o economic systems o - université laval · economic systems 71 chapter 4 industrial complex...

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Arctic Human Development Report

Economic activities create and distribute wealththat individuals, households, and societies canuse in reaching different social and materialgoals. Therefore, economics is a fundamentaldimension of human development. In theArctic, subsistence activities have been impor-tant to local economies, but the region is alsoincorporated in the economies of the Arcticnations and in the global economy. These con-nections are becoming increasingly important.Examples include exploitation of oil, gas, andmineral resources but also harvesting of the vastbiological resources in the region. Governmentor state supported public service illustrates theclose connection to national economies. Takenas a whole, the Arctic economy is large enoughto be geopolitically important.

The first part of this chapter looks at the Arcticas a whole and describes its economy by explor-ing three major characteristics: the large-scaleresource exploitation, the lack of manufacturing,and the prominent role of public service andtransfer payments. The second part identifies theprincipal similarities and differences amongstdifferent parts of the Arctic, while the third partdiscusses the most striking recent trends thatwill affect the future of the Arctic economy.

The industrial distributionof the Arctic economyThree characteristics set the economic situationof the Arctic apart from that of other regions ofthe world (4, 5). First, the formal economy ismainly based on large-scale resource exploita-tion. Second, family-based commercial fishingor customary hunting, fishing, breeding, andgathering activities continue to be important.Third, much consumption, in particular publicservices, is supported by transfer payments toregional governments and individuals from cen-

69Chapter 4

Economic SystemsLead author: Gérard Duhaime, Université Laval, Québec City, Canada.

Contributing authors: André Lemelin (Université du Québec á Montréal), Vladimir Didyk (Kola Science Centre), Oliver Goldsmith, (University ofAlaska at Anchorage), Gorm Winther (Agio Greenland and University of Aalborg), Andrée Caron (Université Laval, Québec City), Nick Bernard(Université Laval, Québec City), and Anne Godmaire (Université Laval, Québec City).

Area of studyThe circumpolar area discussed in this chapter includes all political oradministrative entities overlapping the Arctic for which relevant sets of dataare publicly available. They are:

• Alaskain Canada: the Yukon, the Northwest Territories, Nunavut, Nunavik, andLabrador

• Greenland• The Faroe Islands• Iceland• in Norway: Nordland, Troms, Finnmark, and Svalbard• in Sweden: Västerbotten and Norrbotten• in Finland: the provinces of Oulu and Lapland• in the Russian Federation: the republics of Karelia, Komi, and Sakha; the

oblasts of Arkhangelsk, Murmansk, Tyumen, Kamtchatka, and Magadan;the autonomous okrugs of Nenets, Khanty-Mansii, Yamal-Nenets,Krasnoyarsk Krai, Taimyr (Dolgan-Nenets), Evenk, Koryak, and Chukchi.

Few regions of the Russian Federation extend beyond the Arctic, e.g. theTyumen Oblast. These have nevertheless been incorporated in full, since theeconomic data published by Goskomstat Russia are not available on asmaller scale. The area covered in the chapter corresponds to that examinedin previous studies that are used to identify economic trends and changes(1, 2, 3).

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Arctic circleArctic boundary: AMAPArctic boundary: AHDR

Map of ArcticRegion

Compiled by W.K. Dallmann,Norwegian Polar Institute

tral governments. After placing the Arctic econ-omy in a global context, this section describesthe different sectors of the Arctic economy.

A global viewConsidered as a whole, the production createdin the formal Arctic economy amounts to over$US-PPP 230,000 million. This would be thegross domestic product of the circumpolarArctic. The following comparisons make it pos-sible to assess the Arctic’s significance in theworld economy.

This production is equivalent to one-quarterof the entire Canadian economy and 80% of theentire economy of Saudi Arabia, the world’s

leading oil producer and exporter. It approachesthe value of Belgium’s entire economy, and itequals the entire economy of the RussianFederation. It surpasses that of Sweden, a coun-try whose demographic weight is similar to thatof the entire Arctic area and is among the mostindustrialized countries in the world.

What does this result mean? First and fore-most, it means that the Arctic production is ofsignificant scale. It is based in large part on theintensive exploitation of the vast naturalresources in the Arctic, and the formal economyof the Arctic revolves around these large-scale,capital-intensive activities.

Large-scale resource exploitation iscentral to the Arctic economy

Arctic regions have long been considered vastreservoirs of natural resources by the countriesthat encompass them. First exploited for fish,whales, and furs, these regions revealed sub-stantial diversity and enormous quantities ofother resources, such as minerals and fossilfuels. Today, the economic activity of Arcticcountries is characterized by the large-scaleexploitation of metallic minerals, precious met-als, hydrocarbons, and precious and semi-pre-

70 Arctic Human Development Report

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Arctic circleAHDR Arctic boundary

primarysecondarytertiarynon-specified

Faroe Islands 28%

10%62%

0%

Greenland 8%

29%63%

0%

Iceland 14%20%

66%

0%Northern Finland

63%

3% 7%

27%

NorthernNorway

8%17%1%

74%

NorthernSweden

19%1%

6%74%

NorthernRussian

Federation10%

30%

9%51%

Alaska0%

8%70%

22%

NorthernCanada 19%

13%68%

0%

$US-PPP – a definitionThe data used to describe and analyze the for-mal economy come in different currencies andconcern different years. To allow for compara-bility, two conversions must be made: the firstone converts the national currencies into acommon currency and the second one has thedata refer to a common year. In other words,the data must first undergo a conversion inspace, followed by a conversion in time. ThePPP makes it possible to obtain conversionrates between currencies that eliminate differ-ences in price levels between countries (6). Themethod for calculating the PPP basically con-sists of collecting data on the price of a repre-sentative basket of goods and services for aspecific country and to compare it with a refer-ence basket. If, for example, the reference bas-ket costs 100 US$ in the United States in 2000and 947 Swedish kronor in Sweden, the PPPconversion rate is then 9.47 Kronors per USdollar PPP. By convention, published data areexpressed in $ US PPP. After “moving” all ofthe data to the United States, a common yearis obtained by using the GDP Deflator, whichmeasures the price variations for all of thegoods and services that are produced and usedin the economy of a region or a country.

Industrial Distributionof Gross Product, bysectors. CircumpolarArctic, regions andcountries, 2001(Millions of $US-PPP)

Source:Arctic Map by W.K. Dallmann,

Norwegian Polar Institute

Gross Product. Circumpolar Arctic, regions and countries, 2001(Millions of $US-PPP, 2002)

Circumpolar Arctic(230,156)

Northern Sweden

Northern Norway

Northern Finland

Northern Canada

Iceland

Greenland

Faroe Islands

Alaska28,581

1,106

1,003

8,097

4,308

12,201

10,170

11,045

Northern RussianFederation

153,647

cious stones, as well as fish from the coastalseas. Primary extraction represents $US-PPP60,000 million. This is equivalent to the value ofalmost all of Saudi Arabia’s exports, or the totalvalue of Brazilian exports.

The large-scale exploitation of minerals andhydrocarbons is central to the national economyof several Arctic countries. This is especially truefor Russia, where the Arctic regions have vastreserves of gold (Magadan, Chukotka), nickel(Murmansk, Krasnoyarsk), tin (Sakha,Chukotka), and diamonds (Sakha). Also, petro-leum and gas exploration is massive, especiallyin the Yamalo-Nenets and Khanty-MansiiAutonomous Okrugs (7,8).

In Canada, there is major exploitation of min-eral resources and hydrocarbons in theNorthwest Territories, Nunavut, and Nunavik.Mineral exploitation is also a central economicactivity in Finnmark in Norway, and Norrbottenand Västerbotten in Sweden. Alaska extractsconsiderable quantities of oil from the BeaufortSea and has one of the world’s biggest zincmines.

While the industrial-scale natural resourceexploitation creates considerable wealth, theseactivities are mainly carried out to supply mar-kets outside the Arctic regions. Moreover, theresources generally belong to sources of capitaloutside the Arctic, which control the activitiesand profits. A few large corporations dominatethe extraction activities, and some of them arepresent in several Arctic countries. This fits wellwith the concept of “Resource frontier regions,”(9,10) where the massive riches are destined forexport and only a fraction of the income andprofits remains.

Sometimes, the resource exploitation gener-ates economic spin-off effects in local areas andregions (see also Chapter 8. CommunityViability). In such cases, these large-scale activi-ties represent the very core of local and regionaleconomies, around which a vast set of sub-sidiary activities gravitate, including the con-struction and operation of infrastructure (roads,ports, and airports) and the organization ofservices (transportation, retailing, and housing).Thus, even under these conditions when neitherthe direct income from sales of the extractedresources nor the profits remain in the affectedregion, there are still significant economic con-sequences.

In other cases, these large-scale activities aretotally separated from the regional socio-eco-nomic environment. They are carried out on an

autonomous basis and have practically no eco-nomic impact on the permanent communitiesin the vicinity. In this situation, the entire eco-nomic activity, as well as the extractive and sub-sidiary activities, brings benefits exclusively tothe rest of the world. The phenomenon of eco-nomic decoupling, also characteristic of‘resource frontier regions,’ represents theextreme case but is nonetheless not unusual inthe Arctic.

Large-scale resource exploitation has consid-erable impact on the local natural and humanenvironment. Examples are toxic dischargesfrom gold and nickel mining operations, whichhave caused problems that have yet to besolved. In those cases where the residentsinhabit or use land that borders on exploitationareas, which is common in Alaska, theCanadian North and northern Russia, theeffects on the human environment are multipleand often poorly documented (11, 12, 13). Theseinclude poor health related to industrial dis-charges, as well as the subordination of localgovernments and authorities of civil society(unions, associations). They can also entailforced changes in how people move over land infishing, hunting or trapping areas and candiminish the productivity of such traditionalactivities when the land is disturbed (14, 15, 16,17). Socially, there are often disparities in stan-dard of living and social status between employ-ees of the industrial sector and the rest of thepopulation, often correlated with ethnicity.

In summary, the way in which large-scaleresource exploitation is currently organized inthe Arctic is characterized by outside controland resources moving out of the region.Generally, there is not much overlap with local

71Economic SystemsChapter 4

Industrial Complex Nickel,Kola Peninsula, Russia.

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and regional economies, and it appears unlike-ly that these activities will create economicalternatives that can enable the local communi-ties to survive after the extractive activity is fin-ished. It is thus difficult to see how they cancontribute to sustainable development in theregion.

Fisheries remain a backbone of theeconomyIn almost all coastal and island areas of theArctic, fisheries form one of the backbones ofthe economy. In the Faroe Islands, this is themost important industry, comprising more thana fifth of the gross national product. The catch isdiversified and includes a substantial whale har-vest. Fisheries are likewise very important andequally diversified in Greenland, whose shrimpcatch makes Greenland the second largestexporter of shrimp in the world. AroundIceland, warm and cold currents come togethercreating particularly rich fishing opportunities,and fisheries have long been important to thenational economy of Iceland. In Greenland andIceland, the production of the primary sector islargely based on fisheries.

Coastal fisheries assume considerable eco-nomic significance in Alaska, northern Norway,

and all of northern Russia. For example, practi-cally every coastal Norwegian town or villagehas its own fishing port. Furthermore, lake andriver fishing is practiced everywhere in theArctic, and is significant to local economies. Forinstance, both commercial and customary fresh-water fisheries have been and still are importantamong the Dene nation in the CanadianNorthwest Territories.

Fisheries may be organized according tomany distinct systems of exploitation. Industrialfisheries, based on factory ships, demonstratemany similarities with large-scale extraction ofmineral and hydrocarbon resources and caninvolve importing both the capital and work-force from abroad, and taking both resourcesand revenue out of the region. In such cases, thegeneration of local economic wealth can be ten-uous at best. In several Arctic regions, regionalauthorities or entrepreneurs do own the factoryships themselves, and consequently can retainthe benefits (or what is called the “rent”) with-in the region, and hence favor the regionalworkforce as well.

Fisheries can also be organized in a waywhere the captain-owner of a ship hires a smallcrew or takes care of all the work himself, some-times with family members. This labor-intensive


Red Dog Mine, the world’s largest producer of zinc concentrate,is located in the DeLong Mountains of Alaska’s Brooks Range,approximately 144 kilometres north of Kotzebue and 88 kilome-tres from the Chukchi Sea. First discovered in 1953, initial minedevelopment began in 1986 and by November 1989 constructionwas complete. Operations and production began in December1989. With an open pit, truck/shovel operation, Red Dog has aproduction capacity of over 600,000 tons per annum of zinc con-tained in concentrate. Facilities were expanded in 1998 and againin 2001. In 2003, it produced 579,300 tons of zinc concentrateand 124,900 tons of lead concentrate. Concentrate from the millis trucked to a port facility at tidewater where it is stored prior toloading onto vessels. Given its Arctic location, Red Dog has asummer shipping season of 100 days, during which the concen-trate ore is shipped to markets in North America, Asia, andEurope.

The interest in Red Dog Mine does not merely lie in its size, inits integration with large corporations or in the spatial distribu-tion of its operations. Rather, the interest lies in the relationshipsbetween the mine and the Northwest Alaska Native Association(NANA) Corporation. Native Alaska land claims against theUnited States were settled in 1971. The NANA Corporation isone of the corporations created in connection with the AlaskaNative Claims Settlement Act. Cominco and NANA agreed in1982 to a land lease with wide-ranging terms regarding devel-

opment of the deposit. Under the agreement, Cominco financed,constructed and now operates the mine and the mill, in additionto marketing the concentrates produced. NANA receives anannual royalty in the form of a payment, which is equivalent to4.5% of the annual production value. This rate will remain ineffect until Cominco recovers its capital investment with interest.Thereafter, NANA will receive a share of the mine’s net profits;this share will be 25% and will increase by 5% per five-year peri-od, up to 50%. Moreover, the agreement includes provisions fortraining and hiring NANA members, and first preference on allRed Dog jobs goes to qualified Natives in the NANA region. Asa result, more than 50% of the 365 jobs are held by NANA mem-bers. The agreement also includes provisions for contract andpurchasing preferences, subsistence resources protection as wellas various consulting and approval mechanisms.

This is one of the first benefit-sharing agreements known inthe Arctic and illustrates an increasingly common way to maxi-mize benefits of resource development for Arctic residents ratherthan continuing with the “decoupling” model of development. Itis also used to attenuate negative impacts of resource develop-ment, including making provisions for the bust cycle at the endof the mine’s life. Among other tools, such as environment andsocial impact assessments, this is one way to improve resourcedevelopment from the perspective of increasing benefits forArctic residents (18).

Benefit sharing agreements: a trend in Arctic big business

system, widespread in the circumpolar North, isof the utmost importance not only economical-ly but also from a social and political point ofview. It involves a significant number of jobs(more than 20% in Greenland, around 5% inIceland and northern Norway). It entails mak-ing arrangements, negotiations and compro-mises between actors, such as commercial dis-cussions with local suppliers, local buyers andprocessing plants, participation with municipal,regional and national governments, concerningregulations etc. And in contrast to industrialfisheries with factory boats, these fisheries con-tribute to local food supplies. Moreover, as longas fish stocks are not over-harvested, they pro-vide a guaranteed long-term activity. However,the depletion of fish stocks is beyond the controlof the local fishermen and this activity, estab-lished for generations, is also subject to externalinfluences that may even threaten its survival(19, 20, 21, 22). For further discussion of fish-eries, see Chapter 7. Resource Governance andChapter 11. Gender Issues.

Manufacturing is very limitedAside from customary harvesting and foodfrom commercial fisheries and reindeer herd-ing, most food and other products consumedin the Arctic are imported. Manufacturing

activity is limited. This sector has atrophied insome areas and was never established in oth-ers. In places where it remains important, it isusually not very diversified. For example, inIceland and Greenland, it is primarily concen-trated in fish processing, most of which isexported. In some areas in northern Russia,mining activities have lead to a primary refin-ing of the minerals.

One of the few manufacturing activities inthe Arctic area is the electronics industryaround Oulu in northern Finland. This sector isvery dynamic in development and production,and includes companies such as Nokia thatprovides more than 3,000 jobs in the region.This is more than 5,000 jobs in the electronicsindustry, which represents some 10% of jobs inthe secondary sector (31, 32, 33). This situationis exceptional. The Oulu region is one of thefew that has managed to overcome the difficul-ties of creating a manufacturing industry in theArctic. Due to the geographical isolation ofmost Arctic regions, production costs are high.While specific raw materials can be found with-in the region, technology, qualified labor, andcapital have to be imported most of the time.Transportation costs not only impact produc-tion itself; they also affect costs for gettingproducts to their markets which tend to be


Fishing trawlers in Nuuk,Greenland

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located outside the Arctic. As a result, costs areoften too high to successfully compete withnon-Arctic manufacturers who have moreaccess to resources (including cheaper trans-portation systems). It is therefore difficult togenerate sufficient economic benefits to sustaincommercial activities.

In general, the role of the circumpolar Northin the global economy is asymmetrical: itexports raw materials on a large scale to devel-oped regions and imports most finished prod-ucts for its own domestic consumption. Only apart of the food supply is locally produced.

The service sector is dominated bypublic serviceThe service sector is strongly developed in manyparts of the Arctic. This includes activities infields such as retail, transport, and tourism aswell as education, health care, and administra-tion in the public sector. This so-called tertiarysector represents almost three-quarters of theeconomy of northern Sweden and Norway andapproximately two-thirds of the economy of

other regions, excluding northern Russia, whereit constitutes slightly more than half of the grossdomestic product.

Retail and transport activities account forabout 12 to 25% of the service sector. Within theservice sector, transport has an important placein the Arctic economy. It creates from 5 to 12%of the production value, depending on theregion. Facilitating long distance mobility, thetransport sector is important in exporting localproducts and for importing goods on whichnorthern consumers depend. It also encouragesnorthern tourism.

Tourism is well developed in a number ofregions and is of growing importance in theArctic economy. It is almost impossible howev-er, at the present stage of economic statistics, toput a number figure on this service industry. Adecade ago, and excluding Russia, the number

of visitors was estimated at 1.9 million, ofwhom half were in Alaska and 500,000 were innorthern Scandinavia (34). There is no indica-tion that this industry has decreased in the lastdecade. On the contrary, some regions are giv-ing high priority to tourism development. Thisis the case in Iceland and Finland for instance,and in almost all regions where it is less devel-oped, efforts are being made to build up theindustry.

Nonetheless, public services account for themajority of the service sector. This includes pub-lic administration, health care, and education.Altogether, public services comprise the secondlargest industry in all the Arctic regions, andthey represent a share of the gross domesticproduct that ranges from 20 to 25% (in regionssuch as Alaska), up to 40% in Canada andFennoscandia (35) (see box next page).

Theme summaryThree characteristics set the economic situationof the Arctic apart from other regions of theworld. First, the Arctic has been used as a largereservoir of resources to meet the energy needs


TouristsCircumpolar Arctic, regions and countries, selected years

Country or Region Number of Tourists

Alaska 1,074,800Greenland 6,000Iceland 129,000Northern Canada 224,820Northern Scandinavia 529,000

Source: Margaret E. Johnston. Patterns and Issues in Arctic and Sub-Arctic Tourism. In Hall, C.M. and M.E. Johnston. Polar Tourism. Chichester, Wiley, 1995, p. 31

Subsistence activities still play a roleBiological resources are also harvested in small-scale subsistence activities.In particular, rural and indigenous populations reinforce traditional prac-tices outside the formal economy, which include fishing, hunting, and trap-ping, as well as gathering fruit, mushrooms and wild eggs.

This customary harvesting forms a significant part of the dietary intake ofhouseholds and communities in some parts of the Arctic (23, 24, 25, 26). InAlaska, recent studies indicate that rural villages have an annual productionthat generally varies between 69.5 and 301.8 kg per capita (27, 28).For theCanadian Arctic, the annual harvest in edible weight varies between 84 and284 kg per capita (29).The latter value would be equivalent to the produc-tion before other sources of food were available. In Greenland, a majority ofthe households eat food of this type five times or more per week. The dailyquantity consumed is estimated at 0.33 kg/day/person on average. When“commodity production” intended for the market is taken into account, thequantities produced in traditional harvesting activities vary from 1.21 to 3.50kg/per capita/day, depending on paid employment and the level of involve-ment in the harvest (30).

Customary harvesting practices are not only culturally but also economi-cally important locally, though their role varies by region, ethnic group,urban or rural setting, and generation. This harvesting is important for itscontribution to food production and consumption. Food from the land isone of few substitutes to imports in the Arctic, and in several regions, itscontribution to food intake is central. It is also important for its contributionto the meaning of life, because customary activities create links bothbetween past and present and between people living together. They aretermed customary, because they reproduce the past practices of the peopleliving in the Arctic; but similarly and more generally, they are clearlyembedded into the modern world, as they put together heritage with capi-tal, modern technology, present-day know-how, and government regula-tions.

of developed countries. Its formal economy ismainly based on large-scale exploitation andexport of minerals, hydrocarbons, and marineresources. Much of the remaining part of theformal economy revolves around these activi-ties. In contrast to the Arctic countries, there islittle manufacturing industry in the northernregions.

Secondly, much consumption, in particularpublic services, is supported by transfer pay-ments to regional governments and individualsfrom central governments. However, the trans-fers are small in comparison to revenues fromregional production, and if the Arctic regionshad the political power to collect taxes from thelarge-scale exploitation of the Arctic’s naturalresources, the level of dependence on transferswould likely be different.

Thirdly, family-based commercial fishing orcustomary hunting, fishing, breeding, and gath-ering activities continue to be important, bothfor the economy and for the identity of thoseinvolved. These activities are inextricably linkedto the monetary economy. Therefore, the meansused to carry them out, their efficiency, and theirdistribution methods are important for people’sincome and their standard of living.

The spatial distribution ofthe Arctic economyOverall economic characteristics differ acrossthe Arctic, with significant variations in bothsize and structure of the economy from oneregion to another. This section makes someinternational and internal comparisons betweenregions. It tries to assess the regions’ contribu-tion to the circumpolar economy as a whole,and the difference between each northernregion and the countries they belong to. It sug-gests ways for analysis of flows between theArctic and the rest of the world.

Regional variation in total productionThe Russian Federation produces about two-thirds of the total wealth created in the circum-polar Arctic. This share exceeds by far the con-tribution of all other countries and regions. TheRussian North is the widest area in the circum-polar world, and the most populated one. Theindustrial exploitation of large non-renewableresource reserves has been carried out on a verylarge scale throughout the area for decades, andis a backbone of the Russian overall economy.

Iceland, northern Norway, Sweden, and


The tertiary sector accounts for between one-half and three-quarters of the total economic production in the Arctic, anddominating this sector is public administration. In severalregions for which the data is available, public administrationservices account for more than one fifth of the formal economy.In some regions, the majority of all paid jobs belong to this sec-tor, which can legitimately be called an industry.

This “over-development” of public administration comparedto other sectors has a history that goes back at least 50 years. InAlaska, northern Canada, and Greenland, it can be explained bythe policies of nation states to move the Inuit population intopermanent settlements. These policies were especially promi-nent during two different time periods. The first was with themilitarization of the Arctic during World War II and the followingCold War period which brought to the world’s attention thematerial distress afflicting the Inuit, which followed the sharpdecline in the fur trade after 1929. States took responsibility forbuilding permanent villages and for assuming the recurrentoperating costs. The second time period coincides with the fran-tic growth in consumption in the 1960s, and the oil crisis of 1973.These developments fueled North America’s appetite for theArctic’s fossil fuel resources. However, at that time, the indige-nous peoples opposed other’s claims to these resources. Theywanted guaranteed access both to the territory and to the use ofthe resources, as well as compensation for the losses resultingfrom the exploitation. They called for a significant place in polit-

ical decision-making as it concerned their own affairs. Therestructuring and growth of the public administration ensuedfrom subsequent agreements: the Alaska Native ClaimsSettlement Act (ANCSA-1971), James Bay and Northern QuébecAgreement (JBNQA-1975), Northeastern Québec Agreement(NEQA-1978), Greenland Home Rule (1979), Inuvialuit FinalAgreement (IFA-1984).

The story is not altogether different in northwest Russia.Geological exploration carried out at the start of the 20th centuryrevealed the abundance of the region’s ore deposits (36). Thebuilding of mining towns between 1900 and 1930 within the con-text of the centralized Soviet system led to major public expendi-tures. However, the indigenous peoples did not have the sameinfluence as in North America. Saami and Komi reindeer breed-ers gradually saw some of their pasturelands transformed, eitherby the building of mines, cities and roads, or by the pollutionaffecting the natural environment, forcing them to change areasand, in some cases, economic activity. The Komi were constitutedin a district in 1921, then in a Soviet socialist republic in 1936.Since the fall of the Soviet Union in 1990, this jurisdiction hastaken on the name of the Republic of Komi. As for the Saami,they are spread out across the northern countries (Norway,Sweden, Finland), as well as in the Russian Barents region.

In summary, the size of the public administration within theArctic economy is linked to the development of resources and toconcerns raised by their exploitation.

Public administration as an industry

Finland are the most densely populated regionsin the Arctic. Together, they represent threequarters of the Arctic population outside of theRussian Federation. They display a number ofcommon characteristics. For example, theircommunication networks, transportation infra-structures (including extensive road systems),commercial and personal services, and publicservices are remarkably advanced. Indeed, theirtertiary sectors are among the most developed

in the polar world and globally, with economicdiversification being the most advanced in theseareas. On the whole, these regions make animportant contribution to the entire economy ofthe circumpolar North, amounting to almostone fifth of the total.

In North America, the contribution to thetotal Arctic economy varies considerably acrossthe regions. Alaska has the second most impor-tant contribution on the circumpolar scale. Thisis due to the massive oil extraction and trans-portation from Prudhoe Bay south through theAlaska pipeline, and to a diversified economy,particularly in the southern and urban part ofthe state. By contrast, the contribution of theCanadian North to global circumpolar wealthcreation is much more modest, with its popula-tion widely dispersed through vast territories,and with regional economies much less diversi-fied than those in northernmost Europe.

Disparities among and withincountries

When looking at GDP relative to the per capitaGDP in the different regions, some significantcontrasts do appear. While northern Russiamakes up more than 66% of the total GDP ofthe circumpolar Arctic economy, the per capitaGDP in Russia is very low, in fact, uniquely so.At the other end of the spectrum, the Alaska percapita GDP is the highest among the Arcticregions, and far above the circumpolar average.Canada, whose contribution to the global Arcticeconomy is modest, has the second highest


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Arctic circleArctic boundary: AMAPArctic boundary: AHDR

Per Capita Gross Product. Circumpolar Arctic, regions and countries, 2001

$US

-PP

P (p

er-c

apita

)

23,532

17,877

28,404

39,915

18,893

21,939 21,577

12,327

45,107

15,127

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

NorthernRussian

Federation

CircumpolarArctic

Alaska FaroeIslands

Greenland Iceland NorthernCanada

NorthernFinland

NorthernNorway

NorthernSweden

Faroe Islands: 1,106(0.5%)

Greenland: 1,003(0.4%)

Northern Canada: 4,308

(1.9%)

Northern Finland: 12,201

(5.3%)

Northern Norway: 10,170

(4.4%)

Northern Sweden: 11,045

(4.8%)

Northern Russian Federation: 153,647

(66.8%)

Iceland: 8,097(3.5%)

Alaksa: 28,581 (12.4%)

Gross Product. Circumpolar Arctic, regions and countries, 2001(Millions of $US-PPP and %)

Arctic map by W.K. Dallmann,Norwegian Polar Institute

Circumpolar Arctic (230,156)

GDP per capita. These differences are the resultof multiple factors, including the scale of theAlaskan resource exploitation relative to popu-lation. In Russia, the large population and thegenerally poor economic situation, includinglow prices are largely responsible.

More interesting are the internal differencesthat may be extracted from these statistics. Theeconomy of Northern Russia represents a sub-stantial proportion of the economy of theRussian Federation. This proportion greatlyexceeds the Arctic part of the economy for otherArctic nation states (except Iceland, which is theonly country which falls entirely within theArctic region). This supports the conclusion pre-viously drawn about the importance of theRussian economy in the circumpolar and globaleconomies, and importantly, highlights thegreat role of the North in the overall Russianeconomy.

The economy of the northern regions ofFennoscandia also represents a substantial pro-portion of the economies of each of these coun-tries. This may be seen as evidence of the keyrole of some specific industries to the respectivenational economies (e.g. minerals and fisheriesin northern Norway, manufacturing and com-merce in northern Finland, etc.). It is also a signof economic diversification and the fact that theservice sector is comparatively well developed.Moreover, the northern parts of these countriesare much more integrated in their nationaleconomies. In other parts of the Arctic world,the contribution to the country’s national econ-omy is much more humble, even though it maybe strategically very important, for instance aspart of the nation’s resource supplies.

When calculated on a per capita basis, the dif-ferences between countries reveal another aspectof the Arctic economic reality, namely the highvalue of production in large-scale resource devel-

opment relative to population size. Specifically,the per capita GDP is higher in northern Russiathan in the federation as a whole, and the situa-tion is similar in northern Canada and in Alaska.Northern territories can be seen as wealthyplaces relative to the national situation, and infact, some of them with large-scale resourceexploitation are often perceived as such.

What the statistics do not reveal are the sig-nificant disparities that exist between regions ofthe same country. Within Russia for instance,massive economic activities are highly concen-trated in certain regions: the Tyumen Oblast cre-ates as much wealth as the seven other Arcticregions of the Russian Federation combined,and the Krasnoyarsk Krai creates as muchwealth as the State of Alaska. Within Canadathe economic indicators vary widely betweenregions with substantial large-scale mineralexploitation, such as the Northwest Territories,and regions where this sort of development ismore limited, as in Labrador. This suggestssevere regional disparities that should be prop-erly analyzed with more disaggregated data.

Import and exportThe balance between imports and exports ispoorly documented. However, it is still worthexamining from an explorative point of view.

As discussed earlier, the Arctic is exportingraw materials, such as minerals, gas and oil, fish,and sea food, in order to satisfy the energyneeds of industrial development and mass con-sumption. The presence of extractive industrieson a large scale in several Arctic regions gener-ates considerable wealth. It also increases geo-graphical differentiation: regions where it oper-ates are generally wealthier, and regions with-out such resources (due to insufficient quantitiesor exhaustion from previous exploitation) aregenerally poorer. Finally, it increases social strat-


Gross Product. Circumpolar Arctic, regions and countries, 2001(% of national GDP, and per capita difference)

Country or region Gross product as percentage of national GDP, 2001.(% of national GDP in

$US-PPP)

Difference between GDP per capita of the region (or country) and the

national level, 2001.($US-PPP per capita)

Circumpolar Arctic 1.87 n.a.Alaska 0.29 10,787Faroe Islands 0.71 -5,468Greenland 0.65 -11,123Iceland 100.00 0Northern Canada 0.51 12,785Northern Finland 9.63 -5,537Northern Norway 7.61 -7,681Northern Sweden 5.14 -2,603Northern Russian Federation 14.95 5,227Notes: n.a.: not applicable

ification between well-paid workers and con-tracting entrepreneurs in these export sectors,and less-paid workers in other sectors.

In this type of industry, not only resources butalso benefits are exported. Most of the time,these enterprises are subsidiary companies ofnational or transnational corporations, whichprovide them with the capital, technology, andknow-how that ultimately lead to sales on theworld market. They generally pay royalties andtaxes to central governments in whose jurisdic-tion they operate. Finally, they pay dividends tothe shareholders.

In sharp contrast, and because of limitedmanufacturing activity, the Arctic imports goodsand services on a large scale to meet internaldemands. Food is one of the few commoditieswhere the Arctic is sometimes able to meet its

own demands, by virtue of its own food indus-try. The Arctic imports petroleum products formachinery and motors even in regions produc-ing crude oil, and electricity even in regions pro-ducing hydroelectricity. It imports capital andtechnology for all purposes, including for somecustomary herding, hunting, and fishing prac-tices. Such activities are therefore embedded inthe market logic. The extent of this is so signifi-cant that the withdrawal of state support forreindeer herding generated a dramatic setbackin northern Russia. In general, the geographicalisolation brings higher costs for producers andconsumers, as transportation and work forcecosts are higher in the Arctic. Importers usesouth-north channels in a way that links thenorthern economy of a given country closelywith the metropolises. Consequently, most


The standard of living is uneven throughout the circumpolarArctic. In the following paragraphs, the formal incomes of indi-viduals are compared, whether from paid jobs, transfer pay-ments, or investments.

The Russian standard of living is the weakest in the Arctic.Moreover, some regions of northern Russia have much lowerpersonal incomes than the national average, and dramaticallylower than the circumpolar average. This is the case for theRepublic of Karelia, and the region of Arkhangelsk, the TaimyrAutonomous Okrug, as well as the regions of the Far East:Kamtchatka and Magadan, and the districts of Koryak andChukchi Autonomous Okrug. Even in regions that are relativelyrich in mineral resources, such as the Republic of Sakha, theaverage personal income may fall below the average for the restof the Arctic. Although salaries are generally high in the extrac-tive industry, these are only enjoyed by a small segment of thepopulation. In the Republic of Sakha for instance, about 16% ofthe workforce is employed in the mining industry where thesalaries are higher. For the vast majority of workers in otherindustries, salaries are lower when compared to the miningindustries, and most of the time, lower when compared to other

Arctic regions. According to Syrovatski (37), a reindeer herder’ssalary is usually less than 600 US$ a year. In other words, thegaps between incomes in different economic domains are espe-cially significant, and the majority of the population have lowerincomes than the national or the Arctic average elsewhere. Theeconomy of a few other regions, such as the Yamal-Nenets andKhanty-Mansii Autonomous Okrug, is driven by mega-scale oiland gas exploitation. In these regions, personal incomes areabout four times the average personal incomes in the poorestregions of Russia.

The situation is somewhat different in Fennoscandia, inIceland and in Greenland. In a circumpolar comparison, thepersonal incomes fall in the middle range. The standards of liv-ing in Iceland and in Greenland are higher than in Russia.Generally in these regions, the standard of living is also indi-rectly supplemented by considerable contributions from publicservices. This is however less the case in the Russian Northnowadays, which may help explain the widening gap betweenthe different regions of the Arctic. However, regional disparitiesdo exist in Fennoscandia as well. Some central areas providehighly paid jobs, while salaries in the northern periphery aregenerally lower (38). Differences between urban centers andrural areas are also important, both there and in Greenland,with large contrasts between the big municipal centers and thesmall settlements (39).

The standard of living is the highest in the North AmericanArctic with Alaska ranked top. Here again, significant differencesinternally do exist. For instance, in the Canadian NorthwestTerritories workers get high salaries from the mining industry,and, as a result, the income per capita is quite high. In Nunavut,the best paid jobs are in the government sector, and the averageis lower than elsewhere in the Canadian Arctic. In Nunavik,recent work from Chabot (40) shows that more than 55% of theInuit households, representing 68% of the total population, wereliving below the low-income threshold. Longitudinal studieshave shown that the Nunavik Inuit earn less than the non-Inuitworkers in this region, but the gap is very slowly narrowing (41).

The gaps between standards of living are significant throughout the Arctic

Personal Income and Personal Disposable Income Circumpolar Arctic, regions and countries, 2001

Country or Region Personal income($US-PPP per capita)

Disposable Income($US-PPP per capia)

Circumpolar Arctic n.a. n.a.

Alaska 31,027 27,099

Faroe Islands n.a. n.a.

Greenland 14,802 10,547

Iceland 18,068 n.a.

Northern Canada 26,166 21,253

Northern Finland n.a. n.a.

Northern Norway 22,171 14,608

Northern Sweden n.a. 11,448

Northern Russian Federation 5,843 n.a.

Note: n.a. : Original data not available

investments in the Arctic result in spin-offs fur-ther south, since they generally generate newimports.

This disequilibrium between exports (of rawmaterials, as well as economic rents) andimports, is a new element of the asymmetricalrelations between the Arctic and the rest of theworld. One of the main implications is that it isalmost impossible for the regions themselves tocover the costs of public services given the limi-tations of their fiscal capacity. Most of the time,they cannot benefit from large corporate profits,because the corporations are outside of theirjurisdiction. Also, in Arctic regions with limitedor no large-scale resource exploitation, costs ofpublic services must be covered by the capitalregions.

Transfer payments are another kind of import,which in many cases are an indispensablesource of funding needed in order to maintain aminimal level of public services. This is the casein the Russian Far East for instance. In certaincases, however, this is the price to be paid formaintaining the capacity for exploitation ofresources of a given territory. This is the situa-tion in certain areas where large scale resourceexploitation has generated substantial profits,and where the central powers wish to maintainjurisdiction over the territories. Transfer pay-ments also exist in places where the democraticsetting allows the residents to assert their rightsto be part of the deal. Negotiations of so-called“benefit-sharing agreements” would fall underthis category.

Theme summaryOverall, economic characteristics differ acrossthe Arctic with significant variations in both sizeand structure of the economy from one regionto another. While the Russian contribution tothe circumpolar economy is the highest, thepopulation’s standard of living there is the low-est. In Fennoscandia, the economy is generallymore diversified than in other parts of theArctic. Across North America, the contributionto the circumpolar economy is highly variable.The greatest concentration of relative wealth isin Alaska. The gaps between wealthy and poorregions appear everywhere but are mostextreme in Russia and North America. Finally,the asymmetrical relations between Arcticregions and the rest of the world should be sta-tistically documented, in order to support defi-nite conclusions.

Trends and forecastsWith increasing connections between the Arcticand the rest of the world, the future of the Arcticeconomy is highly dependent on global eco-nomic and political trends. These include thecontinued importance of mineral and hydrocar-bon resources, as well as the increasing influ-ence of private ownership.

Continued role as reservoir ofresourcesMost of the economic characteristics of today’sArctic were already apparent in 1978 whenArmstrong, Rogers and Rowley (42) publishedtheir work on the geography, politics and eco-nomics of the circumpolar region. For example,there was resource exploitation and export on alarge scale, and this had been the case for a longtime in many regions. Sugden’s historic modelof development in successive waves based onone key product (43, 44) also continues to bepertinent. The two major types of regions hedescribed, “Resource Frontier Regions” and“Downward Transitional Areas,” are still visibletoday (45). These economic phenomena consti-tute basic trends in the Arctic and are insepara-ble from the role of the region and its resourcesin the global economy. Therefore one can confi-dently predict that they will persist.

Furs and whales are still used in customaryeconomy to a great extend, but they are nolonger the most sought-after resources. Formore than a century, the vast quantities of min-eral resources, especially hydrocarbons, havetaken over that role in the Arctic. This exploita-tion is likely to continue in years to come, sub-ject to the conjunction of three principal factors.Firstly, the exploitation would be contingent onthe rising prices of metals that are abundant inthe Arctic, such as nickel and gold, which wouldrender exploitation of distant deposits prof-itable, notwithstanding generally high costs ofproduction and transportation (46). This pre-supposes that, in the long run, the demand forthese metals should remain strong.

Secondly, despite the weak increase indemand for petroleum over the past few years,economic and geopolitical factors have givennon-OPEC countries a new role in production.In particular, supply is rising in Russia (whichhas become the second largest exporter in theworld), in Canada, and in the United States (47).A considerable portion of the reserves underdevelopment is situated in the northern parts of


these countries: in Western Siberia, in theNorthwest Territories and the Mackenzie RiverDelta, in Alaska, and in the Beaufort Sea.

Thirdly, world gas consumption has beengrowing. In the coming decades, more new gaspipeline projects transporting this fuel from theArctic to markets, including southern Canada,the United States, Western Europe, and the veryfast growing market of China, would intensifythis type of exploitation. Taken together, thesetrends, if realized, will perpetuate the Arctic’sglobal economic role as a vast reservoir ofresources.

Privatization will affect the form ofeconomic developmentPrivatization is a general trend that alsoapplies to the Arctic. This trend in itself will notalter the Arctic’s economic structure.Nonetheless, it will affect the forms of eco-nomic development taking place, includingthose in the metal and energy sectors. This isespecially true for Russia but it also applies toother parts of the Arctic.

Since the break-up of the Soviet Union in1991, northern Russia has undergone profoundchanges. From a political perspective, territorialrestructuring and the pushing by republics andregions have led to an evolution of the uniontowards a confederate system (48). Theincreased power in the regions and republicshas laid the groundwork for dynamically devel-oping regional economies. Yet, at the same timeprivatization of the economy has led to signifi-cant economic declines in northern regions. Forexample, in less industrialized cities, the sale ofstate enterprises to private interests was used asan opportunity to shed social responsibilitiesinherited from the former regime. This led toprivatization expanding even further to alsoinclude services, such as healthcare and daycare.These services were seriously affected, if notcompletely abandoned. These phenomenaimposed new burdens on the citizens andharmed their quality of life.

Many cities in northern Russia experiencedwaves of emigration, an exodus of hundreds ofthousands of people (49) (see also Chapter 2.Arctic Demography). Such was the case inMurmansk, for example. Some of the richestcities were affected. This emigration was partlysupported by the central government, whosenew political framework favored freedom ofmovement and was no longer aimed at prevent-ing such emigration. In the midst of the eco-

nomic turmoil of the 1990s, especially in the FarEast, many villages, abandoned by publicauthorities, were deserted and became ghosttowns (50).

The implementation of privatization policieshas had a profound effect on the economicpractices of many communities, in particular inthe northeastern regions, including Yakutia,Chukotka, Magadan, and Kamchatka. Thesecommunities specialize in breeding reindeer. Asa result of the central government’s disinvest-ment, the domestic reindeer population fell bymore than one-third between 1991 and 1999,from 2.2 million head to 1.4 million (51). Oneresult of the reduction of this economic activityhas been a more settled way of life, instead offollowing the reindeer.

When the supply networks that supportedproduction and ensured distribution were cutoff or became intermittent, people also had tomake greater investment in hunting, fishing andtrapping activities. (52, 53). Among the Dolganand the Nganasan, more isolated now than inthe past thirty years, the main source of proteincomes from subsistence hunting, fishing andharvesting (54). Prior to the dismantling of theSoviet Union, reindeer and fish were obtainedthrough local markets, state businesses, andstores in urban centers. Nowadays the impor-tance of the domestic and community informalsectors has increased, and non-market distribu-tion of food products has developed. As localresidents no longer have money for moderntechnology, the diversity of prey has increasedwhile the distance covered has declined (55). Inshort, activities that comprised the majorexploitation of biological resources amongstindigenous peoples in the past have re-emerged.

Privatization does not only affect northernRussia. Greenland has proceeded with arestructuring of its state company in the fooddistribution sector, for instance. The operationsof the Greenland state company formerly calledKNI, Kalaallit Niuerfiat or Greenland Trade,were dismantled, and two distinct enterpriseswere created in which private interests will beheavily involved from now on. One is expectedto supply key market centers. The other, whichis responsible for supplying less populous com-munities, will receive financial subsidies. Thegovernment-supported policy of uniform pric-ing throughout Greenland, aimed at diminish-ing regional disparities due mainly to distance,has been modified (56).


Other aspects of neo-liberal policies haveaffected northern regions across the Arctic. Forexample in the Canadian North, restrictionshave been imposed on employment insuranceand social assistance. There have also been cutsin governmental services such as healthcare,education and subsidized housing. As a result,places such as Nunavut and Nunavik have been,and still are, experiencing a severe shortage ofproper housing. In coastal regions where sea-sonal fishing provides the bulk of monetaryincome, the tightening of admissibility criteriafor social benefits is having significant conse-quences. In other words, forces that promoteglobalization by means of privatization andneo-liberal policies are affecting the Arctic todayand will influence future development.

Partnerships and competitionThe North is experiencing diversification of theeconomy, particularly in Iceland, Fennoscandia,and in parts of Alaska, where the economies arenot as centered on large-scale exploitation of asingle resource. Examples include tourist devel-opment, especially ecotourism or “greentourism,” where the north of Finland andIceland serve as models.

A significant diversification is taking placeamong agents involved in the northern econo-my, where privatization has opened upresources to new investors. International part-nerships, for example between Russian andNorwegian enterprises in the energy sector, aremore numerous than ever.

In certain regions residents have concernedthemselves in development and are receiving aportion of the accrued profits, or at least some ofthe benefits. This is particularly true in regionsthat are rich in resources and have enoughpolitical power to enable residents to defendtheir demands with respect to planned develop-ment. This phenomenon can be observed in theregion of Yamal-Nenets and Khanty-Mansii,where political reforms and the abundance ofstrategic energy resources have allowed for theemergence of regional power. Similarly, this hasbeen witnessed in regions where large compa-nies have reached agreements with local andregional authorities, usually in terms of a bene-fit-sharing agreement. In some cases, the localauthorities or residents’ associations themselvesbecome investors or entrepreneurs. This activelocal participation limits the most adverseeffects of exploitation, because residents’ con-cerns are taken into account.

Social stratification can increase both within acommunity and between communities andregions, however, depending on who benefitsfrom development and who does not (seeChapter 8. Community Viability for further dis-cussion). Also, the economic activity encour-aged by this apparent convergence increasescompetition for resources. In regions lackingindependent political power, local vulnerablepopulations will feel the effects of competitionmore keenly. Examples of such situations maybe the Saami reindeer breeders, faced withsevere competition from the forest industry inFinland, and the mining industry in Murmansk.Another is the Nenets reindeer breeders facingcompetition from the petroleum and gas indus-try in Arkhangelsk.

ConclusionConsidered as a whole, the formal economy ofthe Arctic is of fundamental geo-politicalimportance. Indeed, it permits the production ofraw materials that contribute to meeting theneeds of the industrialized world.

However, the natural resources are distrib-uted unevenly in the circumpolar area and theconditions of their exploitation vary greatly. Inregions that are rich in mineral resources andwhere civil society exerts a real influence in thepublic arena, exploitation activities are super-vised. For example, big companies must guar-antee through tangible measures that the envi-ronmental impacts will be minimized or that theeconomic spin-offs for the local populations willbe maximized.

However, this type of supervision is recentand does not exist everywhere. On the contrary,there are numerous large-scale mineral andhydrocarbon production operations that havebeen carried out – and that continue to be car-ried out – with little concern shown for the nat-ural and human environment. These situationsare most common in regions where local resi-dents have little say vis-à-vis central govern-ments or big industry, for example in one-industry towns where the dominant industry’sconsiderable power allows for the virtual impo-sition of conditions on employees, their families,and other residents.

Another conclusion from reviewing the eco-nomic systems of the Arctic is the central roleplayed by the state. Accounting for the greatestnumber of jobs in several regions, the state is avery important economic agent. The state also


plays an important mediation role between pri-vate interests and civil society, for example toensure that the expectations of civil society arereflected in the practices of enterprises. Stateintervention has occasionally been decisive inallowing Arctic residents to play a larger role inthe market economy, not only as employees, butalso as entrepreneurs.

A global trend reflected also in the Arctic isstate withdrawal and privatization. In can bedrastic as in Russia after the fall of the SovietUnion or partial as in Greenland. In many cases,the withdrawal has divided residents and con-tributed to making the Arctic’s economic futuremore uncertain. Social policies may need to be apriority in order to counterbalance this uncer-tainty.

Gaps in knowledgeResource developments in the Arctic are basedon a wide variety of practices. Some are basedon a pure market ideology, while others makeroom for social and environmental concerns.The scope of this chapter did not allow for anin-depth analysis of different practices of theirimportance in the Arctic world. This should beone of the topics for a follow-up of the AHDR.

In most regions of the Arctic, economic devel-opment is viewed as the best way to promotesocial advancement. However, relationshipsbetween economic and social development arenot a given, nor automatic or unidirectional. Insome regions for instance, the domination of amarket ideology has created major social prob-lems, be it in decreasing social programs, or be itin harming the social and natural environmentof the Arctic residents. There is a clear need todeepen the relationships between economicdevelopment and human development in theArctic, rather than to assume that what is goodfor companies is good for societies. This modelshould be challenged empirically within the con-text of the Arctic, and by jointly analyzing datasets on both economic and social development.

In some regions, economic rents fromresource exploitation are so important that theycould cover the costs of public services, if onlyregional authorities could control the rent. Inother regions, economic rents have been re-directed toward regional authorities, but fewassessments have been made of the results ofsuch arrangements. Research initiatives shouldbe launched to analyze this, and to study theregional government arrangements and their

results. Such an initiative could be beneficial toArctic regions that are experiencing economicand social changes, where few models exist forcomparison. A major research initiative shouldbe launched to help shed light on the widerange of practices available. This could be a spe-cific focus for a follow up AHDR. One complica-tion in undertaking such an endeavor is the dif-ficulty of acquiring the appropriate data sets.

Indeed, difficulties in acquiring statisticaldata sets for the Arctic region that would allowfor rigorous comparisons have been experi-enced in creating this report. The AHDR wouldhave benefited significantly from a properaccess to circumpolar statistics. Our capacity todeepen our understanding of the economic andsocial situation in the different regions of theArctic is highly limited by the non-availabilityof statistics.

Chapter summaryThe formal economy of the Arctic is mainlybased on large-scale exploitation of naturalresources (e.g. mineral, oil and gas, and fish),most of which are exported. The service sector iswell developed in many parts of the Arctic,whereas manufacturing plays a relatively minorrole. Public services are often supported bytransfer payments from central governmentsbut overall, more money is flowing out of theArctic than into the region.

The large-scale exploitation of Arcticresources is important to the nationaleconomies of several Arctic countries, as well asin the global economy. This is especially true forthe Russian Arctic.

The size and structure of the economy differbetween and within countries. The gapsbetween wealthy and poor regions appeareverywhere but are most extreme in Russia andNorth America.

The Arctic is likely to continue to play a role asa reservoir of resources for the rest of the world.New trends are privatization of resources andnew forms of economic partnerships.

References and notes1. T. Armstrong, G. Rogers, G. Rowley, The

Circumpolar North (Methuen, London, 1978).2. S. Chatuverdi, The Polar Regions (Wiley, New

York, 1996).3. O. R. Young, Arctic Politics (Univ. Press of New

England, Hanover, 1992).


4. In such a geographic area, where varying politicalsystems and diversified economic practices can befound, it is necessary to employ a number ofsources and complementary methods. The sys-tem of national accounts measures transactions inthe formal economy, namely legal currency trans-actions subject to taxation. The system is usefulfor it enables us to describe very meticulously thesize and structure of transactions and economicflows, as well as compare the standard of livingthat may differ considerably amongst countries.The application of the system of nationalaccounts to the Circumpolar Arctic has neverbeen done before and constitutes a major compo-nent of this chapter. The data dealing with theformal economy have been taken from nationalstatistical organizations. They were processed tomake them rigorously comparable: they wereconverted into 2001 US$, and modified to reflectpurchasing power differences (which is referredto as PPP, Purchasing Power Parity).

5. The informal economy represents all of the eco-nomic activities that are not encompassed in thenational accounts. It includes four activity sec-tors. The domestic and community sector produces,distributes and consumes goods and services, inthe home or in the community, without resortingto monetary transactions. It is characterized by alimited number of intermediaries and a set oftacit rules based on the underlying motivationand ties that unite people involved in a transac-tion. The actual informal sector, is often associatedwith traditional activities, (C. Godfroy, Thesis,Université Montesquieu-Bordeaux (1997)), the activity of a single producer, or of micro-enterprises involved in the production of goodsor services, commerce, transportation or pro-curement. This sector’s transactions are notincluded in the national accounts; nevertheless,they all employ currency, and hence are legal orsimply tolerated (C. Michaud, Thesis (MBA),Laval University (1994)), or encouraged (A.Portes, M. Castells, L. A. Benton, Eds. TheInformal Economy (Hopkins Univ. Press,Baltimore, 1989)). The irregular sector and thecriminal sector are characterized by the failure tocomply with existing state regulations. Becausethis study is based on available data and isattempting to achieve a systematic analysis, itdoes not refer to the irregular and criminal sec-tors of the informal economy. Moreover, it doesnot focus on all of the activities of the actualinformal sector, or the domestic and communitysector. Indeed, available data concerning theinformal sector and the domestic and communi-ty sector generally deal with food-producingactivities, the production, distribution and con-sumption of food associated with hunting, fish-ing, trapping, breeding and gathering; they onlyexceptionally concern activities such as women’sdomestic work, including their role in this food

chain. The informal economy data come from abroad range of scientific literature and mono-graphs, since the transactions of the informaleconomy have not given rise to any systematiza-tion on the circumpolar scale.

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7. T. Armstrong, G. Rogers, G. Rowley, TheCircumpolar North (Methuen, London, 1978).

8. J. Newell, The Russian Far East (Daniel & Daniel,McKinley Ville, 2004).

9. J. Friedman, Regional Development Policy (MITPress, Cambridge, MA, 1966).

10. D. E. Sugden, Arctic and Antarctic (Barnes,Totowa, 1982).

11. Arctic Monitoring and Assessment Programme,AMAP, Human Health in the Arctic, http//www.amap.no/ (2002).

12. Arctic Monitoring and Assessment Programme,AMAP, The Influence of Global Change onContaminant Pathways, http//www.amap.no/(2002).

13 Arctic Monitoring and Assessment Programme,AMAP, Arctic Pollution 2002, http//www.amap.no/(2002).

14. J. L. Jernsletten, K. Klokov, Eds., SustainableReindeer-Husbandry (Centre for Saami Studies,Univ. of Tromsø, 2002).

15. A. Pika, Neotraditionalism in the Russian North(CCI Press, Edmonton, 1999).

16. Human Role in Reindeer/Caribou SystemsWorkshop, Proceedings of the Human Role inReindeer/Caribou Systems Workshop, Rovianemi,Finland, 10-14 February 1999 (Norwegian PolarInstitute, Tromsø, 2000).

17. T. Tuisku, in Social and Environment Impacts in theNorth, R. O. Rasmussen, N. E. Koroleva, Eds.(Dodrecht, Kluwe, 2003), pp. 449-461.

18. Shared Values, Common Goals, Exceptional Results.The Red Dog Mine Story. (Northwest AlaskaNative Association & Cominco Ltd., n.d), 26p.Myers, Heather. Changing Environment,Changing Times. Environmental Issues andPolitical Action in the Canadian North. InEnvironment (43 (6), 2001) pp. 32-44.

19. G. Duhaime, R. O. Rasmussen, R. Comtois, Eds.,Sustainable Development in the North (Gétic, LavalUniv., Québec, 1998).

20 L. C. Hamilton, in Arctic Economic Development andSelf-Government, G. Duhaime, N. Bernard, Eds.(Gétic, Laval Univ., Québec, 2003), pp. 49-61.

21. C. Neil, M. Tykkyläinen, Eds., in Local EconomicDevelopment (U. N. Univ. Press, Tokyo, 1998), pp.309-317.

22. E. Varis, in Local Economic Development, C. Neil,M. Tykkyläinen, Eds. (U. N. Univ. Press, Tokyo,1998), pp.154-170.

23. I. Krupnick, Polar Research 19, 1 (2000).


24. J. P. Ziker, in People and the Land, E. Kasten, Ed.(Verlag, Germany, 2002), pp. 207-224.

25. V. Golovnev, G. Osherenko, Siberian Survival,(Cornell, Ithaca, NY, 1999).

26. L. Granberg, L. Riabova, in The Snow Belt Studieson the European North in Transition, L. Granberg,Ed. (Kikimore publ., Helsinki, 1998), pp. 171-198.

27 R. A. Caulfield, in Sustainable Food Security in theArctic, G. Duhaime, Ed. (CCI Press, occ. pap. ser.,Univ. of Alberta), 52, 75 (2002).

28. R. C. Wolfe, paper presented to the Institute ofMedicine, National Academy of SciencesCommittee on Environmental Justice, 13 August1996.

29. M. Chabot, thesis, Laval University (2001).30. R. A. Caulfield, Greenlanders, Whales, and Whaling,

(Univ. Press of New England, Hanover, 1997).31. H. Ylinenpää, http://www.ies.luth.se/org/

Rapporter/al2001-48.pdf (12 September 2001).32. A. Kasvio, http://www.info.uta.fi/winsoc/engl/

lect/REGION.html (8 December 2000).33. A. Kasvio, http://www.uta.fi/~ttanka/finland.htm

(9 May 1997).34. M. E. Johnston, in Polar Tourism, C. M. Hall, M. E.

Johnston, Eds. (Wiley, Chichester, 1995).35. Except in Iceland, were they are third, after per-

sonal and commercial service36. Regina and Kozlov, 2000: 37.37. D.I. Syrovatsky, Organizatsia i ekonomika

olenevodcheskogo proizvodstva (Organization andEconomy of the Reindeer Husbandry Production)(Yakutsk, 2000, quoted in Sustainable Reindeer-Husbandry, J. L. Jernsletten, K. Klokov, Eds.(Centre for Saami Studies, Univ. of Tromsø,2002)).

38. A. Kasvio, http://www.uta.fi/~ttanka/finland.htm(9 May 1997).

39. Statistics Greenland, Greenland 1998 StatisticalYearbook (Greenland Home Rule Government,Nuuk, 1999).

40. M. Chabot, Kaagnituuruma! As long as I am nothungry. Socio-economic status and food security oflow-income households in Kuujjuaq (NunavikRegional Health Board of Social Services &Corporation of the Northern Village of Kuujjuaq,Kuujjuaq & Pontiac 2004). M. Chabot in TheCanadian Review of Sociology and Anthropology, 41,2 (2004).

41. G. Duhaime, P. Fréchette, V. Robichaud, TheEconomic Structure of Nunavik Region (Canada):Changes and Stability (GÉTIC, Université Laval,1999), http://www.chaireconditionautochtone.fss.ulaval.ca/extranet/doc/73.pdf (2004).

42. T. Armstrong, G. Rogers, G. Rowley, TheCircumpolar North (Methuen, London, 1978).

43. Arctic Monitoring and Assessment Programme,AMAP, Human Health in the Arctic, http//www.amap.no/ (2002).



46. A. Belkaï, in L’État du Monde, S. Cordellier, Ed.(Boréal, Montréal, 2003), pp. 78-82.

47. J.-M. Martin-Amouroux in L’État du Monde,S. Cordellier, Ed. (Boréal, Montréal, 2003), pp.75-78.

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AcknowledgementsStatistics on the formal economy and data on theinformal sector have been extracted from ArcticStat,the core infrastructure of the Canada Research Chairon Comparative Aboriginal Conditions, GérardDuhaime chair holder. Their compilation and pro-cessing were made possible thanks to the financialsupport of the Canada Research Chairs Secretariat,the Louis-Edmond-Hamelin Chair and theDepartment of Indian and Northern Affairs Canada.The authors are grateful to Pierre Fréchette of LavalUniversity, Eric Guimond of the Department ofIndian and Northern Affairs Canada, FinnChristensen of Statistics Greenland, Rein Billströmand Eva Lundström of Statistics Sweden, Ulla-MaaritSaarinen of Statistics Finland, Heidi Ryan of theNewfoundland Statistics Agency, and Heather Tait,Marc Pagé and Robert Aubé of Statistics Canada.


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