from Hacker News

Canada forgot to plan for its future by leaning on oil and the loonie

by gabbo on 1/12/16, 1:41 AM with 165 comments

• by 3pt14159 on 1/12/16, 3:04 PM

  Canada didn't forget anything. We have a diverse economy with common sense measures like reducing our net debt to GDP, while keeping a fully funded retirement pension fund (CPP, unlike SS, actually invests in the public market).

  Even the way we do provincial transfer payments is sane. While one industry is booming (Oil, manufacturing, tech) other "have not" provinces get payments through the federal government. This brings a measure of stability to the system.

  No rational economist can look at the situation in Canada and say that "Canada forgot to plan for its future by leaning on oil and the loonie" it's a ridiculous statement.

  Criticizing Canada's action on climate change is warranted, but our federal economic policy has been quite level headed.

• by plehoux on 1/12/16, 2:10 PM

  "If the Canadian government is serious about long-term growth, it must focus on how it can build cities and policies that attract people and businesses. But we have not been headed in the right direction on this front."

  YES!

  I live in Quebec city and there is a rampant idea in the population that the status quo is the only way forward. More petroleum exploration, larger highways, big government mining investments/subsidies initiative like 'plan Nord', big fat houses in the suburbs that you can spin after 2 years for 20% gain... we never allow ourselves to think outside the box.

  I'm glad the US is 'embracing' successes like Space X, Tesla, Uber, AirBnb, ... to really show us what innovation looks like. You CANT innovate if your mind live in the status quo.

  With the $CAD drop and the rise of remote work we should also expect a massive brain drain... although it's anecdotal, my brother just accepted a job (remote from Quebec) for a US-based company at double the salary he would have got from a local one. That can't be good for locally-made innovation.

  Refs: http://www.petrolia-inc.com/en/corporate/projects/anticosti-... http://plannord.gouv.qc.ca/en/

• by HorizonXP on 1/12/16, 2:52 PM

  I've been saying this to my circle of friends and family for years. The stark contrast between Toronto and Silicon Valley is mind-numbing. And the short-sightedness of our politicians and society is infuriating. I cannot understand why people think it's ok to rely on banks, resource companies, and manufacturing to hold up our economy. We need to invest in growth sectors. It may not create a ton of jobs immediately, but the potential payoff could save us. If you're not growing, you're dying.

  I'm reaching the point where I need to hire developers soon. I'm worried about what kind of talent I'll be able to find, simply because most people worth their salt are already employed, or work in the Bay.

  Remote is an option of course, but it adds a lot of complexity that most early-stage startups can't manage well.

  I'm seriously considering going back to SV.

• by patrick_99 on 1/12/16, 1:51 PM

  It seems like the effect of the low dollar is already helping the tech sectors. Companies like Shopify make their money in USD while salaries are a bargain. American companies like Amazon are expanding their offices in Toronto and Vancouver. The brain drain is real though. I feel like there's a problem when police officers make more than most software engineers.

• by cmrdporcupine on 1/12/16, 2:16 PM

  We had a gov't for 10 years full of "Calgary-school" (Canada's right-wing ultra free market economic ideologues coming out of the University of Calgary econ/poli-sci program). They were overwhelmingly driven by an oil and gas agenda. From the gov't down to mutual fund investors, everyone was treating our economy like a one-trick pony, all oil and gas.

  If you listened to people talk, Alberta's oil sector was supporting the whole economy. Snarky message board comments from people from out west (where I'm from originally, BTW) making comments about Ontario being a "have-not" province being propped up by the superior entrepreneurial hard-working western oil sector.

  Meanwhile through all of this as a % of GDP, exports in manufacturing were _still_ triple those of oil and gas. Ontario's beleaguered auto-sector was still the primary export in the country. Followed by agriculture and other sectors.

  I said it at the time, and now it is obvious. They were lying through ideological teeth, and telling a story to the country about resource driven prosperity which was factually incorrect. And it has led to our country as a whole inheriting many of the problems Alberta as a province has been plagued with for decades: highly cyclical, with a political culture verging on corrupt, and environmentally dirty dirty dirty.

  And I'm afraid the new gov't is only half-heartedly interested in remedying any of this.

  Ontario and Quebec could be the "Germany of North America"; the deliberate assassination of our manufacturing and engineering sectors by everyone from federal gov't officials to fund managers has been disgusting. We have a heavy infrastructure debt, are saddled by decades of ideologically-driven mismanagement, and an ineptitude at actually getting anything done.

• by guiomie on 1/12/16, 3:20 PM

  The scary part in my opinion is: "Housing is the only thing keeping the Canadian economy afloat."

  This more an anecdote than an argument, but I know quite a few people who can barely pay their mortgage or have crazy margin debt (with mortgage) in Canada. I doubt their situation will get any better soon. There is this mentality around here that owning a house is a must or you are some kind of loser.

• by Almaviva on 1/12/16, 6:25 PM

  I've seen enough agreement that I think it's worth pointing out. The dating market for men in Toronto is terrible, at least if you're not in the mainstream attractive subset: over 5'10, have all your hair, have easy social charm and confidence. I don't know exactly why this is but anecdotally women are extremely selective and have it ingrained deeply to never settle for anything (and they're not happy about not finding "good enough" men either).

  I can live with lower pay but after years of nothing but female rejection I'm really tempted to run to the US just for this reason. (Again, only anecdotally, but the way I'm treated by women in social settings is night vs day anywhere but Toronto.)

• by S_A_P on 1/12/16, 2:14 PM

  I was recently in Calgary. I found the people there friendly, polite and nice just like all the Canadian stereotypes suggest. I would love to live up in Canada, but HOLY HELL is it COLD! I couldnt deal with that. I was just in Calgary, I cant imagine Edmonton, Red Deer or the like. Is it just as cold on the east coast? I would imagine it has to be.

  Signed, Someone from Houston, Tx

• by gabbo on 1/12/16, 7:57 PM

  It's crazy and upsetting to watch Canada squander the talent its great engineering schools produce, especially given the low cost.

  I left Toronto 8 years ago for the US but have close ties to home and keep regular tabs on the labour market. Even at 1:1 CAD:USD, before factoring in increased cost of living in Toronto (vs. where I am, which is not SF), I'm making close to double what I'd hope to fetch back home. If I really bust my ass and kill it where I am, the disparity is only going to grow.

  Once you account for other factors like the increased cost of everything and the general rarity of high-paying tech jobs, returning to Toronto feels like too much of a risk: even if I were to strike relative "gold" and make $120k-140k+ CAD as a senior engineer (a far cry from what I get how), what happens when I move on to something else? A close, highly-talented friend of mine has one of those jobs but feels trapped and doesn't even know where else he could go.

  I love that the Toronto startup scene is growing and maturing and I have friends who are really working to, but I fear what's going to happen when funding in the US begins to contract. SF, NYC, and Seattle all have profitable "anchor" employers which will continue to bid for talent even when startup funding won't sustain high tech salaries. Toronto has small branch offices of American companies and some banks (I'm skeptical about the latter). Is there much else?

  As far as I can tell there just isn't as much good work. I want to go home some day, but as someone who was fortunate enough to land a good tech job in the US: returning is a massive step down in pay for: fewer choices of work, a more fleeting labour market, a less ambitious environment, an expensive city with overpriced real estate, and a public transit/commute crisis which might not get materially better before I retire. I really do love the place though.

  tl;dr I'm an exceptionally fortunate Canadian spoiled by great career prospects in a major American tech hub and find it hard to justify returning home :(

• by graeme on 1/12/16, 4:45 PM

  I run an online business in Canada (both products and services). I virtually never take Canadian clients now, since the exchange rate has shifted markedly, and Americans tend to view $100 USD the same as Canadians view $100 CAD.

  I know a few others with cross border operations and they're also shifting towards US markets.

  I noticed product sales to Canadians also dried up, as my products are now 40% more expensive.

• by tahssa on 1/12/16, 5:24 PM

  It's more like Canada is sticking to the same old plans and is failing to adapt to a future where its economic cycles no longer work.

  Canada has what's known as Dutch disease. When the loonie is strong the natural resource sector booms since they get more value in return for selling these assets, however the services and manufacturing sector tend to fall off a cliff since labour cost become too high.

  Historically the Ontario govt has banked on this cycle. When the loonie rises and Ontario crashes then govt spending increases to compensate. When the loonie crashes and employment increases, tax revenue increases and then they payoff the debt from the crash. Ditto can be said for Alberta using the opposite scenario.

  The federal tax transfer system adds additional funding mechanics to level the playing field between provinces.

  That all said, everything has become very different. Oil has crashed due to external forces and the loonie has crashed too. That's fine, but I think govt is trying to figure out why the manufacturing services sectors are not gaining traction as they historical would (which is because other countries are now more equipped to compete within Canada and are still much cheaper... Example Mexico has taken all the auto manufacturing work). At the same time housing prices are 30 to 50% overpriced and the energy sectors nose dive is not a typical down cycle, it's a long term structural change.

  I'm probably wrong, but my spidey senses are telling me that Canada is going to go through a rough time and will continue to do so until the govt models these structural changes to compensate. If the Canadian govt jumps into a thoughtless spending spree (which is the current plan) using the old economic model then in 5 to 10 years Canadas outcome could be dire.

  [Edit: removed "Greece 2.0" as it highlighted aspects that could not compare to Canada's circumstances.]

• by dang on 1/12/16, 7:27 PM

  Diversification of Canada's economy so that it isn't so dependent on commodities has been talked about for years, and successive governments have long been blamed for not doing it. That makes it worth asking whether governments have the power to do this in the first place. What examples are there of it having been done successfully?

• by Tiktaalik on 1/12/16, 6:03 PM

  I accept the premise that the government spent too much time and effort focused on the resource sector, but this article, like all I see on this subject, is extremely vague on what exactly the government should be doing to create a better environment for tech companies in Canada.

• by sushirain on 1/12/16, 9:16 PM

  The article mentioned brain drain, but more specifically, Canada let Hinton, Lecun, and Sutskever go... :)

• by prolepunk on 1/12/16, 3:01 PM

  Boo-hoo.

  Same newspaper that endorsed Conservatives, whose economic policies for the past decade was to put oil sands above everything else, the government under which we saw Canada withdrawing from Kyoto and generally have terrible environmental record, is now having seconds thoughts when oil tanked as well as other commodities tanked dragging loonie with it.

  Boo-hoo, sir, boo-hoo.

  Refs: their endorsement -- http://www.theglobeandmail.com/globe-debate/editorials/the-t...

• by she_moves_on on 1/12/16, 5:26 PM

  > No rational economist can look at the situation in Canada and say that "Canada forgot to plan for its future by leaning on oil and the loonie" it's a ridiculous statement.

  Many "rational economists" have made that statement. Even the head of the Bank of Canada himself has suggested it is regrettable that our currency is so tied to oil. He can't openly criticize gov policy and so that's about as close as Poloz can get to condemnation.

  Classic hacker news comment. "I must disagree with whatever the post says and declare that no rational person could disagree with my criticism."