Pittsburgh: deindustrializing right

Pittsburgh isn’t escaping the recession unscathed, but it’s probably doing the best of any city between Philadelphia and Chicago. Partly, the city was lucky to be unlucky before anyone else. Perhaps of equal importance, city leaders took the right steps to give Pittsburgh a new raison d’être. The New York Times reports:

Pittsburgh’s transition has been proceeding for decades in fits and starts, benefiting some areas much more than others. A development plan begun in the 1980s successfully used the local universities to pour state funds into technology research.

Entrepreneurship bloomed in computer software and biotechnology. Two of the biggest sectors are education and health care, among the most resistant to downturns. Prominent companies are doing well. Westinghouse Electric, a builder of nuclear reactors, expects to hire 350 new employees a year for the foreseeable future. And commercial construction, plunging in most places, is still thriving partly because of big projects like a casino and an arena for the Penguins hockey team.

(photo credit)

Adrift in a sea of federalism

Richard Florida points out that the US has no long-term economic strategy.

Does Canada?

I imagine in both cases our federal structures are impediments to economic nation-building. States and provinces are protective of their constitutional powers and naturally they put their self-interest ahead of the nation’s.

In Canada, for example, Alberta charges ahead with oil production while Ontario struggles with deindustrialization. Yes, Alberta is the only thing keeping the Canadian economy’s final tally in the black, but it could also be speeding the collapse of manufacturing in Ontario.

It would be reassuring if the federal government had a long term-plan for Canada’s economy. Alberta and Saskatchewan are at the mercy of resource markets today, and will face water shortages in the future. Ontario, centred on Toronto, is ready for deindustrialization, but it will be painful for a lot of people if they are left out of the new economy. These kinds of issues are extremely important, and there is probably more the government can do to assure a prosperous future than to deal with the current market crises.

My fear is that the federal government is taking a short-term approach to our economic challenges, and letting the provinces lead will take the country in an unproductive direction.

Globalization

Today Stephen Harper promised to implement a number of recommendations (on the condition that you vote for him) from a report released back in June on the state of Canada’s economy in the world. The measures can generally be characterized as opening the door to foreign investment in Canada.

My opinion of globalization as a trend is that participation is more or less compulsory if we want to keep up with our neighbours and not find ourselves in a situation like Japan in 1854. It might not be pleasant right now, but like our experience during industrialization, after enduring the economic and social upheavals we will enjoy a higher standard of living.

So I agree it is a good idea to invite more foreign investment in Canada. Having said that, I do have some reservations.

1. Sovereign wealth funds can be dangerous. If they aren’t operated at an acceptable distance from their governments, we risk having huge chunks of our country directly in the hands of foreign politicians or ruling elites.
2. Labour mobility needs to catch up with capital mobility. People should be able to pass through provincial borders – short or long term – without any trouble at all, and the government should work with the US to allow citizens of both countries to work on either side of the border.
3. You can never spend enough money on skills retraining and upgrading. This is like labour mobility except people are moving across industries instead of geography.
4. We need to take steps (what they are is beyond me) to make sure we use our resource wealth wisely. We don’t want an economy that uses foreign money for the sole purpose of exporting minerals and oil to other foreign countries. There are plenty of jobs to be had besides primary resource extraction (mining, fishing, farming, and so on) and auto manufacturing. This is where Canada should aim to be a world leader. Norway seems to be getting by, despite it’s oil wealth.