Ontario's One Cylinder Economy

The reluctance of firms to invest in Ontario’s factories reinforces the ongoing slump in manufacturing exports and limits its capacity to grow in the future. [...] Even with the investments related to retooling some automobile plants, investment in this sector in Ontario remains well below its average of $3.4 billion in the three years before the recession, reflecting the absence of greenfield invest- ments in new automobile plants (the all-time peak of automobile investment in Ontario was $4 billion in each of 1997 and 1998) (Statistics Canada, 2014: CANSIM [...] Another sharp reduction will occur in the second half of 2017 according to the Bank of Canada, when automobile assembly in Canada is forecast to decline 10% as GM phases out one shift at its CAMI plant (on top of the transfer of production of 72,000 Camaros from Oshawa to Michigan late in 2015) (Bank of Canada, 2017: 16). [...] Historically, unemployment was always higher in Quebec than in Ontario, by four percentage points in the 1980s and 3 points in the 1990s, although the gap temporarily narrows during a recession, when Ontario’s greater depend- ence on exports to the United States leads to more unemployment than it does in Quebec. [...] Ontario’s net provincial government debt as a percentage of GDP rose to 39.9% in fiscal 2015/16, the third highest in Canada (Lammam, Palacios, MacIntyre, and Ren, 2016: 4) Most of this higher debt reflected increased government spending, despite the absence of the external shock of a recession for eight years and the boom in Toronto’s housing market (Murphy, Emes, Clemens, and Veldhuis, 2015: iii