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Thursday, August 06 2020 @ 12:15 MDT

Is Alberta heading for a fall?

Alberta PoliticsI have some concerns about the direction our province of Alberta is heading. Though we currently have huge oil revenue surpluses, it would seem that mismanagement of this revenue is robbing our future for short term personal gain. Case in point is the $300 or so “dividend” announced by the premier this past week. With an estimated seven billion dollar infrastructure deficit (roads, hospitals, etc) the government is going to dole out three billion dollars to Albertans. Laudable as a short term goal as I think no one would object to an extra couple of hundred bucks, but it fails to look at the long term.

Alberta\'s oil revenue is short term. The oil will not last forever, nor will the current high price of oil that generates the income. With the debt and deficit supposedly slain, now is the time to invest our extra money in things that will help the future of Alberta. Invest so when the oil money dries up, we\'ll still have the infrastructure we need. Taking our oil revenue and investing it by building and repairing roads, schools, hospitals is one way of doing this. Society as a whole would benefit from this investment for years to come, as opposed to the hours of benefit the $300 will give Albertans.

Part of the problem, I feel, is that the current government lacks direction. They were elected to get the province out of debt. They\'ve done that. Now they don\'t know what to do with the embarrassment of riches we find ourselves having here. The best they can come up with is a “hands off” to the rest of Canada and a $300 dollar cheque for people in Alberta.

I would suggest that if the provincial government is so concerned with Ottawa taking the money to give to poorer regions of the country, they could preempt this quite simply. Back during the last oil boom, Alberta invested in Canada by giving low interest loans to other provinces. This allowed the other provinces to use the money to help their people, without the evil bogeyman of taxes from Ottawa. It was win-win. Albertans got a long term investment for their lucky strike in oil, the rest of Canada got money to maintain their services for their people.

There are other implications of the invest in Canada route. First we look less like spoiled rich kids whining that everything belongs to us and screw everyone else. This means that when the oil bubble bursts, as it surly must do, we are more likely to get the help we need from the rest of the country. The current “hands off” attitude will come back to bite Albertans when the bubble does burst. What a lot of these people seem to forget is that before oil was discovered, Alberta was a have-not province, sucking at the federal teat for money. This could happen again, as could the world wide recession that caused the bust during the mid 1980\'s (it was not, as a lot of Albertans believe, the National Energy Program that caused the bust). Either would cause the oil revenue to dry up, and put the Alberta government in a financial crisis.

How much this crisis hurts depends on how well we manage our money now. If we properly invest the money in things we need and in other provinces, we\'ll have the infrastructure we need in the future as well as money to pay to maintain it. This requires some foresight, something the current government seems to lack, having fallen into what I call “North American Business Myopia”, or the inability to see beyond next quarter\'s profits. NABM keeps companies from being truly competitive since unless something pays off in the next three months, it won\'t happen, even if whatever is planned would guarantee long term profitability. Unfortunately our current provincial government has also fallen into this business trap. They will sell away our future for short term political gain. In the long run, it will hurt all Albertans.

Let me paint a picture of two Albertas. The first Alberta squanders its resource revenue in short term tax cuts and dividend cheques. When the oil bubble burst, this Alberta has nothing to fall back on. All the Americans who live here pushing for short term gain will leave, with the personal gain they acquired while here. All the oil companies will do the same. Government revenue will plunge and there will be nothing there to replace it. The strained infrastructure will collapse since it wasn\'t kept up in the first place so that tax cuts could be afforded and now there\'s no money to maintain what little infrastructure is there. The rest of Canada will laugh at how the mighty has fallen.

The second Alberta takes its resource revenue and invests it. A plan that takes into account future infrastructure needs is implemented. Money is invested in that plan so that when the bubble bursts, the infrastructure is there. Money is also invested both in Albertans and Canadians through low interest loans. Low interest loans to Albertans to diversify the Alberta economy so that the fall isn\'t so far. Low interest loans to other provinces to act as a source of income to maintain our infrastructure in the future. Now when the bubble bursts, it\'s a soft landing. The rest of Canada looks at us with sympathy and a willingness to help, as opposed to scorn and ridicule. The interest on the loans helps keep the infrastructure going. The economy is diversified so that more people who live here can stay here, working.

All it takes is a little foresight on the part of the government and the people of Alberta. Unfortunately, I don\'t see any of that from either, which will reap its rewards as the first Alberta and not the second. A shame really.
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