Government in the Territorial Economy
Doug McArthur
THE ROLE OF GOVERNMENT IS critical in determining the overall shape and structure of the economy. Not surprisingly, this matter was central to many of the deliberations of Yukon 2000.
Most discussions about the role of government start with an examination of the role of markets, and of the private sector as the primary participant. The private sector is generally accepted as the leader in matters relating to business, and it is recognized that both opportunities and constraints are largely determined by market conditions. Yukon citizens generally seem to appreciate the market disciplines under which business must operate, and they are aware that market conditions-particularly national and international market conditions-are difficult to alter.
However, Yukon 2000 has revealed that Yukoners are also concerned about letting market forces be the sole determinant of their economic future. Participants cited numerous economic problems-instability, lack of diversity in economic activity, limited development in rural areas, gaps in investment financing, limited participation in the economy by certain groups, income inequality, conflicts in the use of resources-and expressed the view that these cannot be addressed unless market forces are channelled to at least some extent.
Mixed Economy
Yukon people accept that theirs should be what is often called a "mixed economy", with decisions about the respective roles of the private and public sectors taken on relatively pragmatic grounds. Although some of the early Yukon 200u forums suggested that there might be considerable disagreement about the general role of government in the Yukon economy, it later became clear that Yukoners are relatively non-dogmatic in this matter. Part of the reason seems to be a recognition that the Yukon economy is itself a complex mix of activities, only some of which are of the usual market variety. Another part of the reason seems to be that Yukoners view government as an important economic institution in its own right. There are very few illusions about the ability of the Yukon economy to function without active government involvement.
Nevertheless, important questions remain about the responsibility of government in specific cases, and about the means government should employ in fulfilling its responsibility. These questions, which are often very complex, arise because of differences about goals, priorities, and the effects of particular government action.
Economic Planning and Government
Economic planning is a matter about which many people seem to feel uncertain today. Although the need for planning is often expressed-due, perhaps, to the complexity and intractability of many economic problems-industry and government are skeptical about whether such an approach can be made to work. The problem is not whether planning is needed or desirable, but whether an acceptable approach-one that ensures that competing interests are reconciled with economic reality-can be devised.
The Yukon government initiated Yukon 200u æ an explicit exercise in economic planning and made it clear right from the start that it recognized widespread concerns about the role of government. Early on, an effort was made to engage the larger Yukon community, with the primary source of information and ideas being the participants in the various forums and conferences.
The government emphasized two points essential to the success of the undertaking. One was that the government intended to be only a partner in the process; widespread participation from a general cross-section of Yukon society was a primary goal. This participation was encouraged through the organization of a large number of forums focusing on sectoral, community, and more broadly defined economic issues. In this regard, perhaps more than any other, Yukon 2000 can be seen as unique in terms of economic planning.
The second major focus was on consensus. The government leader (and minister responsible for Yukon 2000) stated at the outset that an important purpose of the initiative was to identify areas of agreement about goals, needs, and measures that can and should be taken. He stressed that government can only be part of the solution to most problems and that very little can be accomplished without general agreement and support.
The attempt to realize a consensus on major issues appears to have been relatively successful. Participants in each of the conferences repeatedly acknowledged the extent to which understanding had been advanced and general agreement reached on the required course of action. Still, it remains to be seen whether apparent agreement in many areas will stand the test of time.
There are a couple of areas where a relatively enduring consensus seems possible. The first is economic planning. Judging from the reaction of participants in the conferences and other forums, there is now widespread agreement that government sponsored planning of the participatory type embodied in Yukon 2000 is useful, at least to help people understand one another and to identify common goals. The second area of agreement concerns the issue of economic leadership. As Yukon 2000 progressed, the need for leadership and action by government was increasingly emphasized. No doubt part of this is recognition of the fact that the high dependence on government employment, purchasing, and resources makes it inevitable that governments will play a critical role. But part of it also appears to reflect a recognition that many of the goals identified will not be attainable without government leadership and initiative. Whatever the explanation, one of the enduring results of Yukon 2000 is that people will be more demanding of their government and quicker to evaluate its performance in terms of the economic goals established during the course of the exercise.
Economic Instability
A continuing focus of concern throughout Yukon 2000 has been the problem of economic instability. Instability is most generally attributed to the dependence of the economy on mining, tourism, and government, and, in particular, to the volatility and unpredictability of international markets for minerals. Possible government action to counter, or at least reduce, this instability has been explored extensively in Yukon 2000 deliberations; however, the general conclusion appears to be that government can do very little to offset the fundamental instability of mineral markets. In fact, based on past experience, it seems government will be relatively ineffective at even predicting cyclical swings.
Some participants did suggest that government should place less emphasis on mining when devising policies and programmes. Others wondered what difference this would make, and still others questioned its wisdom, given the importance of mining in the Yukon. The most widely supported solution to instability appears to be diversification of the territory's economic base. Interestingly, the majority of suggestions as to how this might happen call for government action-either directly or indirectly. The most commonly emphasized approach involves import substitution, whereby reliance on imported products is reduced in favour of locally produced goods. Government purchasing is seen as one way to achieve this, particularly when Yukon resources can be used to produce the goods in question. Decreased dependence upon imported energy is another approach, although there appears to be less general agreement here about the role government should play in realizing this objective. Subsidies to support conservation and the further development of hydroelectric generating capacity appear to be widely supported, although their effectiveness has yet to be determined.
A general concern about government measures to diversify the economy involve their future reliability. The scope of private" sector initiatives in response to such measures is likely to be determined by government's commitment to such measures over the long term. It is not yet clear whether Yukon 2000 has contributed anything to resolving this problem, although many participants expressed a sensitivity and concern about it.
Equality and Participation
It is apparent that Yukoners are concerned about opportunities for participation in the economy and the extent to which opportunities are fairly shared. Government is almost universally seen as instrumental in achieving these goals. However, it is also clear that people see this as an extremely complex matter, one not necessarily achievable through simple and conventional solutions. One dimension of this is the complex nature of the Yukon economy and the "mix" of productive activity. Another related dimension is the existence of an Indian economy, with its own unique institutions and patterns of participation. It is clear that the Indian economy will increase in importance in the future, especially with the settlement of land claims and the development of new institutions.
Notwithstanding the complexity of the economy, it is clear that there is widespread agreement that the extent and quality of participation of Indian people, women, rural people, and the disabled should, and must, be improved. There is also agreement that this must be a co-operative enterprise, involving the traditional private sector, organizations representing the groups identified, and government. However, there is a need for considerably more work before generally acceptable approaches can be implemented. For example, Indian people clearly wish to play a larger role, but still have a considerable amount of their own planning to do. Affirmative action programmes, development of Indian institutions to undertake training and investments, and increased roles and powers for Indian governments are just some of the measures being explored. None of these are achievable without deliberate initiatives on the part of the federal and territorial governments. But exactly what these should be and how they should be devised remains uncertain and will have to be resolved in the future.
A similar situation appears to exist with respect to women and the disabled. There was widespread agreement that opportunities for participation in employment and business need to be improved, and government is being asked to upgrade its own performance in this regard. But beyond this, it is not apparent that agreement has been achieved on how to get the private sector to respond, and on what role governments should play in influencing or directing the private sector.
Investing in the Economy
Nothing is so contentious as government investment in the economy. Fears about government control, unfair competition, and waste and inefficiency almost always come to the fore when the matter is raised. Yukon 2000 has been no different in this respect. Nevertheless, the various proceedings indicate considerable support for judicious but active participation of this sort. For example, government investment in such things as parks and transportation facilities are seen as essential to realize the potential existing in the tourism sector. And it was frequently noted that another goal, greater Yukon control of the economy, may not be possible without some government ownership, at least on a joint-venture basis. The new government owned Yukon Development Corporation was frequently suggested as a vehicle for capitalizing on opportunities that might otherwise be missed by the private sector, although most participants agreed that joint ventures with other Yukon investors is the best approach. In general, there appears to be a belief that strategic investments by the public sector, in pursuit of the goals articulated in Yukon 2000, will be important in the future.
Resource Development
The Yukon economy is highly dependent upon natural resources. Questions about the use of resources and the role of governments in determining such uses are controversial. It appears that the concept of resources as a public endowment is generally accepted and that, in the final analysis, government must take responsibility for sustainable and environmentally sound renewable resource developments. There is less clarity about the role governments should play in conflicts over the use of particular resources, but a strong preference for participatory mechanisms in which users are assigned an active role. However, it is unlikely that Yukon 2000 will contribute significantly to the development of new mechanisms in this area. The newly established land-use planning process, the negotiations on Indian land claims, and the gradual devolution of federal responsibilities to the Yukon government will be much more important, with the exact role of each level of government remaining quite uncertain for some time yet.
Capital Financing
Many of the participants in Yukon 2000 identified the failure of private financial institutions to meet the financial needs of business as a matter of considerable importance. Numerous suggestions were made for the creation of new financial institutions in the Yukon, most involving government in one form or another. In many other jurisdictions, government has acted to support new financial institutions, although such action has been questioned, particularly where direct government ownership is concerned. It is apparent that private financial institutions have not served the Yukon well. It is not so clear whether any consensus has developed about the role government should play in addressing this matter. Developments in this regard will be of considerable interest to those looking for an indication of the future role of government in the Yukon economy.
Conclusion
Yukon 2000 has, among other things, proved to be a useful way for people to explore collectively the role that government might play in reaching their economic goals. It has also established that people can work together effectively to formulate strategic directions for the economy and to articulate expectations of government. For government and other major participants in the Yukon economy, a critical stage has been reached. To fulfil its promise, Yukon 200v must now move in the directions agreed upon by the participants.
Doug McArthur is Associate Professor of Economics at the University of Regina.