Staples Thesis Canada

Staples Thesis Canada-68
This won’t settle the debate, of course; the manufacturing sector continues to have a powerful hold on the imaginations of non-economists — and of politicians.But it’s still a point worth remembering: even the best of us can get things wrong.

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Innis was certainly right about boom-and-bust cycles in resource prices, but his solution — reduce the importance of the resource sector — doesn’t hold up very well.

Innis was writing in the 1930s and 1940s, and we’ve since learned more about how exchange rates work.

Indeed, you can take a typical staples thesis argument, substitute the word “manufacturing” for “resources,” and get a fairly convincing argument for why it’s dangerous to over-specialize in manufacturing. It’s also clear that the income generated by resource exports has been broadly shared, or at least as broadly as the income from manufacturing exports.

“The manufacturing trap” is as good a way as any to describe the fate of the former industrial heartland in the U. This was not inevitable, and much of the credit can go to Canada’s culture of governance.

More importantly, many of those “ifs” in the staples thesis narrative don’t fit the data.

Or perhaps it’s better to say that they fit too many data points, and not just the resources sector.

Perhaps more to the point, Innis is credited with developing the “staples thesis” of economic development, a class of arguments warning of the dangers of relying on natural resource wealth — “staples” — as a driver of economic growth.

The fact that the staples thesis was never developed in a formal axiomatic framework — this is why it’s called a “thesis” instead of a theory — was not considered to be a fatal flaw in Innis’ time, and it continued as a basis for an active branch of Canadian scholarship after his death in 1952.

In countries with weaker governance, resource revenues are usually expropriated by well-connected elites, but Canada’s political culture has avoided that.

To be sure, the income generated by (say) Alberta’s oil wealth during the last boom was not uniformly distributed across Canada, but it did show up as increased tax revenues for the federal government, and all households benefited from the increased purchasing power of the Canadian dollar.


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