Calling the business bluff in Alberta

The votes had barely been counted in Alberta when stories purporting to herald capital flight, particularly from the oil sands, were already appearing in venues like the Financial Post. As if on cue, the TSX fell 2%,the day after the Alberta election. What are we to make of this? Is Notley’s Alberta in the position of Rae’s Ontario 25 years ago, already being undermined?

An assessment of the NDP’s victory in Alberta grounded in reality has to account for the fact that the place of the oil industry in the province is, for the moment, being left largely unchallenged. This is no value judgment: support for the industry is the default position of most Albertans, not just elites. Given the economic importance of the oil industry and relative lack of economic diversification combined with the absence of a mass movement pushing against oil extraction and dependency, this should not be surprising.

The Alberta NDP’s program seeks to redistribute the gains from a resource economy largely left untouched. This general tendency is moderated by commitments to greater consultation with First Nations and an end to active lobbying for the Keystone XL and Northern Gateway pipelines. The latter, however, is a practical decision based on the small likelihood of these being built. All the while, for example, oil by rail continues to gather pace. The flip side of greater spending on social welfare are policies to recapture more of the proceeds of the oil boom while leaving its fundamentals intact: moderate tax increases and a planned royalty review.

For now, it seems the warnings of capital flight are thus a first salvo with a blank round. The dire words from parts of the business press and business elites are mostly bluster. Many business figures are actually taking a conciliatory tone; even the infamous “five CEOs” have taken it back. Fear-mongering is mixed with courting favour. (more…)

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Stagnant wages for over 80% of Canadian workers

Are wages in Canada stagnant or growing? The short answer is another question: do you live in an oil boom province? There’s a fairly common meme that while Canada, like the US, saw wages stagnate, this is no longer true. Indeed, overall wage growth has picked up since the last crisis.

The baggage that comes with this meme is that we here in reasonable, responsible Canada shouldn’t care about all those things that the US and European lefts are alarming about: no need to worry about inequality, austerity doesn’t concern us and so on. But while it’s a truism that we shouldn’t wholesale import analysis of another economy into the Canadian context, we are not immune to global trends. Yes, the US is a large economy with huge internal markets and this is a big difference; however, as a small, open economy, we cannot escape larger trends, especially with ever greater economic integration through free trade, freer movement of capital and international financialization.

One example of a phenomenon we haven’t really escaped is precisely wage stagnation. Here is a pair of charts showing wage growth since the end of the last recession in June 2009. They separate the three oil boom provinces (Alberta, Saskatchewan and Newfoundland and Labrador) from the rest of Canada. The first chart is from the survey of employers and shows the change in average real weekly wages . (It and all others are smoothed out to show the underlying trend, adjusted by provincial CPI and weighted by the size of the workforce in each province.)

120225 seph short


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Paths old and new: beyond the tar sands

This is an expansion of my last piece on the tar sands. The expanded form was republished as a Bullet at Socialist Project. I’ve decided to post the new bits here as they can stand alone.

On a path to nowhere

One way to see how this happens is to turn to the concept of path dependence from the language of mainstream economics. Path dependence is the idea that history matters and reverberates strongly in the present; more metaphorically, economic decision-making (whether about production or consumption) can follow increasingly well-worn grooves.  Indeed in many ways, path dependence is actually a powerful challenge to parts of the mainstream framework, undermining equilibrium and efficiency as paths can diverge from the “optimum” – and also potentially undermining rational choice theory as decisions viewed in isolation now seem irrational.

Even if the tar sands account for but 2% of our economy, getting off this path may be difficult. Taking seriously the idea that a large percentage of fossil fuels will have to be left in the ground to prevent even more dangerous levels of global warming, path dependence becomes even clearer. A recent report notes that 40% of “high-cost” oil projects planned over the next 10 years (requiring a high per barrel cost to break even) are in the tar sands. Despite the potential for volatility in commodity prices, even higher extraction costs or serious political intervention on climate change, the tar sands may continue to expand, a furrow that requiring we dig ourselves deeper and deeper into a climate hole.

The mechanisms are various. Canada’s history of staples-based resource extraction lays the foundation. Expanding infrastructure and expanding extraction reinforce each other: “if we have the pipes, we might as well fill them!” The existence of vocal lobby increases the chance that the now almost $1 billion in direct subsidies, low royalties and significant externalized costs remain absorbed by society at large and encourages further growth of the industry. High profit expectations (until 2009, operating profit as a percentage of sales was significantly higher in the resource sector than in other sectors of the Canadian economy) and an insular boom town mentality also contribute. (more…)

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The Temporary Foreign Workers Program and labour market discipline

While it is a truism that migrant labour built Canada, this same migrant labour has long been used to discipline domestic workers. Both facts are imprinted into the history of Canada. Today is no different and the Temporary Foreign Worker Program (TFWP) is at the centre of debates about migrant labour. Often missing from the debate are the deep links between labour policy, (im)migration policy and the ways these interact to undermine the power and solidarity of workers. (more…)

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