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Dependency and federal aid in Canada's Arctic

Heather Exner-PirotEye on the Arctic

Nunavut is a wealthy region. With a GDP/capita of $53,506, if it were a country it would easily rank amongst the top ten richest – ahead even of Canada, which using the same formula has a GDP/capita of $47,605.

But of course, Nunavummiut themselves are not wealthy. They are more likely to live in poverty than any other Canadians, and have the lowest human development ranking in the country. This is because most of Nunavut’s income does not come from employment, profitable businesses or even resource development. It comes from the federal government.

Indeed, 92 percent of the Government of Nunavut’s revenue comes from federal transfers, compared to 9.1 percent for Newfoundland at the provincial low end, to 39.9 percent for PEI at the high end. Yukon and NWT stand at 71.7 percent and 76 percent respectively. This amounts to, as they say in the development biz, a “high level of aid dependency."

Money transferred from Ottawa to Iqaluit is not, technically speaking, aid – citizens in Nunavut pay taxes and transfer royalties to the Crown, after all – but comparisons between Nunavut’s and Africa’s situations are unsettlingly easy to make.

Dependency in the North

Roger Riddell defines aid dependency as “the process by which the continued provision of aid appears to be making no significant contribution to the achievement of self-sustaining development," while Deborah Brautigam and Steven Knack identify it as "a situation in which a government is unable to perform many of the core functions of government, such as the maintenance of existing infrastructure or the delivery of basic public services, without foreign aid funding and expertise.” Sound familiar? The problem in Nunavut, and, to a lesser but equally problematic extent, Yukon and NWT, is not that the federal government is ‘wasting’ billions of dollars in transfers to the North. The problem is that the money it sends does not and cannot provide reasonable rates of literacy, employment, health outcomes and educational achievement. Because the high level of federal transfers and the culture of dependency it breeds is the problem.

Two prominent books have come out in recent years that highlight the pitfalls of dependency. One is Dambisa Moyo’s 2009 “Dead Aid," that looks at how decades and tens of billions of dollars of aid have not only failed to improve Africa’s well-being, but have exacerbated its poverty. The other, Calvin Helin’s “Dances with Dependency," urges aboriginal people to actively seek the self-reliance offered by economic and business development rather than settle for the welfare trap engendered by the current system. The two books have been controversial, and they are not without their faults, but their main message seems to apply very well to the North: that reliance on external funding will inevitably result in less self-sufficiency. This is because while the public sector plays a critical part in any society – infrastructure, law and order, and education being only a sample of the goods governments provide – there is a point when the public sector gets so big that it suffocates innovation, reduces incentives to work, and occupies parts of the economy that could otherwise, and more fruitfully, be filled by the private sector. In other words, you need to find a happy medium. Inasmuch as the long term objective of Nunavut, and many other indigenous communities and regions in the North, is to achieve a level of autonomy and self-determination, solutions will need to be sought, and produced, from actors other than the federal government.

Dependency in Practice

Two examples are worth mentioning here. The first is from an article written by Mary Simon in this month’s edition of Policy Options, in which she outlines a number of practical things the Government of Canada can do to put the relationship between Canada and Inuit on a stronger footing. The piece is eloquent, and in principle I have no problem with the suggestions she makes. Except that it is representative of a larger paradigm that sees the Government of Canada as the root, and solution, of the North’s problems. And I think it’s time to focus on a bigger picture. (For their part, Greenland’s government has released a vision for 2050 in which it aims to become independent of Denmark based on resource development and higher education.)

The second is regarding the failure to implement the 2006 Berger Report’s recommendation to make Inuktitut the language of instruction from grades 1-4 in order to improve attendance and performance in Nunavut schools, due largely to its massive cost of $20 million/year over ten years. Numerous critics have decried the federal government’s unwillingness to fund this program and Inuktitut bilingualism in general, including Mary Simon in the above-mentioned article. But I think the tragedy lays not in the fact the federal government is unwilling to pay for Inuktitut bilingual education. The tragedy is that the people of Nunavut are unable to pay for it themselves.

More Funding is Not the Solution

It is worth pointing out that Canada can afford the transfers it provides to the north and that this is not a complaint about the amount of money being sent to the North, which if it went any distance towards addressing the many socioeconomic challenges in the region, would be well spent. But increases in public spending do not seem to be improving anything. Writing in the Canadian Medical Association Journal in November 2010, Kue Young and Susan Chatwood pointed out, for example, that Nunavut’s per capita health expenditures are the highest in the world, with health care alone consuming almost 30 percent of the territory’s GDP. While Yukon’s expenditures are 1.3 times greater than the Canadian average, and the Northwest Territories’ is 1.7 times greater, Nunavut’s health spending is 2.5 times greater than the Canadian average, and still they have the lowest life expectancy and highest infant mortality rates. To compare apples with apples in the circumpolar north, Alaska’s health expenditures are only 1.2 times those of the rest of the United States, the northern regions of the Nordic countries are indistinguishable from the their southern regions, and Greenland’s per capita expenditures are a shocking 30 percent less than those of Denmark.

Proponents of increasing aid to the developing world (I’m looking at you, Bono) should be surprised, and sobered, to learn that subsidies to the tune of $34,000/person do not address the fundamental obstacles posed by poverty and dependency. It is a complex, frustrating, grind that can only be won in a long war fought by those who seek self-sufficiency and prosperity for themselves. You cannot buy development.

And Now For Something Completely Different

As the Tea Party represents the extreme right wing perspective on the public sector, believing that less regulation and government intervention is always the answer, pushing the free market hypothesis further and further out of the bounds of reality, so Nunavut embodies the left wing equivalent: the belief that more federal services and public funding in an economy that is utterly dominated by the public sector will ultimately lead to development when it has so clearly failed to do so in the past.

Someone once famously defined insanity as doing the same thing over and over again but expecting a different result. Looking to the federal government as the solution to the North’s problems, after four decades of dependency and underdevelopment, falls under that category. Federal funding must start to be seen as a last resort, not a starting point, in devising a path to self-determination and prosperity in the North.

This story is posted on Alaska Dispatch as part of Eye on the Arctic, a collaborative partnership between public and private circumpolar media organizations.