Atlantic Canada was a founding partner of the Canadian dream nearly 150 years ago. However, as Canada's economic centre of gravity shifts ever westward, the Atlantic region's economy risks becoming further diminished. The area's recent economic performance has been very uneven. With the premiers meeting in Prince Edward Island this week on the 150th anniversary of the Charlottetown conference, the question to be posed is: What can Atlantic Canada do to raise its game?
The Conference Board's How Canada Performs economic report card compares recent performance of the provinces with 16 advanced developed countries. Here, Newfoundland and Labrador has been a star performer, ranking third over all and received an exemplary "A-plus" grade. Like Saskatchewan and Alberta, the other two "A-plus" performers, Newfoundland has benefited from its strong natural resource base and high commodity prices.
For the other Atlantic provinces, PEI ranked near the middle of the pack among the 26 jurisdictions covered. PEI scored well on attracting foreign investment and employment growth, but its overall ranking was just 15th, pulled down by the highest unemployment rate and lowest income per capita in Canada. Nova Scotia and New Brunswick were close to the back of the pack and received "D" grades. Nova Scotia ranked 23rd and New Brunswick ranked 25th, second last over all, ahead only of France. Offshore energy production and ship building should help to boost Nova Scotia's performance in the near term after some lean years.
As mediocre as these recent results have been, the long-term outlook is even more sobering. The Conference Board's 20 year long-term economic forecast is based on the supply capacity of the economy and is guided by projected growth trends for three fundamental factors: demographics, private investment and productivity. Atlantic Canada's growth potential is slowly fading. No province is projected to generate sustained annual growth in real gross domestic product above 1.5 per cent from 2015 to 2035. In some cases, potential growth will be as low as 1 per cent annually.
The population outlook explains weak economic growth in most parts of the region. Only PEI is projected to have a relatively positive demographic outlook; its reputation as a retirement haven is expected to bring in more people than it loses. The other three provinces are expected to see their populations decline between now and 2035.
As in other parts of Canada, stronger productivity growth could help to offset the demographic impact of an aging population. But based upon past performance and absent significant changes to policy and behaviour, there is little reason to expect stronger sustained productivity growth. This will make it nearly impossible to sustain the current level of Atlantic Canada's public services, notably health care, without higher taxes.
To raise its game, policy and business reform would be needed on many fronts in Atlantic Canada, but we identify three priorities.
1. Improve productivity growth based on innovation.
Atlantic Canada could commit to developing and implementing a comprehensive, region-wide strategy to foster business innovation and boost productivity performance. Based on detailed analysis of the core elements of productivity, no stone should remain unturned as the region searches for every opportunity to create and build more robust growth capacity.
2. Attract many more immigrants.
Atlantic Canada could seize the opportunity to shift into high gear in terms of attracting new immigrants to the region. It could examine best-in-class practices elsewhere and how they might be adapted to meet the region's future population and labour force needs.
3. Streamline the delivery of government policy and services. Atlantic Canada remains a loose coalition of four separate provinces, each with its own agenda, focus, and areas of specialization – accompanied by a good dose of rivalry. Improving the performance of government could only strengthen the growth foundation for the entire region. This means better alignment on policies among the Atlantic provinces and with the federal government, better co-ordination and delivery of government services, and harmonization and elimination of regulatory differences and practices. All provincial services should be on the table – including health care, education and training, social services, and infrastructure.
These approaches do not mean the end of four separate political entities, but it does mean examining all opportunities to work together as one. The region cannot expect to do the same thing and get different results. In an age of globalization with a rapidly aging population, now is the time for Atlantic Canada to examine what is possible, and seize the opportunity.
Glen Hodgson is senior vice-president and chief economist at the Conference Board of Canada.