A Decade by Decade Review of British Columbia's Economic Performance
By historical accident, the last two new governments to take power in British Columbia did so at the start of new decades: the NDP in 1991, and the Liberals in 2001. Not surprisingly, it’s become popular to argue that one party’s ability to manage the economy was shown to be better than another’s, based on which decade apparently produced the best overall economic outcomes.
This exercise can sometimes cause confusion. For one thing – as we all know – statistics can tell quite different stories, depending on which data are used and how they’re presented. While focusing on top-line GDP growth is inadequate as a way to gauge macro-economic performance, there are a few simple steps that can allow us to get a clearer picture of how BC’s economy has fared over time.
The Business Council of British Columbia has prepared an analysis of key economic indicators in British Columbia over the 1980’s, 1990’s and 2000’s to provide more data and gain greater insights into longer-term trends. Also, and of particular importance, we examine per-capita measures of economic activity, which take account of changes in population. Lastly, in this report we compare BC’s economic record to that of Canada as a whole. Because world economic conditions tend to affect BC and Canada similarly, determining how BC did relative to the rest of the country can provide a better sense of the extent to which the province capitalized on the global economic conditions of the day.
We find that, in broad terms, the 2000s produced somewhat better economic results than the two earlier decades, although not on all of the measures considered. That said, even by the end of the 2000s BC still had a less productive economy than the country, based on comparing the level of output or real GDP per person.
Some highlights from the report:
GDP Growth: The strongest growth in total real gross domestic product was in the 1990s, with an average annual increase of 2.72%. The 1980s saw the weakest growth (2.12%), with the 2000s in-between (2.36%). Compared to Canada as a whole, economic growth in BC was slower in the 1980s and 1990s but faster than the national average in the 2000s. Increases in overall GDP are related to population change: when population growth accelerates, this tends to push up total GDP. BC's population grew faster in the 1990s than the 2000s.
GDP Per Person: GDP per person/per capita attempts to capture an important idea: the size of the "economic pie" per resident. It is the most widely used measure of changes in overall economic prosperity. BC posted the biggest gains in per capita GDP in the 2000s (on average annual growth of +1.2% per year), compared to +0.65% in the 1990s and only +0.41% in the 1980s.
Incomes: Real income per person is another key indicator of economic well-being. On average, it rose by 1.61% per year in the 2000s. Real income per person actually decreased in the 1990s. In the 1980s, it increased by slightly less than 1% per year. In all three decades, Canada enjoyed stronger gains in per capita income than British Columbia - although the gap narrowed significantly in the 2000s.
Unemployment: On average, the unemployment rate in BC fell over the three decades examined in the study. Unemployment averaged 11.48% in the 1980s, 8.87% in the 1990s and 6.63% in the 2000s.
Job Creation: The 1980s saw the number of jobs in BC rise on average by 1.91% per year. In the 1990s, job growth increased to 2.17% per year. Over the 2000s, it averaged 1.58% per year. Over all three decades, BC outpaced Canada in job creation. Like total GDP, job growth is also correlated with how quickly the population expands.
Business Investment: Private sector non-residential investment climbed by 0.81% per year in the 1980s, by 3% in the 1990s, and then by 5.33% in the 2000s. BC underperformed the country in the 1980s and 1990s, but in the first decade of the 2000s, BC registered stronger growth in business investment than Canada as a whole.
Fiscal Management: Measured as a share of GDP, the province posted small operating budget deficits (on average, equal to 0.8% of GDP) in the 1980s and 1990s. From 2001 to 2010, the operating budget moved to a small surplus (on average, equal to +0.35% of GDP). At the same time, the provincial government's debt fell slightly as a share of GDP over the three decades - going from 27.2% of GDP in the 1980s to 26.85% in the 1990s and 22.20% in the 2000s (again, on an average annual basis).
Exports: Remarkably, BC's exports of goods and services to other countries and other provinces combined, remained essentially unchanged, at 42-43% of GDP over the three decades. Export growth was strongest in the 1990s and weakest in the 2000s. BC has generally underperformed Canada in export growth over the past 20 years.
In sum, we can say that the 1990s were stronger for economic indicators that are more influenced by population growth while the 2000s were better for fundamental measures of prosperity and well-being that adjust for population growth. This review does not explore the reasons behind the changing economic circumstances across the decades, but we do note that as a small, open economy external circumstances (such as commodity prices, strength of the US and Asian economies, interest rates, economic conditions in other parts of the country) are important factors in BC’s overall economic performance. For this reason, comparing BC’s results for each decade against Canada’s is an important part of the review.
It should be noted that the three decade periods reviewed in this study are defined in the following consistent manner: 1981 to 1990; 1991 to 2000; and 2001 to 2010.