Published on: 12/30/2013 11:34:46 AM Print | Font Sizes:  Normal Text Large Text

What is it about three strikes that you don’t understand?


By: David Robinson

David Robinson, Economist, Laurentian University, drobinson@laurentian.ca.
David Robinson, Economist, Laurentian University, drobinson@laurentian.ca.

Here we are halfway though the playoff game in Canada’s Export Industry League. Alberta’s Big Oil Consortium (BOC) has been whipping Central Canada Manufacturing (CCM).

Energy exports have seen a $63.6-billion surplus for the past 12 months, and everything else has seen a $72.9-billion deficit. But maybe this is the inning when the game turns.

The real score-card tracks jobs created. Alberta brought in 10,600 new jobs in November. Canadian employment rose by only 21,600, so the Royal Bank reported that Alberta created half of the new jobs in Canada.

But not so fast! Ontario brought in 13,800 jobs and Quebec racked up 8,600. How can Alberta’s 10,000 be half if Quebec and Ontario alone produced twice as many jobs?

The answer is that B.C., for example, lost 8,000 jobs in November. Score for the November inning?

Central Canada 22.4, Western Canada 0.8.

Even more significant, the traditional extraction industries, including oil, added only 3,200 jobs, while manufacturing racked up 24,900.

The manufacturing sector represented by the Central Canada team was actually the underdog for most of Canada’s history.

Beaten repeatedly by teams from the Resource Exporters Division, it only started winning the 1960s. Fortunately, a century of being ‘hewers of wood and drawers of water’ had laid the foundation for a diverse and creative Canadian economy. We started the 21st century on track to become a manufacturing powerhouse.

In 2006, though, the Export Industry League got a new commissioner.

Prime Minister Harper, educated at Oil U in Calgary, came with old ideas about economic development. He committed himself to selling Alberta oil at any cost. And he was in a hurry.

Since the 1980s, anyone with half a brain knew that the "End of Oil" really meant that the world would have to stop burning the stuff. If you can't burn it, you can't sell it.

That is why energy companies are spending tens of millions supporting climate change deniers and pushing mystical concepts like ‘clean coal’ and ‘ethical oil.’

They have vast reserves of fuel that will be worth almost nothing when serious carbon restrictions are implemented.

If they don’t move Alberta bitumen soon, they may never move it. That’s also why Harper has been pushing the Keystone Pipeline, pipelines to the Pacific, and even pipelines to Eastern Canada.

The move-it-fast strategy depended on three things: growth in the U.S. economy, rising U.S. Demand, and dwindling U.S. Supplies of oil and gas.

Unfortunately, U.S. Growth went negative in 2008 and has been grindingly slow since. U.S. oil demand started to fall in 2005,

Demand is now down 10 per cent. U.S. oil production, which had been falling since the late 1960s, started to shoot up in 2008.

Now the U.S. expects to overtake Russia and Saudi Arabia as the world's largest oil producer by 2015. Oil prices have fallen.

The U.S. market is basically fried for Canadian producers. There were three big strikes against Harper’s strategy almost before he got started.

There was another problem with bringing back the resources-first policy. Like anyone with an elementary education in economics, Harper understood that the strategy would hurt Canada's manufacturing industries.

He gambled that the benefits would be bigger than the costs. He also gambled that high oil prices would last long enough to drive investment in other industries.

Alberta’s high-cost, low-quality oil only make sense when prices stay high. He lost both bets. The damage to Canada’s leading industries was much worse than he expected, the good time hasn’t lasted as long as he hoped, and Alberta frittered away most of the money it took in.

Northern Ontario has felt the pain too. High exchange rates hit forestry, mining and our mining supply sector.

The tragedy isn’t that Harper gambled Canada's growing industrial strength for quick money by selling Alberta tar. The tragedy is that he lost his bet but doesn’t seem to know it.

Harper came in with a bold plan. It failed. In baseball you may get three strikes before you have to face the music. In this game, where the stakes are so much higher, Mr. Harper is the umpire, and Mr. Harper doesn’t count strikes against his team.

comments powered by Disqus

Advertisement

Advertisement