What happens to a government-based economy in a global pandemic?

Last month the N.W.T. government passed a "status quo" $1.96 billion budget.

Caucus leader Rylund Johnson characterized the funding as "pretty stable," and assured people there would be no "austerity" to be found.

That's because about 80 per cent of the revenue comes in the form of federal government transfers.

So while the private sector began layoffs, and business owners watched their revenue rocket to zero, government employees continued to enjoy regular paychecks, even those whose jobs were deemed inessential enough to be redeployed to work on the response to COVID-19.

That's a good thing, according to Ken Coates, a historian at the University of Saskatchewanwhere he studies Indigenous and northern Canadian issues.

"The saving grace of the three northern territories is the fact they're so government dependent," he says. He saw the budget as the work of a government trying to reassure and calm its citizens.

But what does that mean for the future of the territory?

Federal funding secure

Nearly everything about what happens next is an unknown. "Nothing even remotely close to this" has ever happened, says Coates.

And while Coates grants that "the idea of extremely well-funded territories is kinda new," he also believes it's not threatened for example, by a federal government looking to balance its own badly battered budget.

"This is a tiny drop in the bucket so they can continue to be generous and kind to the N.W.T.," Coates says. "They're not gonna walk away from this."

"If you compare how much the federal government transfers to Toronto compared to how much they transfer to the N.W.T., it pales in comparison," Coates adds. "So I don't see this as being at risk."

The trouble is, he says, "government spending is supposed to be the foundation for long-term economic stability. Not the core of it."

'The N.W.T. has failed'

One Yellowknife-based economist argues the N.W.T. has done little to build that foundation.

"The N.W.T. has failed to nurture the growth and development of its economy," wrote Graeme Clinton in the opening sentence of a report prepared last year for Indigenous and Northern Affairs Canada. "As a result, the territory will experience a major setback where the disadvantaged among us will suffer most."

Long before COVID-19, Clinton diagnosed a future economy still heavily reliant on government.

"These economies can be incredibly stable," he concludes, "but when pressures emerge in the form of growing unemployment and widening infrastructure gaps, greater demand for public programs and spending, and an aging population, the community finds it has no means to respond effectively without additional support."

That support, he notes, often doesn't come, as governments tend to invest just enough to maintain the status quo (see above).

"If the N.W.T. cannot maintain the quality of life of residents today in a period of relative economic stability and on the heels of a decade of economic growth and transformation, how can it possibly achieve such a goal during a period of economic decline?

"The answer is it cannot."

'Vision is what's missing'

The solution, Clinton writes, has been "discussed and debated and discussed some more" for twenty years: the territory needs to invest in infrastructure that can support future growth.

Why hasn't that happened already?

"Vision is what's missing," writes Clinton.

His report says leaders in the N.W.T. have spent 20 years debating whether or not to embrace resource extraction as part of the economy. That decision, he says, needs to be made so the territory can begin "purpose-driven investments and action."

Without growth and returning to page one of his concise 23-page snapshot on the territory's economic future Clinton quotes the N.W.T. Bureau of Statistics, which predicts that up to 3,200 people will simply move away, lessening future opportunity and future government spending (which is based on population) as well.

"The people most negatively affected in this scenario will be those without the freedom of choice, who don't have the option to relocate, are unable to retrain or find new work in their community, and don't have a savings account to see them through hard times."

Unemployment at 13.5%

The hard times have arrived.

A territorial snapshot released by the Conference Board of Canada last month was titled "Shielded from the Worst," a reference to that continued government spending.

It predicts the economy will shrink by 3.3 per cent this year, down from the 5.5 per cent expansion predicted in February.

Unemployment will spike to 13.5 per cent, the highest on record, as about 1,200 jobs are lost in all sectors, and that number will stay at 11.9 per cent in 2021.

"That's pretty high," says Richard Forbes, who wrote the report, though "not completely out of the realm for what we're expecting in other provinces and territories."

The biggest difference Forbes sees is that the territories have been slower to allow visitors back in, "so that may delay the recovery," particularly when it comes to jobs in the tourism, accommodations and food service sectors.

But he thinks people may have more agency than they realize.

"No matter how much the government pumps into the Northwest Territories, it's going to come down to whether consumers feel comfortable traveling there and feel comfortable going to hotels and eating out," says Forbes.

"Unfortunately, it's very much a wait and see type of thing."