Add ‘Dutch Disease’ to climate change as real phenomena denied by Stephen Harper’s neo-Conmen

Prime Minister Stephen Harper, above right, presents his petroleum-development policy package to members of his oil patch caucus. Industry-financed Western politicians may not be exactly as illustrated. Below: the real Mr. Harper and Opposition Leader Thomas Mulcair.

If the Alberta and federal governments’ mismanagement of oil sands development were not so clear and their defence of their policies not so divisive and intellectually dishonest, one could feel a little more sympathy with their foot-stomping and tears of outrage at Opposition Leader Tom Mulcair’s diagnosis Canada suffers from “Dutch Disease.”

You could argue that the dose of Dutch Disease Canada has caught isn’t very serious, for example, or claim different economic factors are involved in other regions’ problems. But it’s pretty hard for anyone to make a serious case Canada’s currency has not been driven upward to some degree by the West’s bitumen boom or that our muscular petro-Loonie isn’t having some economic side-effects in other parts of the country.

Indeed, the Globe and Mail revealed yesterday that researchers contracted by Industry Canada concluded “a third or more of job losses in Canada’s manufacturing sector can be attributed to resource-driven currency appreciation.”

And this isn’t just major unionized manufacturing companies we’re talking about here – which the Harper Conservatives may have ideological reasons for wanting to weaken. Another report cited by the Globe, an attempt to debunk the Dutch Disease thesis by the Institute for Research on Public Policy, suggests the damage is mostly being done to “small, labour-intensive industries such as textiles and apparel.”

Economist Jim Stanford characterizes these hysterical attacks on the patriotism of anyone who dares suggest there may be two sides to the bitumen development coin as “Energy McCarthyism” by Conservative oil patch politicians like Prime Minister Stephen Harper, Saskatchewan Premier Brad Wall and Alberta Premier Alison Redford.

This is true enough, although the tactic is hardly performing up to its users’ expectations. From the perspective of most Canadian voters, it may not amount to much more than confirmation the Conservatives of the West are the crybabies of Confederation.

It is certainly not true – as the Globe and Mail stated as if it were unquestioned fact – that there’s a battle brewing between Mr. Mulcair and the Western provinces.

Excuse me! A lot of us out here in the West agree with Mr. Mulcair’s analysis – both of the economic effects of an overvalued petro-Loonie and the need to ensure any benefit analysis of bitumen extraction includes the costs of putting carbon inputs into the atmosphere, polluting and using up Alberta’s water, and cleaning up the mess after the foreign oil companies have taken their profits and gone home.

Furthermore, we share the suspicion that many of the economic symptoms of western bitumen development could be ameliorated by more Canadian control of the oil industry and domestic development of the downstream industry – not the 71-per-cent sellout of oil sands production supported by the fake-patriot Mr. Harper.

Like Mr. Mulcair, we’re not opposed to bitumen development and we’re not from the greenest fringe of the environmental movement. But we are, also like Mr. Mulcair, in favour of environmental sanity and putting the interests of Canadians first.

So this is not a fight between all of us here in the West and the leader of the Opposition. Au contraire!

And you can count on it that Mr. Mulcair’s arguments resonate powerfully in other parts of the country, or the federal Conservative reaction in particular would have been swifter and more vicious than the muted and hesitant efforts to date.

You have to know these guys are looking to unleash a million oil-drums of slime onto Mr. Mulcair – that’s their style. If they haven’t yet done so on this issue, it’s because their polling tells them the Opposition leader’s message resonates with many voters in many places.

This presumably is also why they’re not screeching about NDP being tax and spend socialists for advocating a sane taxation policy – because lots of recent polling has shown that a majority of Canadians are “tax-and-spend socialists” by that definition too.

The IRPP report, for example, sensibly argues that since resources constitutionally belong to the provinces, the federal government should treat Canada’s Dutch Disease symptoms by using “additional federal tax revenues stemming from natural resource booms to invest in infrastructural and other activities that bolster the competitiveness of the manufacturing sector as a whole.”

This, presumably, is precisely where Mr. Mulcair is heading with this debate. It is an argument that is bound to be persuasive to a large number of Canadians, including many of us here in the West. It is equally certain to be anathema to neo-Conservatives like our prime minister, his party, his “ethical oil” Astroturf shills and the significantly under-taxed foreign petroleum corporations that bankroll them all.

It is typical of the tactics of the Harper Conservatives to use wedge issues to intentionally divide Canadians along regional lines for electoral advantage, as they did cynically and openly in the long-gun gun registry debate, and then to disingenuously attribute the same strategy to their opponents.

It is ironic in the extreme that these professional climate-change deniers attack Mr. Mulcair as “ill-informed” and “foolish” when their own researchers and common-sense observation confirm his basic thesis.

That said, one feels that Mr. Mulcair and the Opposition are up to this debate and that these tactics will not go well for Mr. Harper and the Conservatives.

This post also appears on Rabble.ca.

8 Comments on "Add ‘Dutch Disease’ to climate change as real phenomena denied by Stephen Harper’s neo-Conmen"

  1. Sam Gunsch says:

    Another study documenting 'Dutch Disease'… Mulcair using evidence… the horror!

    Alberta politicians and executive class have so long operated in a 'free-fire-no-evidence-necessary-zone', they get hysterical when someone with a national profile actually responds in the reality-based world.

    But wait… the Calgary School has yet to weigh-in and get the Calgary Herald to print their news release. Sure to put that Mulcair guy in his place.

    http://www.cbc.ca/news/politics/story/2012/05/18/pol-cp-dutch-disease-industry-canada-jpbs.html?cmp=rss&utm_source=twitterfeed&utm_medium=twitter

    ===========
    And of course, D. Francis, that other raving socialist, was more than a year ahead of Mulcair.

    Diane Francis, Canada’s case of ‘Dutch Disease’
    http://opinion.financialpost.com/2011/04/16/canadas-case-of-dutch-disease/#more-12987
    excerpt: " …Canada is weak and vulnerable because it has an advanced case of the “Dutch Disease.” This is an affliction caused by a booming resource sector which drives up the currency’s value, which in turn drives out exporters, manufacturing and tourism.
    Canada’s looming predicament is well described in a report by MacroResearchBoard (MRB), an independent investment consulting firm. Located in London and Montreal, the report is headlined O Canada (Part I) and Uh-Oh Canada (Part II).

    This study, and its conclusions, should be required reading for every politician and executive in Canada.

    “A severe case of Dutch Disease has dramatically reduced the breadth of the Canadian business sector over the past decade, hollowing out manufactured goods exporters and making the nation increasingly reliant on commodity demand. Canada has often been referred to in jest as the 51st state, due to its historical reliance on the U.S. as a key export market. However, it is becoming more accurate to regard Canada as another Province of China,” writes MRB partner Phillip Colmar.
    ====

    …petrolization of Canadian democracy and the media by Albertastan.

  2. jerrymacgp says:

    The thing I don't understand is, why is it that Canadian industry, Canadian manufacturers, and Canadian exporters need a discounted loonie with respect to the greenback to compete in the US market? The Canadian dollar is not "high"; it's just at par, so that a Canadian dollar is worth the same (within a cent or two) as a US dollar. So why can't they still compete south of the Medicine Line (as you so charmingly put it)? Why are they so dependent on the loonie being the "Northern Peso" it was just a few years ago?

  3. The Mound of Sound says:

    Great photos. Only Nixon looks human. Notice how Harper's eyes are way too small and close together for the size of his head? And Mulcair's eyes? They're like something out of a zombie movie.

  4. The Mound of Sound says:

    @jerrymacgp. It's not the fact of parity but what lies drives it that matters. Petro-dollars are volatile. Ask Peter Lougheed. His constant complaint is that petro-bucks overheat the Alberta economy, draining away real value and leaving the economy shattered when oil prices retreat. If, because I have a back pocket stuffed with cash, I'm willing to pay 50-grand for a 25-grand pickup, I'm effectively out 25-grand. Just look at Alberta's historically convulsive real estate market. That plays out in a similar way throughout the Canadian economy. Just Google "Dutch disease" and read a bit about it.

  5. Dan Tan says:

    jerrymacgp,

    Your argument that "the dollar is not high" is wrong:
    _____________

    http://www.policyalternatives.ca/publications/reports/cure-dutch-disease

    International organizations (like the Organization for Economic Cooperation and Development) estimate that the “fair value” of Canada’s currency is about 81 cents U.S. (according to purchasing power parity, or
    PPP, standards).

    In the 1990s, Canada’s currency traded for well under this level, making Canadian costs and the prices of Canadian-made products and services seem highly attractive to international consumers and investors.

    As currency traders came to associate Canada’s currency with the price of oil (rightly or
    wrongly), however, this advantage was lost. The dollar began to
    rise quickly, shooting through its PPP benchmark, and reached
    par with the U.S. dollar by 2007, where it has fluctuated since.
    _____________

  6. James says:

    It's not so much the nominal value of the dollar but its buying power, and the value of the goods that dollar can buy, that's important. Also, Canadian industry is less productive than its American counterpart in general, partly because of higher costs e.g. labour and machinery. This is partially compensated for by a lower dollar. The govt should be using oil revenue and taxation policy to encourage improvement in woeful Cda productivity – across the board tax cuts do the opposite.

  7. Nordic says:

    The high Canadian dollar relative to the US dollar also means all exports return less money to Canadian producers. The reason is oil, gas, wheat, beef, forestry products, etc. are denominated on the international market in US dollars.

    So the higher the value of the Looney, the fewer Canadian dollars a barrel of oil or bushel of wheat can purchase. So the oil producer or farmer not only has trouble selling their product, but when they do, they end up getting fewer Canadian dollars.

    This is a real problem for Canadian farmers and other Canadian industry – not so much for the foreign owned oil industry. We need an industrial policy to counter this problem – the free trade rackets are not doing the job.

  8. GeraldR says:

    Woah. Look at Harper’s stare. I’m guessing that Ontario Liberals with luck just managed to save a few dozen manufacturing jobs. Since being elected his master plan has managed to liquidate over 200,000 good Ontario jobs in exchange for 15,000 oil patch jobs. But even Albertans are getting screwed out of refining and processing jobs: Harper’s grand plan consists of exporting those jobs to Texas, Louisiana and eventually China (some of his best ideas come from the Texans on the NEB). His manufacturing jobs plan is simple: take advantage of the 5% of goods that the oil patch buys in Canada. Note: even your mcjobs aren’t safe – they have TFWs for that (don’t be fooled – once the current controversy dies down – it’ll be business as usual).

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