Stock markets this week reminded Canadians that hewing wood and drawing water are not as profitable as they used to be. Canada needs to get back into the manufacturing game and the innovation game in order to ride the wave of economic recovery.
The euphoria was palpable on Wall Street as stock prices rose to the highest levels ever seen. The Dow Jones Industrial Average, reflecting prices of 30 blue-chip U.S. stocks, rose above 16,000 for the first time ever; the S&P 500 index, reflecting a wider range of US stocks, briefly reached above 1,800 for the first time in its history.
Canadian stock prices were also strong but the euphoria was more muted. The Toronto Composite Average, at about 13,500, was still well short of the 14,250 level it reached in February 2011.
Investors in both countries were apparently counting on the U.S. Congress to approve the nomination of Janet Yellen as the new chair of the Federal Reserve Board.
She seems inclined to continue the U.S. central bank's practice of buying assets from banks at a rate of about $85 billion per month. Investors love the stimulative effect of the program for both Canadian and American companies.
But Canadian stock prices have risen a great deal less than those in the U.S. The difference is commodities. Canada relies heavily on production of gold, oil and base metals to employ its people and finance its governments. U.S. industry also digs and drills, but a much larger share of U.S. industry builds airplanes, shoots movies and writes software. Commodity prices have declined from their 2011 high points, and Canada is feeling the effects -- most dramatically in stock market prices.
In New York, shares of Boeing soared to new heights after the aircraft maker reported orders for 367 planes during the Dubai air show. Meanwhile in Toronto, stock prices of oil producers sagged along with the world price of oil.
Prime Minister Stephen Harper and his government have focused their efforts on helping the oil industry. A procession of ministers has visited Washington in the hope of persuading the Barack Obama administration to approve the Keystone XL pipeline.
Celebrities complaining about the Alberta oilsands have been sharply rebutted. Alberta oil producers and the government are keenly conscious of the wide gap between the oil price at the U.S. Gulf Coast and the prices realized by Alberta producers on account of the transport costs and the glut of oil in Alberta.
Narrowing of that gap would benefit the producers and the governments that draw revenue from them.
But the market is signalling commodities are not enough.
While Mr. Harper and his ministers were stoutly defending the oil industry against its environmental critics, Canada's high-tech industry suffered the rapid decline of BlackBerry, the former Research in Motion. Caterpillar closed its locomotive plant in London, Ont., and moved the work to Muncie, Ind.
The big picture was captured by Statistics Canada's report on Canadian economic output by industry for August this year. While output of all industries grew by two per cent from the previous August, mines and oil and gas extraction grew by 7.6 per cent and manufacturing shrank by another 2.1 per cent, continuing the trend of recent years.
This is the trend that has taken Canada out of the fast lane to economic expansion and tied the country's prospects to commodity markets, where prices have declined.
Mr. Harper and his colleagues should put as much effort into supporting the industries of the future as they do into pipelines and oil production because Canada needs both.
Boeing's experience at the Dubai air show suggests a robust economic expansion is taking shape out there for countries and industries that can offer top quality manufactured goods.
If Canada sits here waiting for someone to bid up the prices for our gold, our oil and our coal, we may miss the boat.