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May 27, 2021 | Natural Resources are More than 50% of BC’s Economic Base. Surprised?

Stewart Muir is founder and executive director of the Resource Works Society, a Vancouver-based group open to participation by British Columbians from all walks of life who are concerned about their future economic opportunities. He is an author, journalist and historian with experience on three continents including a financial editor of The Vancouver Sun responsible for mining and markets coverage. Since Resource Works was established in 2014, the group has gained international recognition for its practical approach to the public challenges of responsible natural resource development and use.

An economic study shows that British Columbia’s endowment of natural resources remains a primary source of the province’s wealth. Neglecting the health of these industries would come at the cost of our standard of living.

suprised.jpegA population of 5 million could not efficiently produce all the products that are standard features of a modern standard of living – computers, smart phones, automobiles, medical imaging equipment, a wide range of books, movies and music, fresh year-round foods and more. There are also experiences – such as international travel – that would be impossible under a self-sufficiency model.

British Columbia’s standard of living depends on the value of the goods and services we sell to people and businesses living outside our province. Exports bring dollars into British Columbia that form the “economic base” of our province, and those dollars circulate through the economy as businesses and citizens purchase services from each other. Money flows back out of the province to purchase goods and services that we cannot efficiently produce for ourselves.

An economic base represents the dollars brought into the economy through the export of goods and services. Defining the major components of our economic base is important, because changes in the competitive health of any sector will have different impacts on our society depending on how much of our economic base that sector represents. This chart illustrates that B.C.’s international goods exports are still heavily weighted to our natural resource sectors:

BCExports-by-industry.png

In 2018, 74 percent of international goods exports were natural resource based. Exports of goods to other provinces would follow a similar pattern.

Attributing service exports by sector is more difficult. Some services exports – such as money spent by out-of-province tourists – is easily assigned to the tourism sector. Other services – such as the transportation, financial, insurance, legal and other professional services purchased to support the manufacturing of exported B.C. goods – need to be assigned to the goods-producing sector they support.

This is achieved using data from BC Stats’ Input-Output model, with some assumptions about how to assign values among the major sectors. On that basis, our best estimate of the relative size of the major components of B.C.’s economic base is provided in the following pie chart:

BCEconomicBase.png

The data illustrates several key points:

  • Considering service exports in addition to goods exports reduces the percentage attributed to the natural resource sectors, but it should still be clear that our endowment of natural resources remains a primary source of B.C.’s wealth. Neglecting the health of these industries would come at the cost of our standard of living, impacting all British Columbians.
  • “Gateway Services” are those that are involved in moving people and goods not originating from B.C. into and out of North America. Our location on the Pacific has made the Port of Vancouver and Port of Prince Rupert significant North American trading centres and have made Vancouver International Airport an important North American flight hub. The activities associated with these “gateway services” as well as the rail and road connections to them, account for a significant portion of B.C.’s economic base;
  • Other manufacturing (excluding natural resources and hi-tech manufacturing) also represents a significant portion of our economic base;
  • A final point should be made about real estate. Some people may be surprised at how small a portion of the economic base is accounted for by real estate. BC Stats data do show that real estate and home construction account for approximately 20 percent of BC’s GDP. The concept of the economic base, however, is different from GDP. GDP measures the output of the entire economy; the economic base measures the dollars brought into the economy through exports of goods and services. Real estate and construction, while a significant part of the domestic economy, is primarily the result of the incomes generated from the economic base and the dollars circulating within the domestic economy.

Excerpt from 2019-2020 economic plan, “A framework for improving British Columbians’ standard of living”. See the full report here.

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May 27th, 2021

Posted In: Resource Works

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