Quote:
Originally Posted by ssiguy
The auto sector {or any manufacturing except food} maybe a foreign concept in the West but it and especially the auto sector is crucial for Ontario and as goes Ontario so goes Canada. Economically Ontario is the elephant in the room and you cannot have a prosperous nation without a prosperous Ontario, it simply isn't possible.
Some would say that Canada has done better than most since the recession but that was due strictly because of high commodity prices. Now that commodity prices have tanked other sectors must fill in the gap and that means manufacturing.
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Manufacturing is a big part of Canada's history, but it's not the way forward. Every developed country has seen at least some decline in manufacturing. There is a fair degree of variation, but the story is ultimately the same.
The UK saw a near-total collapse of its manufacturing sector during the Thatcher years. Some regions were devastated, but ultimately the economy adapted, new sectors opened up, and the economy boomed. Manufacturing is not a prerequisite for prosperity.
Germany has maintained manufacturing output in some high value added industries, but overall employment has slowly declined as German companies have opened factories in more eastern EU countries. You could argue that East Germany helped prevent the decline in manufacturing as labour costs in that part of Germany are significantly lower.
The US has seen manufacturing employment fall precipitously, yet output has grown. There have been huge productivity gains, but mostly from automation. They also have the southern states with relatively cheap wages.
Canada doesn't really have a region with significantly lower than average wages. That is going to make it harder to compete with the US going forward.
Even if we were to artificially force manufacturing to stay in Ontario, labour costs are just too high. Automation will be the name of the game if manufacturing recovers in Ontario. The jobs associated with manufacturing are
never fully coming back. Rather than put our eggs into one basket in a sunset industry, we might as well retool the economy towards the future.
The future is not manufacturing. The future is in high tech, biomedical, etc. We will continue to become more and more of a knowledge based economy as time goes on. It's a natural transition as an economy develops. Resisting this transition is going to hurt growth, not help.
That being said, there is a place for manufacturing in Canada. High value added manufacturing, in fields like aerospace will continue to be important. If the long term trend has energy prices rising, manufacturing will slowly move to areas with lower transportation costs, nearer to markets. As well, as poor countries continually converge with developed countries, the difference in labour costs will become less relevant, and manufacturing will locate to areas with the highest human capital.
In the short term manufacturing will decline. The long term outlook looks a little bit brighter. Government policy can slow the bleeding, not stop it. There is no point wasting taxpayer money prolonging the inevitable.