Dual Identity

Can Toronto become Canada's first creative gateway city?
Article
August 1, 2008

Toronto is one of those cities that has always inspired a rash of superlatives from Americans. “New York run by the Swiss,” as famously described by Peter Ustinov, is now North America’s fourth-largest city, and has begun to see itself no longer as a primarily Canadian or even North American city, but as a global city. With one of the world’s most ethnically diverse populations, North America’s largest life sciences cluster, and an impressively broad set of industry clusters ranging from film and new media to apparel, aerospace and furniture, Toronto holds many lessons for people interested in urban economic development.

In the early 1900s, Canada made the creation of a domestic manufacturing sector a national priority, and erected tariff walls to keep out U.S. goods. Toronto, particularly in the years after the second world war, developed as the center of this economy, in the process becoming the last North American city to create an industrial working class from European immigration.


The Toronto region is still one of the largest industrial concentrations on the continent, but as with many cities, there has been a significant movement of manufacturing to the suburbs. In Toronto’s case, this trend has been especially pronounced for two reasons. First, it has chosen to keep its property taxes — one of the few city revenue streams it has the power to control — heavily slanted against industrial and commercial employment, and in favor of homeowners. Fixing this problem has long been an issue, but even today the commercial and industrial tax rate is nearly five times the residential rate.

The second reason is the place that Toronto’s industry has mostly escaped to — the suburb of Mississauga. An outer-ring exurb only a few decades ago, it is now Canada’s sixth-largest city, and nearly the size of San Francisco. Nearly all of this growth has happened since the 1970s and was fueled by the relocation of jobs from Toronto. There is nothing in the Bay Area that quite compares to how different Toronto and Mississauga are, although we certainly don’t lack for municipal rivalries. It would be as if Phoenix was across the Bay from San Francisco, instead of Oakland. Mississauga’s conservative government offers highway access, endless stretches of open, flat land and “no nonsense.”

Toronto experienced two serious recessions in the past 30 years, both related to shocks to its declining manufacturing sector. The severe downturn of the early 1980s led to fears— alarmist, in retrospect — that Toronto could turn into another Detroit, a city where economic decline fed on itself to inhibit any recovery. But Toronto was blessed, and its economic future secured, by Montreal’s misfortune in the 1970s.

For most of the 20th century, Toronto was Canada’s second city, behind larger Montreal. Size was only one dimension of its secondary role. While Toronto had manufacturing, Montreal had financial services. Toronto was staid and somewhat Victorian, proud of its clean streets. Montreal was bilingual and cosmopolitan, proud of its swinging reputation. And yet Toronto also was equitable, in that distinctive way that many Canadian cities were, at the time. Montreal’s francophone working class, on the other hand, was already suffering from deindustrialization by the early 1960s, just as its elite class was boosting the city as Canada’s window to the world, hosting the world’s fair in 1967 and planning for the 1976 Olympics.

The relationship between Canada’s two major cities changed fundamentally in Toronto’s favor in the second half of the ’70s, when political power in Quebec swung to the separatist Parti Quebecois. That party’s economic and linguistic policies frightened many of the headquarters jobs — including those in Canada’s five largest banks — out of Montreal, and they decamped to Toronto, along with much of the Anglo-Canadian establishment.

It is difficult to overestimate the role of these large banks in Canada’s economic history. Canada was a resource economy before it was a country, and these financial empires were built by financing the exploitation of those resources. To no small degree, they ran most of the 20th-century Canadian economy. Toronto quickly found itself the unquestioned foremost city of Canada: the home of manufacturing, the banks, most of the media and the government of the largest province.

Toronto’s second major recession of the 1980s came at the end of the decade, when free trade with the United States began to powerfully restructure the economy in ways that reinforced past trends. Financial services gave birth to new clusters in professional services and information technology. Mass-production manufacturing was decimated by direct competition with U.S. manufacturers, but some manufacturing employment has survived: Business in high-value, design-intensive products thrived in industries like aerospace, furniture, and apparel.

The worst years of free trade were the earliest. By the late 1990s, both the city and the region had begun to show clear signs of recovery that are even stronger today. Much like San Francisco, one of Toronto’s economic roles is as a producer of innovation, creativity and design, which have become vital to its competitiveness across all of its manufacturing, service and information clusters.

Indeed, more so than in most cities, people across the public, private and non-profit sectors in Toronto seem to be speaking the same language, albeit with different interest and emphasis, about creativity, competitiveness, Toronto’s distinctiveness and the need for it to direct its own destiny. Toronto is no longer at risk of becoming another Detroit, but it has its share of economic problems: slow job growth, rising inequality, limited taxation power and aging infrastructure. Toronto has a lot of resources, but doesn’t really have the power to use them effectively to solve these problems.

This last issue has become particularly acute since the last major event in Toronto’s economic history: amalgamation. Beginning in the 1950s, what is today Toronto was composed of the old city of Toronto and five inner-ring independent suburbs (not including Mississauga), linked in a higher-level government called Metro Toronto that was equivalent to a U.S. county. By the mid-1990s, the growth of Mississauga and other outer suburbs meant that Metro was no longer the right size for a regional government for the Greater Toronto area. The province of Ontario was reluctant, however, to incorporate a wider area into the Metro Toronto structure, which would have allowed it to effectively deal with regionwide issues such as land use, transportation and sprawl. Some in Toronto felt this was because a properly sized regional government would have been such a large percentage of Ontario’s economy and population that it would have marginalized the province and allowed Metro Toronto to deal directly with the federal government. In any event, the conservative provincial government took a different route: Metro Toronto was abolished and its six constituent cities were amalgamated into a new “megacity” of Toronto. The fact that its residents massively voted against amalgamation in a referendum did not deter the province .

The amalgamated City of Toronto is an uncomfortable combination of a gentrified urban core — where the creative economy and corporate headquarters are — and inner suburbs where immigrants make up the majority of the population, jobs are disappearing, inequality is rising and social problems are growing. Toronto, like so many other cities, likes to market itself as a center of creativity and innovation, and clearly, without that economy the city would be in dire straits. But it is not its only economic role: Toronto also is vital as a gateway for immigrants. After Miami, Toronto has more immigrants than any other major city in the world, and they come from literally every country in the world. Fostering immigration is a major federal government priority, but it hardly furthers their integration into mainstream society to have them live in isolated residential areas with limited employment opportunities. The interactions and tensions surrounding Toronto’s two functions as a creative city and a gateway city are, I think, some of the most interesting problems the city has to deal with at the moment.

San Francisco has that role too, or a U.S. version of it, but in fact today we are turning into a very specialized gateway city. In the past five or so years, the vast majority of new immigrants to San Francisco have arrived with a college education already in hand, and generally get jobs that reflect that level of education. Since getting a good job has always been a fundamental yardstick for acceptance in mainstream U.S. society, a gateway city that mostly receives educated immigrants has a lighter social task. In effect, we've started to outsource Americanization. Of course, our city is roughly 40 percent immigrant, and they span every social class. But this is a legacy of earlier waves of immigration, and I don't think it's well appreciated that most new immigrants to San Francisco today, tend to be well-educated and affluent. The Bay Area has become so internationalized that most of the region has become a "gateway city." In that context immigrants are no different than anyone else: San Francisco is great if you can afford it, otherwise the suburbs are often a smarter choice.

Toronto is never going to work that way, both because it gets a wide range of immigrants, and because being a Canadian is not quite that simple. American liberals sometimes imagine that Canada’s envied welfare state is based on simple differences in policy choices, and that had the United States taken the rational fork in the road at different points in the past, we also could have single-payer health care, well-supported public schools and the rest of what are viewed as Canada’s advantages. I suspect that this perception comes from thinking that Canadian society is basically similar to U.S. society — a kind of northern parallel universe. I think, though, that Canadian society has been much more careful and deliberative in the way in which it fosters a shared sense of identity, on many levels, that is a political prerequisite for a strong welfare state. It’s a testament to Canada’s political talents that it has managed to welcome a tremendous number of immigrants from literally every corner of the world, while at the same time maintaining broad support for its welfare state. I cannot think of another country in the world that has managed to do that. A Californian can easily appreciate the skill required — we are not doing nearly as well.


Much of that hard political work takes place in Toronto, and how well Toronto and other cities do that work will determine a great deal about the social future of Canada. Toronto and Canada need immigrant areas with a range of job opportunities for every age group, where educational attainment is rewarded with access to quality jobs. What Toronto is becoming, unfortunately, is an increasingly segmented metropolis in which new immigrants are concentrating in the inner-ring suburbs (now part of the amalgamated city), while the jobs are growing in the outer suburbs and the gentrified core. If Toronto's economy is going to meet the needs of its immigrant majority, and if Canada is going to continue to successfully integrate new generations of Canadian immigrants, then Toronto will need to change, and will need the power to change. It will have to make itself competitive again for jobs that fled to the outer suburbs, break down the cultural barriers to the jobs in the downtown creative economy, and grow that economy within the inner suburban areas that need those jobs. Creativity is all the rage in urban studies these days, and its intellectual partisans often claim for it a protean quality. If Toronto can manage to make its two economic roles complement one another, instead of conflict, it might just prove that point. END

About the Authors: 

Ted Egan is the chief economist in the Controller’s Office in San Francisco, and an adjunct assistant professor of city and regional planning a the University of California, Berkeley. In 1999 he led a team of consultants working on the amalgamated City of Toronto’s first economic-development strategy.