The Yukon hasn’t got an economy.
It has money.
There is a difference.
An economy produces stuff.
Money buys stuff.
The Yukon buys a lot, but it produces almost nothing.
It churns out a little gold, a little salmon, a little art, a little tourism and, frankly, little else.
The economy, as it stands, is an illusion.
Contrary to popular myth, there is no hard-rock mining in the territory today. None. Zero.
And there hasn’t been an operating hard-rock mine in more than five years.
Before that, the most prevalent miners were shysters, people better suited to tapping a vein of paydirt in government than one buried beneath overburden.
That said, there is one active property — Minto, near Pelly Crossing.
There is a lot of optimism focused on this play (it’s not a mine).
The enthusiasm needs to be tempered.
It is a copper play, and with prices at US$3.45 a pound — in the mid ‘90s they hovered around 50 cents — there is much activity there.
The place is under construction — and it has been since 1999, when it was licensed.
Nevertheless, it could be operational, perhaps as early as next year.
But there’s also talk about a slowdown in the US economy, and it is the second-largest copper consumer next to China.
Should the American housing market crash, and there is a lot of rumbling about that these days, most analysts expect copper prices to drop, and with it the fortunes of the Minto property because it is a fringe mine with high operational costs for things like power, wages and worker’s compensation premiums — which, by the way, are scheduled to rise significantly next year.
So nothing is certain.
But, in the last four years, metal prices have been exceptionally strong, bolstered by natural disasters and a white-hot Chinese economy.
It must be noted, again, that no mines have opened to capitalize on that situation in the Yukon.
Despite all the hype, mineral exploration in the territory has been sluggish as well.
Since 2003, mineral exploration totaled $88.9 million (excluding this year, in which final figures aren’t known).
Last year, it barely topped $50 million, still below what it was in the mid ‘90s, and that’s without indexing to inflation.
As a percentage of the Yukon’s GDP in 2003, mineral exploration was one per cent — almost nothing.
By 2005, amid unprecedented mineral prices and demand, it was still only 3.6 per cent. Just a smidge more than nothing.
There’s much crowing, but little to be proud about, especially considering that across the border in the NWT mineral exploration was measured in hundreds of millions of dollars.
Oil and gas demand was through the roof over the last four years.
Natural gas prices jumped 16.4 per cent between 2003 and 2005.
So, how many gas dispositions has the Yukon government issued in the last four years?
None. Zero. Nada.
So, if we produce nothing, what’s paying the bills?
There are 131 federal and territorial employees for every 1,000 inhabitants.
That’s a lot.
In fact, it proves the Yukon is exceedingly good at bureaucracy — that ratio is the highest in Canada.
The money comes from Ottawa.
Of the Yukon’s annual revenue, 84.6 per cent comes directly from the federal government.
Between 2003 and 2005, the Yukon government spent $1.8 billion in federal transfers.
In fact, federal transfers increased $209.5 million in that period.
And, Finance Minister Dennis Fentie was exceedingly adept at spending that federal largesse.
Yukon spending as a percentage of GDP was 47.1 per cent in 2003. It rose to 54.7 per cent of GDP by 2005, an increase of 7.6 per cent.
Fentie excelled at it.
Yukon’s spending, as a percentage of GDP, was higher than any other province and territory in Canada.
Every month, the payroll of federal and territorial employees exceeds, by some estimates, $60 million.
That’s money that is spent, for the most part, in Whitehorse.
So, let’s be clear: Over the last four years, the Yukon has produced paper — MOUs, studies, reports, briefing notes, funding requests, and little else.
That’s not an economy. It’s a bureaucracy.
And it’s expensive. And, in the last four years, it has expanded.
Is it sustainable?
It is a dependence — an addiction, like any other.
And it makes the territory extremely vulnerable to federal cutbacks, like the $1 billion announced this week.
That is, the largesse can end on a whim from afar.
But, while it lasts, the bureaucracy consumes a lot, which is why you’ll find big-box retailers springing up like mushrooms.
Better still, a bureaucracy manages itself — heck it grows all by itself, if a premier nurtures it.
But don’t kid yourself, it produces nothing on its own.
Except the illusion of an economy where none exists.
And that’s useful, because it allows a politician to claim success, when all they’ve done is sign billions in cheques.
And, frankly, anyone can do that. (RM)