Dispatches from the road: The Big Smoke
This is the first time I have visited Toronto for work since the onset of the pandemic. Every time I come here I am reminded of just how intertwined the Canadian economy is with its ‘capital’ city. Every time you pay a bank fee, download a Drake song, watch the national news, book an airline ticket, and a host of other activities, Toronto’s GDP ticks up a notch. This mostly doesn’t work in reverse which is why places like New Brunswick or Nova Scotia need to focus on nurturing its own export industries.
A few years ago I studied the meat processing industry on PEI and found that for every dollar of direct output at the plant, industry output in Ontario increased by 26 cents. Finance and insurance output related to the PEI manufacturing plant was higher in Ontario than on PEI. Transportation and related services output was higher. Wholesale margins were 4x higher. The meat processing industry on PEI boosted professional services output in Ontario by nearly a million dollars.
When I studied the shipbuilding sector in Nova Scotia with the Conference Board, the effect was the same.
Again that is not a bad thing. In any country you have concentrations of economic activity to take advantage of scale, etc. It just happens that in the Big Smoke that impact is more pronounced than many other countries.
Don’t forget the IT industry. Ontario generates more GDP from IT than NL, NS, NB, PE, QC, MB, SK and AB combined. Almost all of that GDP is created in the Waterloo-Toronto corridor.
Smaller cities are not really competing with Toronto any more than the mice are competing with the elephant for food. If you exclude Montreal, the Toronto CMA GDP increased between 2014-2018 by more than all other CMAs in Canada combined east of British Columbia. That is 30 CMAs - from Calgary to Halifax.
The bottom line is that Canada needs a strong Toronto economy. It accounted directly for 34% of national GDP growth between 2014-2018. It’s difficult to predict the ripple effects if the Toronto economy had stagnated over that period.
Many Atlantic Canadian cities are doing well by focusing on fundamentals, population growth, entrepreneurship, trying to nurture clusters of export-focused activity.
That’s the recipe for future success.
Tip o’ the hat to the Big Smoke, rots of ruck, as Scooby-Doo would say, in the future.
There is lots of opportunity to go around.