands (now SUNCOR) plant 1967 
  • Syncrude plant 1973
 The largest known unconventional sources of energy in Canada were the Athabasca tar sands of north-eastern Alberta, which contained reserves estimated to exceed 1.5 trillion barrels. Extracting the oil was expensive, however, and although promising technologies existed, their commercial feasibility remained to be proved. 

In the 1960s a small American firm, Sun Oil set up a subsidiary, Great Canadian Oil Sands to operate a pilot plant near Fort MacMurray. In the 1970s a much larger project, Syncrude, jointly financed by the Alberta government and a consortium of major international oil companies, began operations in the area. 

The collapse of oil prices in the 1980s disrupted development plans for the tar sands. Syncrude was threatened with collapse when one of the major commercial partners withdrew from the project, but it was salvaged with infusions of capital by the federal and Ontario governments and substantial royalty concessions by the Alberta government. 

Despite such support, the future of the oil sands remained contingent on some subsequent rise in world oil prices.
 
 

Hibernia
 



 
 
 

  • Discovery well drilled 1979 
  • Falling oil prices 
  • Offshore platform completed 1997 
  • First commercial production Feb. 1998 
  • Prospects for diversification of local economy
Promising prospects off the Arctic coast in the northwestern arctic Beaufort Sea area and off the Canadian east coast where the continental shelf extended out into the Atlantic. 

Exploratory drilling  in the late 1970s confirmed the presence of commercial quantities of oil off the south-east coast of Newfoundland. 

Both technical and difficult jurisdictional issues delayed development. 

Latter were resolved by the 1985 "Atlantic Accord" by which  the federal and Newfoundland governments agreed to jointly manage the petroleum and natural gas resources in the Newfoundland offshore area through an agency, the Canada-Newfoundland Offshore Petroleum Board. 

High hopes were raised in Newfoundland that jobs and income arising from the Hibernia development would help offset the collapse of the fishing industry and provide some long-hoped for diversification of the local economy.

But falling oil prices in 1990s made further offshore projects uncertain.
 
 

Saskatchewan Potash

  • large, high-grade reserves found in 1940s 
  • production begins 1962 
  • 10 operations in production by 1971 
  • 25% of world supply
Huge underground deposits of high grade potassium chloride discovered during drilling for petroleum in 1940s. 

Growing world demand for product (agricultural fertilizer) but difficult technical
problems delayed development.

Issues of ownership and control under socialist government of the province, but initial development entrusted to private firms.

International Minerals & Chemicals Co. established the world's largest potash mine at Esterhazy in the early 1960s, followed by other multinationals and several Canadian-based companies such as Noranda and Husky Oil. 

In the late 1960s the industry was reorganized by a newly reelected socialist government who established the Potash Corporation of Saskatchewan which came to control some 40 percent of the province's potash production. 
 
 

Labrador Iron Ore

  • Iron Ore Co. of Canada 
  • Knob Lake 1953 
  • Schefferville 1955 
  • St. Lawrence Seaway 
  • shipping ore to Great Lakes steel mills in Canada and US
Depletion of Mesaby Range in US during World War II.

M.A. Hanna iron company of Cleveland with other American steel companies establish  the Iron Ore Co. of Canada in late 1940s to develop deposits in central Labrador.

Obtained support in  US Congress for development of the St. Lawrence Seaway project which made possible shipment of ore from the Labrador mines to Great Lakes steel mills.

Heavy investments were made in huge open-pit mining operations at Knob Lake, Schefferville, and Labrador City in the 1950s and 1960s and in electric power and railways to support them. 

Canadian iron ore production increased from 2 million tons annually at the end of the war to over 20 million tons annually in the late 1950s.

Development in the Labrador iron ore mining region slowed in the 1970s and the Schefferville operations were closed in the 1980s but some production continued at Labrador City and Wabush into the 1990s.
 
 

Hydro-Electric Power

Provincial governments in years following World War II begin to use electric power monopolies modeled on Ontario Hydro as instruments of provincial economic development programs.

In Quebec the creation of Hydro-Quebec was a key element in the province-building initiatives of the LeSage government in the 1960s as was its subsequent undertaking of the immense James Bay projects. 

In Ontario the development of remaining hydro sites in the northern part of the province was completed in the 1950s and 1960s.  By the 1970s it was apparent that the province's future needs for electric power would have to be met in other ways.

Hydro-electric power was also important in Newfoundland's attempts to develop resources in Labrador through its ill-fated Churchill Falls project and also in Manitoba where major sites were exploited on their Churchill River system.

In British Columbia, creation of the BC Hydro and Power Authority and the massive Peace River project, completed in 1967, was an important part of W.C. Bennett's drive to develop the province's interior hinterland.In Saskatchewan, SaskPower became the government's key publicly-owned agency for promoting development there.
 
 

Major Uranium Mining Centres

Small-scale uranium mining was developed during the years of World War II by the Canadian government to supply material for the Allied atomic bomb project. After the War it became a huge new industry, supplying the US cold-war demand for uranium in the 1950s and 1960s. 

Large-scale mining operations were developed at Uranium City on Lake Athabasca in northern Saskatchewan and even larger mines at what became Elliot Lake in northern Ontario, west of Sudbury.

Canadian sales of uranium increased from almost nothing at the end of the war to over 1.5 billion dollars annually in the mid 1950s and more than 13 billion by the early 1960s. 

Once the US developed its own domestic sources of uranium, demand for Canadian exports was scaled down. By the 1970s all that remained was the demand of Canada's small domestic nuclear power for uranium products.  (Click here for an update on the model town of Elliot Lake.)
 
 

Base Metals



 
 
 

  • Expansion of the mining frontier throughout Canadian Shield 
  • Chibougamau, Que. 
  • Timmins, Ont. 
  • Thompson, Man. 
  • Pine Point, NWT
After World War II, base metal mining continued to expand and by the 1970s  Canada had become a significant source of world supply for nickel, lead, copper and zince. 

The nickel mining and processing centre established by Inco at Thompson in northern Manitoba was a good example of the kind of "new" mining frontier development envisioned by planners. 

Another large base-metal mining and smelting operation at Timmins helped support the mining community initially established there in the 1920s.

Other, smaller developments, such as the open-pit base metal mine at Pine Point just north of the Alberta boundary in Mackenzie District of the Northwest Territories generated some useful external benefits by supporting improvements in the main transportation links between the Mackenzie River system and southern Canada, but the mining operation itself had a short life.
 
 

Pulp and Paper

  • Expansion from established bases in Quebec and Ontario 
  • New Brunswick 
  • British Columbia 
  • Manitoba and Sask. 
  • diversification 
  • regional development initiatives 
  • "province building"
Following World War II  the pulp and paper industry recovered from its collapse in the 1930s and expanded into new frontier regions.

Many of the older facilities in central Canada and the Maritimes which had been allowed to run down during the disastrous years in the 1930s were revived as the industry underwent extensive reorganization in the 1940s.

In western Canada pulp and paper companies were encouraged by provincial governments to establish new operations often with generous royalty and other concessions (and federal aid under regional development initiatives).

Some of these subsidized ventures proved reasonably successful, but others, such as the forestry complex at The Pas, Manitoba, were not.
 
 

Policy Issues

  • export of power and water resources 
  • energy policy 
  • capture and disposition of natural resource rents 
  • conservation and the environment 
  • non-renewable resource management 
  • social and environmental impact 
The resources boom of the immediate postwar decades was driven by US demand for raw materials, much of it to support military demands arising out of the Korean conflict and the subsequent escalation of the cold war with the Soviet Union.

Provincial governments welcomed  the associated capital inflows and job creation but in the 1960s and 1970s doubts began to be raised about the benefits to Canada of such development.

Concerns about allowing basic resources such as water and energy to be exported rather than saved for domestic use surfaced in the course of the debates over the Columbia River treaty and later plans to divert Canadian water to the US. 

Similar unease developed over petroleum and natural gas supplies.

Growing  anti-American sentiment during the Viet Nam conflict supported a vigorous "left-nationalist" campaign against "continentalism" .

A closely related set of issues involved resource rents. What were Canadians getting out of oil, metal mining and forest production apart from some mainly low-level jobs? 

In the 1970s these concerns were being joined to a growing environmental movement which focussed on the longer term costs of resource-based economic activity.

Take the quiz?

Questions or comments?  Please POST HERE.

RETURN