Much of the province seems to be shutting down. Finance Minister Dwight Duncan will table the Ontario budget on Thursday, but he has already set expectations by delivering in advance the worst news: an $18-billion deficit across the next two years. How that number breaks down will determine whether the deficit cracks the record of $12.4-billion set in 1992-93, although the economy is a lot bigger now than it was back then.
In advance of budget day, Mr. Duncan has a broad base of bad news to consider. This week, Doug Porter, deputy chief economist at BMO Capital Markets, issued a report with a table that ranked the top 10 large metropolitan areas, nationally, that have seen the highest increases in unemployment in the past five months. Nine of the 10 are in Ontario. What's more, the province's jobless rate has surpassed that of Quebec for the first time in at least 30 years.
In the past four years, Ontario has lost fully one-quarter of its manufacturing jobs - a drop of 272,000 from a peak in the summer of 2004. "No other province has seen as broad-based a deterioration as Ontario has seen in the past year or so," Mr. Porter says of the economic engine that through most of the past decade contributed more than 40 per cent to the nation's gross domestic product. Today, he adds, "Ontario stands alone."
All of Canada is in recession, but almost anywhere is better than Ontario. Migration patterns are beginning to reflect the uneven downturn. Canada is undergoing a dramatic demographic reset.
Ontario's economic collapse provides an opportunity to test Richard Florida's ideas. The Creative Class is officially on trial:
Ontario's minister of economic development is in his office at the Whitney Block, just across Queen's Park Circle from the provincial legislature. Michael Bryant is a rapid-talking lawyer with the build of a bantamweight (he is a recreational boxer) who had a high-profile run as the province's youngest attorney-general, a shorter sprint through aboriginal affairs, and was handed his current portfolio in a cabinet shuffle last September.
There was little time to get acclimatized. In December, his department was the unhappy recipient of a woeful research report on the economic impact of the Detroit Three. Worst case - if the U.S. auto manufacturers cease production here - employment in Canada will contract by 323,100 jobs, more than 280,000 of them (85 per cent) in Ontario. ...
... Mr. Bryant wants to make one thing clear. "People say are you going to prop up the 1972 version of auto. No. We're not doing that. Are you going to assist auto in transforming itself? That's the reset that we're trying to participate in." ...
... To understand Mr. Bryant's thinking, it's important to know that since taking on the portfolio he has spent considerable time in the company of two men: Richard Florida and Roger Martin, whom he calls "great tutors." The mentorship of Prof. Martin, dean of the Joseph L. Rotman School of Management at the University of Toronto, goes back some years: "Before I got into government, I was in his office and he was sending me books. It was the education of a young MPP."
Ontario is gambling that Florida is right and that his observations will translate into a reversal of fortune for the ailing province. Sean Safford might tell the Toronto brain trust that it is making a grave mistake and that Florida is a fraud. Even if the plan works, most of Ontario will be very disappointed with the results. As I work my way through the World Bank report about economic geography and development, I realize that one of the primary themes is that any sort of spatially balanced growth policy will fail. The choice for the unemployed in Sudbury, or perhaps even Hamilton, will be between moving to Greater Toronto or Greater Winnipeg. Toronto will continue to prosper, but the rest of Ontario won't like what the "reset" entails, dramatically greater brain drain.