In March of 2022, as the Russian invasion of Ukraine was seriously escalating, the Premier of Newfoundland and Labrador promoted the oil extracted from the Newfoundland offshore as an alternative to Russian fossil fuels. Premier Andrew Furey stated, ‘We have right here what the world needs as well, and that is to relieve some of our NATO partners of the tyranny of Russia and their stranglehold on the energy around the world.’
I quarried on then Twitter as to what kind of leader would treat this terrible moment as an opportunity. This was, after all, the largest and deadliest war on European soil since the end of World War II. While most of us are used to the military industrial complex profiting off war, it is unusual for a Canadian politician to be so blatant about such a thing. Arn Keeling, my colleague at Memorial University, responded that a leader who is deeply enthralled in the resource curse would do this. Suddenly, a new understanding of the resource curse began falling into place for me. For not only was the premier clearly refusing to move away from fossil fuels at a time of global climate crisis. Premier Furey was also doubling down on a product that was increasingly showing itself to be part of a highly concerning world order. Yet, he just could not quit oil.
As I have previously argued on this site, moving away from fossil fuels is a matter of global and national security. The fact that the Russian invasion of Ukraine drove the global price of oil, has also been effectively established in Nature journal. Premier Furey did not seem to be at all troubled by this. This was clearly worthy of further investigation and in June of 2024 I was awarded a Social Sciences and Humanities Research Council (SSHRC) Insight Development Grant to research how the resource curse manifests in Newfoundland and Labrador. Project collaborators are Canada Research Chair Angela Carter, Professor Mark Stoddart, and Professor Lucian Ashworth.
Scholars have argued for some time now that the most corrupt and authoritarian leaders on the planet often benefit from the extraction of fossil fuels. Many researchers have effectively argued that there are a number of negative outcomes that align with being a petro-state. This literature has been carefully outlined by Smith and Waldner in their important text Rethinking the Resource Curse. Such conclusions date back to the research on rentier incomes in the early 1970s. Some of the mostly commonly documented factors aligning with fossil fuel dependence include poor democratic outcomes, weak institutions, poor economic performance, a propensity for bad economic decision making, gender inequality, ‘petromania’ or overspending in times of high oil prices, high levels of investment in policing and military, and even a propensity towards civil war. Newfoundland and Labrador bears the scars of many of these, driven in large part by a history of settler colonialism and resource extraction. This alone makes the jurisdiction worthy of examination through the lens of resource curse theory.
While most of the research on this topic has focused on the impacts of oil dependence, and to a lesser extent mining, recent research on climate justice points to the links between the resource curse and ongoing colonialisms. For this reason, our project takes the perspective that in Newfoundland and Labrador we should see oil dependence as part of a long history of resource dependence, starting with the migratory fishery in the early 1500s. The history of Newfoundland and Labrador arguably is a history of resource extraction. Carter has carefully reviewed this in her award-winning book Fossilized. She details how the jurisdiction was founded as a site for European fisheries and then eventually became a settlement and dominion of the United Kingdom. As a colony and eventually a province, Newfoundland pursued mining, troubled hydro-electric projects, forestry, pulp and paper, oil refining at Come by Chance, and eventually oil extraction in the Newfoundland offshore. The result for the citizens of the province has often been seasonal project-based work, while resources, capital, and higher end service jobs have been shipped outside of the province. These patterns were also documented by Valerie Summers in her important book Regime Change in a Resource Economy.
The first provincial government under Joseph R. Smallwood did try to move the province toward manufacturing and industrialization, and most of the successes were in seafood processing. In the edited volume The Provincial State in Canada, Summers has attributed the failures of the industrialization program to a number of factors including ‘the high cost of bringing raw materials into Newfoundland for processing, an inexperienced or unskilled labor force for these specialized industries, obsolescent equipment, poor management, and inadequate control by government over the disposition the taxpayers’ money’ (28).
After a long history of underdevelopment and economic struggles, great euphoria ensued when the Hibernia oil field was discovered in the Newfoundland offshore 1979. There was a feeling that Newfoundland and Labrador’s financial woes would finally come to an end. Years of ‘resource nationalism’ and court cases followed, pursued by the Peckford government. The province pursued the right to manage it own offshore oil industry, eventually reaching the Supreme Court of Canada. Finally, in 1985, a process of joint federal-provincial management was agreed to as part of the Atlantic Accord agreement, signed by the Mulroney and Peckford governments.
However, when considering the research on the resource curse, and especially the literature on poor economic outcomes, one cannot help but conclude that it is this very reliance on natural resources revenue that actually prevents development in the province.
Certainly, the budget concerns in Newfoundland and Labrador today are very real, with a debt-to-GDP ratio of 45%. This is almost unprecedented for a subnational jurisdiction. However, when considering the research on the resource curse, and especially the literature on poor economic outcomes, one cannot help but conclude that it is this very reliance on natural resources revenue that actually prevents development in the province. The province is now in a worse financial position than when Hibernia was first discovered in 1979. At that point, provincial debt levels were $2.6 billion. Adjusted for inflation that would be $10.1 billion in 2024 Canadian dollars. TD Economics has projected that provincial debt for the 2024-25 financial year will now be $17.8 billion. In effect, even when adjusted for inflation, provincial debt has almost doubled since the Hibernia project was first discovered.
At present, oil royalties account for 11.4% of provincial revenues in Newfoundland and Labrador. However, the government is not only failing to deal with the climate crisis. They are not preparing for the reality that provincial oil revenue could disappear sooner rather than later, as documented in both academic research and journalism. At this point, the best path forward would be to invest in developing the province into the global service and knowledge-based economy. The academic research is very clear on how to move away from a resource dependence and towards a more service-based or knowledge-based economy. We have seen this done before in countries such the Asian Tiger countries (Taiwan, South Korea, and Singapore) and China (Wenar 2016, 22). Massive investments in education, health care, a secure rule of law and infrastructure are the path towards development. To date the province seems to be going in the opposite direction on issues like education, and health care, while continuing to pursue resource developments such as the new Memorandum of Understanding with Hydro Quebec on Churchill Falls. The leadership simply cannot seem to see past resource mega-projects as a path to development. Even in the face of clear evidence that resource dependence holds jurisdictions back in terms of development.
This is the very essence of the resource curse. Leaders who do not want to develop the human capital of their people when they can essentially continue to extract wealth from the outside. The implications of this for their own citizens is that they will continue to do the hard labour of resource extraction, on a project-by-project basis, while all of the service jobs and much of the capital wealth continue to go outside the jurisdiction. In the meantime, politicians will continue to brag about their latest mega-project and tell us about all of the wonderful jobs they have created for us. Young people will continue to vote with their feet and move to jurisdictions with a more service-based economy.
Feature Image: “Hebron Oil Platform, Newfoundland, Canada” by Shhewitt. Wikimedia Commons.
