Looking back in perplexity: where did all of Alberta’s money go again?

First World money and Third World roads. If we’re so rich in Alberta, why do we seem so poor? A motorist negotiates one of Edmonton’s famed potholes. Actual Edmonton drivers may not have snappy uniforms like this fellow. Below: Author, professor and former Alberta Liberal politician Kevin Taft, the cover of Follow the Money.

There aren’t many surprises in Alberta – at least if you’ve been paying attention.

However, apparently paying attention is something you can’t expect either the government or the media to do.

Consider the news in the Edmonton Journal earlier this week that “Experts have warned of ‘Bitumen Bubble’ for years.”

Well, yeah

This just in, reported the Journal: “…oil industry players have been warning about the phenomenon for more than a decade.” (Oil industry players, by the way, means big shots and their trusted flunkies, not the guy playing the piano in a house of ill repute. Just in case you wondered.)

Indeed, the Journal’s reporter noted, “a review of historical markets shows the gap between what Alberta oil sells for and the benchmark price for West Texas Intermediate has repeatedly hit $35 in the past two years.”

Well, it shouldn’t surprise us, I suppose, that Premier Alison Redford was surprised by the fact petroleum prices, known for their volatility, are volatile. There’s a long tradition of governments being surprised by the obvious – and this is not just true of Progressive Conservative governments, and it’s not just true in Alberta. But apparently that helps.

Which brings us to another related surprise. Don Braid, the Calgary Herald’s political columnist, who can usually be counted on to write a pretty good column, could be found shaking his head in astonishment recently about Ms. Redford’s astonishing claim that there’s almost no money any more because of the Bitumen Bubble.

“You have to wonder about a government that can pull off the remarkable stunt of going broke while the province it runs keeps getting richer,” Mr. Braid observed.

Well, actually, you don’t. You just have to listen to what former Alberta Liberal leader Kevin Taft, the best premier Alberta never had, had to say about this long, long ago.

As we said in this space back in January 2012, “Sooner or later, all conversations about the Alberta economy in the modern era come down to one key question: Where the hell did all the money go?” Indeed, where does it continue to go?

Or to put that another way, if Alberta’s so rich – almost double the GDP of the rest of Canada in recent years – how come it feels so poor? (And you only need to drive the potholed Third World roads of Edmonton to know how poor it feels!)

Dr. Taft, a former University of Alberta professor and director of the U of A’s Parkland Institute, answered this question, actually. It’s just that no one in the government or the mainstream media seems to have been paying attention.

So if we’re so rich, Dr. Taft, how come we’re so poor? Illuminate our fuzzification!

Last year working with researchers Mel McMillan and Junaid Jahangir, Dr. Taft wrote a book called Follow the Money, Where is Alberta’s Wealth Going?

Relying heavily on Statistics Canada’s CANSIM (Canadian Socioeconomic) and Financial Management System databases, Dr. Taft made a case that has not been effectively challenged by the government’s spokespeople, its apologists among the legions of far-right “think tanks” that serve as the Greek chorus for Alberta’s perpetual state of scarcity and crisis amid fantastic wealth, or far-right entities like the Wildrose Party that demand ever more vigorous attacks on public services.

So let’s review the places Dr. Taft was able to establish pretty convincingly are not getting our money:

  • It’s not going to government spending. For while government spending in Alberta seems to be perpetually managed incompetently by generations of Tories, who gyrate between throwing money at problems to massive and disruptive cutbacks, over the long term our government spends close to the Canadian average.
  • It’s not going to public services. “As a society, Alberta spends a steadily shrinking portion of its increasing prosperity on public services,” Dr. Taft showed in his book.
  • It’s not going to education. Comparing five-year averages to smooth out individual years’ ups and downs, spending on K-12 education went up 2 per cent, total, over 20 years.
  • It’s not going to health care. When you adjust for the size of the provincial economy, spending on health care puts Alberta last in the country. No matter how you measure it, “health care spending in Alberta and Canada is on a gradual long-term upward trend that is well within reason.” Over the long-term, smoothed out with five-year averages, health care spending in Alberta has been rising at about 1.2 per cent a year.
  • It’s not going to housing and social services.
  • It’s not going into savings. You can tell from a glance at one of Dr. Taft’s many useful charts that, as he puts it, “Alberta’s natural resource treasure wasn’t going into the Heritage Fund,” or any other savings pool.
  • And most of it is not going to personal incomes. Over the past 21 years, average personal incomes in Alberta rose about 35 per cent, accounting for inflation.

So where is it going? It’s going to corporate profits, that’s where.

And the greatest corporate profits are in the oilpatch, naturally.

In fact, so much of our money is going into corporate profit, Dr. Taft shows, that we’re actually selling our collective property at a loss to pad the corporate bottom line!

“Profits in Alberta have grown at rates simply unknown in other jurisdictions, often well beyond double the rates in other provinces and the United States,” he wrote. “There is no such largesse for public services, and the government is drawing down public savings rather than building them, doing nothing to prepare for the future.

“The transfer of public wealth to private shareholders is blistering, and our own government, rather than fighting like an owner, or even thinking like an owner, is just happy to find investors who want to cash in.” (Those investors, Dr. Taft noted as an aside – well before this became a national scandal – are frequently state-owned companies from such places as China, Abu Dhabi and Korea.)

How blistering? Well, corporate profits were up 317 per cent in the same period health care spending rose 28 per cent, incomes went up 35 per cent and education spending increased 2 per cent!

One question Taft said he couldn’t answer from the data he worked with is where all the money goes once it flows into these bloated corporate profits. But you and I don’t need a book to tell us the answer to that one: Most of it leaves the country for places where it does nothing for Canadians.

No wonder, when you think about it, that corporate special interests and their paid representatives in Canada are so aggressive in defending their “right” to rapidly export even more of our resources via pipeline to wherever – the environment, the rights of Canadians, and due process be damned!

Of course, Dr. Taft’s conclusions were not reported very enthusiastically in the media, either here in Alberta or anywhere else in this country.

I guess that’s why the facts have taken the Calgary Herald and the government of Alberta by surprise.

Follow the Money was published by Detselig Enterprises of Calgary and costs $12.95, and it’s also available as an e-book.

This post also appears on Rabble.ca.

6 Comments on "Looking back in perplexity: where did all of Alberta’s money go again?"

  1. jerrymacgp says:

    Another fundamental issue is that while the Alberta government, as well as the province’s municipalities, are on the hook for the extra spending required to keep up with the province’s rapid population growth and low unemployment rate, it has no way of garnering the additional revenue generated by that growth. The tax system is just not structured to collect the extra revenue. Instead, we keep on this endless cycle of increased spending when the economy is hot, or “priming an already overheated pump”. It’s the “anti-Keynes” economic model.

  2. Sam Gunsch says:

    Alberta’s had an right-wing market-cult propaganda problem since Klein got the keys, not a spending on public services problem:

    And if Taft is too left for AB’s MSM business journalists/pundit class & Calgary Exec ruling class, then let’s not forget there is also this guy:

    excerpt: ” Warrack, one of the architects of the iconic Alberta Heritage Fund, told the Tyee earlier this year that the province is being run like a “banana republic” for failing to collect fair rents for non-renewable resources like the oil sands.”

    excerpt: “Deficits, foolish giveaways to corporations at the expense of taxpayers, and environmental “carnage” without funds to fix it, according to Allan Warrack, a former minister in the Alberta government who nearly 40 years ago helped craft the province’s plan for saving and intelligently investing its oil wealth. ”


    in: Alberta’s Oil Wealth and the Big Question for Harper

    PM’s favourite province squandered its petro profits like a ‘banana republic.’ Is this any way to run an economy? By Mitchell Anderson, 13 Apr 2011, TheTyee.ca

    excerpt: “Warrack is a professor emeritus of business economics at the University of Alberta and former minister of lands and forests in then-premier Peter Lougheed’s cabinet in the early 1970s. Warrack then served as utilities minister and on the energy cabinet committee. He also authored a detailed history on the Heritage Savings Trust Fund and was a key player when the province famously revamped the royalty regime and set up the arm’s length oil wealth fund to benefit future generations. ”

    Mark Lisac was the last political commentator in the MSM that regularly shed light on the corporatist governance of AB, where Tories starting with Klein decided they should run AB as a joint venture corporation. Stelmach pushed the Big Oil partner too hard, and the family took him for a drive.

    Sam Gunsch

  3. ronmac says:

    I have a feeling Alberta’s oil woes may be short-term. I’ve been hearing that reports that these oil and natural gas fracking reserves in the US have been greatly exaggerated and they are just a creation of the Wall Street bubble machine.

    So that will put Alberta back in the driver’s seat. Except this is Alberta.

    It’s just a matter of time before the the oil companies (with the coke snorters from Wall Street in tow) will be knocking on Premier Allison or Premier Danielle (it doesn’t really matter, does it) and saying, “You know Premier you really got nice country up there in northern Alberta. Except for that ugly gooey tar sands. You don’t want that stuff, do you? How about you pay us $5 a ton to haul it away.”

  4. rangerkim says:

    That this is a surprise to anyone just beggers belief!
    What passes for moderate understanding of current social events here in petroland makes one wonder what the hell is going on. None of this is in any way difficult to comprehend.
    Some folks here are making big coin but most aren’t and there is just as many food-banks in Alberta as anywhere else. So how does your average Henry and Martha (I think Klien liked to refer to them) justify being left holding the bag while a few slick foriegners make off with the common wealth … and such wealth it is too.
    That’s the hidden side to this story; no idea whatsoever of just how much has been taken out of this economy.

  5. Paddy O'Gogue says:

    We need some bold leadership in this province – we should have built the nuclear reactor at Peace River when we had the chance. High tech jobs, clean, almost limitless energy, waste heat for bitumen upgrading, potential for electricity export to the US, BC, Sask. We even have our own uranium in the Athabasca Basin, which could have created thousands more new high tech, education-driven jobs.

    Same with the Calgary-Edmonton train – a maglev bullet streaking along the QE2 between two of Canada’s most innovative cities, advertising to the whole world that Alberta was not fazed by Asia’s success, we were going to take them on and win by creating thousands of high-tech manufacturing jobs and reinvigorate our province as a centre of science and technology excellence.

    The problem with this province is not one of policy, it is one of leadership.


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