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OVER THE LAST DECADE, THE PERFORMANCE of the British Columbia economy has been desultory, dramatically symbolized by the province's fall from "have" to "have not" status in qualifying for equalization payments from Ottawa. David Bond surveys the many reasons for this decline, including both external factors and those within the province's control.
Bond criticizes the new government in Victoria for its early faith in supply-side economics - expecting tax cuts to stimulate the economy sufficiently to offset the lost revenue. Even if the new government cut taxes prematurely, he argues, an exercise in fiscal restraint was urgently needed to bring provincial spending in line with revenue projections based on average tax rates applied by provinces elsewhere in Canada. Despite the conflicts that surround implementation of fiscal restraint programs, Bond remains optimistic that the provincial economy will recover by the middle of this decade.
BY MOST MEASURES BRITISH COLUMBIAS ECONOMY IS AILING. PROVINCIAL PER capita GDP growth between 1992 and 2000 was the lowest in Canada. This was also true for the growth in average real disposable income, in the ratio of employment to population, in total exports per capita and in fixed business investment. For the last five years, the population growth rate has been declining, net interprovincial migration has turned negative and the number of head offices based in Vancouver has steadily gone down. And, symbolically worst of all, in 1999 the land of the lotus blossom moved from a "have" to a "have not" province: it started to receive federal equalization payments.
What went wrong? Has the bloom just faded temporarily or has there been a fundamental shift in the underlying basics that means B.C. will continue to under-perform? A careful review of the facts leads me to conclude that the downturn was partly the result of external forces and partly the doing of BCers themselves.
Five maior external factors
Bursting of the Japanese bubble
British Columbia has been more dependent on trade with Japan than any other Canadian province. When Japan was booming, this was a strong advantage. The development in the early 1980s of coal deposits in B.C.'s northeast corner was but one example. Japanese investments in the forest sector, in manufacturing and in the tourism industry all contributed to...