[LINK] "The Celebrity Economist"

[rfmcdonald]

Over at Toronto Life, Daniel Stoffman profiles Don Drummond, chief economist of the Toronto Dominion banking group and a man who has becoming an increasingly public figure thanks to his astute observations and predictions about the Ontario economy.

Anyone who watches national newscasts knows Drummond. He’s the bespectacled 55-year-old with greying hair, calmly explaining why the world economy is collapsing. By day, he heads a group of 14 economists headquartered in a busy suite of offices on the 21st floor of one of the TD Centre’s skyscrapers. He and his team have a knack for churning out controversial forecasts. In April 2008, they warned that Ontario was on the verge of qualifying for equalization payments (the definition of a have-not province); it became official only last November. Then, in February 2009, the day before Toronto was to release its draft budget, TD published a paper saying that soaring welfare costs would inflate the city’s 2009 spending by up to $70 million. Toronto officials were not pleased. TD’s estimate was higher than the city’s, and it called into question the accuracy of their forecast. Drummond’s team did it again in March, calculating that deficit spending would drive the national debt well above what the Harper government was pre­dicting. As is often the case with Drummond’s public pronouncements, it was front-page news.

According to Drummond, Ontario's shift from being the economic motor of Canada to merely the largest have-not province was inevitable.

Since leaving the public sector, Drummond has become increasingly drawn to urban and provincial issues. What he sees isn’t pretty. “The underlying economies of both the city and province have changed forever,” he says. Even when the current bust turns into some future boom, Ontario, he believes, will no longer be the economic engine and manufacturing powerhouse of Canada—or at least not in the ways we’ve come to expect. And with the province reduced to have-not status, Toronto will need to find a new role for itself.

Ontario and its capital city owe their long-standing predominance to Canada’s first prime minister, John A. Macdonald, who set up a tariff wall around Canada to increase the price of foreign goods, thereby allowing Ontario to create a manufacturing sector with no competition from the rest of the world. The result was that the other provinces had no choice but to buy Ontario’s manufactured products. When equalization was instituted in 1957, it didn’t hurt Ontario because every dollar that went out came back. Nova Scotia or Saskatchewan couldn’t take Ontario’s dollar and buy something somewhere else because of the tariff wall. Those happy (for Ontario) days are long gone.

The province’s other big economic advantage—low, subsidized electricity prices—is also gone. The energy industry has matured, and costs are now higher. “The key question is whether there will be enough supply,” says Drummond. Even the main bene­fit of the free-trade agreement—unfettered access to the vast U.S. market—is now in question because of physical and security bottlenecks at the border.

Towards the end of the article, Drummond recommends that Ontario and Toronto radically change their tax systems so as to clean up their finances and (in Toronto's case) reduce taxes on business, while the whole province should shift its economy into high value sectors, from the automobile industry to technology and (yes) financial services