Warning: The boom out West is both a lure and a trap
April 26, 2008 | Globe and Mail | JEFFREY SIMPSON.
VANCOUVER -- Fundamental shifts produce winners and losers. In Canada, fundamental shifts in worldwide energy and agricultural prices bless the West and curse most of the rest.
The obvious gaps, therefore, between the three westernmost provinces and the rest of Canada will intensify. Even more people will migrate to these provinces; even more investment will flow there; even more of the country's wealth will be generated there.
Strains will show in federal-provincial relations, among other areas. The country's equalization scheme will be tested, with one of the two big payers, Ontario, no longer willing, politically, to subsidize others when its own economy is under siege.
Quebec will use its special political leverage to get noticed, but its manufacturing-based economy will still get hurt. Belatedly, it has realized that consumers should not be subsidized indefinitely with artificially low prices. Fortunately, Quebec has hydro power in abundance, which is more than Ontario can say.
Ontario will have to go nuclear, with all the huge costs associated with building that new supply. The province is also the centre of the car industry that will have to adjust more radically than at any time since Japanese cars arrived four decades ago.
Ontario's provincial budget is sapped by health-care spending. Its taxpayers bleed money through Ottawa to the five easternmost provinces.
Much of its basic infrastructure (transit, sewers, water mains,bridges) is old. The government in Ottawa is intent on scoring political points against those who run Queen's Park. Municipal governments are stretched.
The two largest, in Toronto and Ottawa, are largely dysfunctional.
Strains will also show in the Bank of Canada's monetary policy. A high dollar is great for commodity industries in the West, but a serious burden for manufacturers. With a productivity gap, between Canada and the U.S., of perhaps 20 per cent, a dollar at near parity is a job killer.
Not many years ago, the rest of the country thought of rich Alberta, period. Now the Saskatchewan economy is red hot. Farmers are planting record grain crops to cash in on the explosion in grain prices; money is flowing into oil and gas. The price for potash is going through the roof. Just over the horizon will be the nuclear energy boom that will spike demand for the province's uranium.
Even before the recent price surges, the Saskatchewan economy was humming, as the latest report from the Saskatchewan Institute of Public Policy documented. It showed that from 2001-2006, Saskatchewan had joined Alberta and B.C. in growing faster than the Canadian average.
British Columbia's forestry sector has a sea of troubles ahead.Snail-paced negotiations over aboriginal land claims cast a pall. Still, the economy is doing fine. Any province that faces Asia, with its soaring economies, is geographically well positioned.
The Alberta government has more money than it knows what to do with, witness to which was this week's budget that once again showered money everywhere. Also once again, the government displayed no vision,especially on sustainable development. Instead of trying to lead the world, Alberta is settling for a seat at the back of the bus.
The boom out West is a lure and a trap. It's a snap to ship raw materials to the U.S. and Asia. Demand is high. So are prices. Just plant and drill and scour, and count the money. It can be fun being rich. Spread cash around. Let the good times roll.
But the hardest thing in politics is to think ahead, way ahead. The No. 1 question every government in these provinces should ask is: Can't we do better?
Better means transforming more raw materials in Canada, wherever possible. Better means thinking not just of a Western gateway as a transportation system, but as a way of putting industries and people together to add value to what is shipped.
Better means not just drilling and scouring, but figuring out how to lead the world in sustainable development, so that when China and India and others decide they need to reduce their greenhouse gas emissions, Canadian companies and governments can show them how, and sell them the technology and know-how.
Better means making universities even better than they are, because using today's money to invest in tomorrow's minds is the best investment for when the commodities boom weakens.
Premier Gordon Campbell in British Columbia understands all this,better than any premier in the country. It's too soon to judge Premier Brad Wall in Saskatchewan. Alberta's government doesn't get it at all.
With commodity prices high, fundamental shifts are taking place in Canada, shifts that will continue. A lot of pain is coming in Central Canada, and some in Atlantic Canada, although Newfoundland's coffers will enjoy high oil prices. New strains will appear in Confederation.
Those who benefit from the fundamental shifts can clip coupons and enjoy the ride. Or, they can demand that leaders govern for a better tomorrow.