Friday, April 10, 2020

Alberta's Cancelled Future

The triple shock of the oil price collapse, the COVID-19 lockdown and the abandonment of democratic government by the UCP government in power in Alberta (Bill 10) all make clear that any sense of the future for Alberta is off the table. Alberta’s future is yet to be determined. What is clear is that the future some thought we had will not be that future.

That future will need to take account of a very different reality.

·      A world-wide recession, with only China and India anticipating any economic growth in 2020 and modest return to growth in 2021 for some other countries.
·      Depressed markets for Canadian and Alberta goods, as the world shifts from a trading global economy to a more local and regional models of trade.
·      Disrupted supply chains which will take time to reconfigure as some key components of those supply chains will no longer operate.
·      High levels of corporate debt – some too high for some corporations to service – linked to lowered levels of consumer demand, requiring new business models.
·      High levels of unemployment, with Canadian and Alberta growth collapsing leading to 20-25% unemployment.
·      A complete reconfiguration of some industries, especially hospitality and tourism, retail, restaurants, small and medium sized oil and gas producers and service businesses which account for 78% of the Canadian economy.
·      Continuing battles between oil producers (especially Saudi Arabia, Russia, US) with Alberta captured between the players unable to really influence either production levels, price or markets. This also will impact the willingness of investors to invest in heavy oil. There will be  a real big shakeout here.
·      Significant levels of Alberta government debt – way beyond the $43.5 billion in net debt already known before COVID-19 and increasing daily as revenue streams (oil and gas royalties, tax revenues) collapse and bankruptcies grow. The deficit will balloon in Alberta, even though we were spending less than any other province on government programs relative to GDP (14.4% versus a cross Canada provincial average of 21.7%).
·      Significant disruptions to communities, with municipalities, school boards, community based organizations being pushed to engage and rethink what they do, how they do it and how they fund it.
·      Growing concerns about the displacement of people, social unrest and the impact of inequality on the way individuals, families and communities respond to the post COVID-19 world.
·      There are new relationships between Federal and provincial governments – interdependencies that matter. Those who favoured Wexit and separation should by now have realized the mutuality of these levels of government. Notice how quickly Alberta closed access to benefits for the laid-off and unemployed and pushed them instead towards Federal programs. Notice how quickly Alberta sought Federal help on a variety of issues.

There is no real sign of COVID-19 going away as an issue or factor in all our activities anytime soon. Until a vaccine is found, tested, approved and is available and all are required to receive it, then working will be problematic. Face masks, now optional, will likely be compulsory and new measures will be in place to limit risk and exposure. The world will not return to the pre-COVID-19 state any time soon.

Options for Alberta

There are several challenges and opportunities Alberta has to respond to. In doing so we should adopt the mantra Peter Drucker was fond of using: “never let a good crisis go to waste”.

There is an opportunity for Alberta to seize the present time and change the future trajectory. Give up the 1970’s thinking that was driving the provincial strategy – low tax, oil and gas, competitiveness, governments as debt free – and build a new frame for understanding what Alberta can become.

1.    Enabling wellbeing and health.
2.    Rebuilding communities and ensuring safe communities.
3.    Reskilling and upskilling the workforce.
4.    Stimulating the economy.
5.    Rebuilding the economy around emerging industries.
6.    Doing what we can for the small and medium oil and gas producers.
7.    Strengthening education and refocus apprenticeship.
8.    Restoring trust and accountability in our government.
9.    Rethinking provincial and municipal financing.
10. Invest in young people.

Enabling Well Being and Health

Community and personal health and wellness will be a challenge for sometime. Rather than cutting health care and privatizing it, now is the time to ensure that we are ready for the second wave of COVID-19 and the pandemic after this one. We know more now about the capacity of our health system and it is time to strengthen these capacities. We also know more about the importance of public health investments – making vaccination mandatory, ensuring health check-ups in schools, tightening regulations for seniors care are all now measures that need to be taken.

Until a proven vaccine is available for COVID-19, face-masks should be compulsory in public places and restrictions on large gatherings should be mandatory.

Health is not just about health care systems and hospitals, it is about each us. A renewed focus on teaching about health, wellbeing and diet needs to be a part of the school curriculum.

Rebuilding Communities

Many communities demonstrated real and deep compassion, especially for the most vulnerable.  But this was not universally the case. There will be real emerging issues around food security, safety in the community, crime and social justice.

Cities need a renewed focus on community, compassion and social justice. There is a need to drive a relentless focus on enabling social action through community organizations with the aim of ending poverty and homelessness and making all communities safe.

Reskilling and Upskilling the Workforce

Unemployment will be high, especially in the service sector. Every citizen of Alberta between the ages of 16 and 65 needs the opportunity to upgrade their skills and develop their competencies and capabilities. A training allowance, similar tp that available in Singapore, a new model for apprenticeship based on competency assessment not time served, the expansion of short skills programs and micro-credentials should be urgent priorities for colleges, polytechnics and universities. Put back the $400 million taken out of the higher education system in Alberta, but demand significant changes to make more courses available more often to more people.

Focus the system on future skills – the skills needed for the next economy and the skills needed to rebuild communities.

Stimulating the Economy

Invest in infrastructure projects that Alberta needs. Increase intended capital spending from $6 billion a year to $10 and support fast-tracking municipal spending on light rail transit and the transport infrastructure. Partner with the federal government on a 3 – 5 year plan to break the back of Alberta’s orphan wells problem. Make good on promises made to end homelessness by building affordable housing. Alberta should have no homeless persons by 2030 – all should be housed in small homes or residential facilities.

Rebuild The Economy Around Emerging Industries

Our next economy is not one focused on oil and gas extraction. It is about technology innovation, green energy, bio-economy and agriculture. Stop provincial subsidies to oil and gas estimated at over $1.3 billion a year, restore tax credits for technology companies, focus new investments in Alberta’s innovation eco-system and leverage the potential of ATB and AIMCo not as oil and has “proper uppers” but as engines for the next economy. Create shareholder tax credits for investments in new Alberta companies or existing ones.

Doing What we Can for the Small and Medium Oil and Gas Producers

There is no such thing as the “energy industry”. There are firms of varying sizes providing a range of services and production for oil and gas. The large companies have assets which they can use to borrow against at a time when interest rates are the lowest they have been in two generations. The small and medium firms, however, are in trouble. Invest in regional networks to convert many of these operations to green energy.  Help lubricate mergers and acquisitions so as to move small firms into co-operate or larger entities to streamline costs and improve productivity. Stop seeing the task of government to bank roll firms which the private sector does not want to invest in.

Strengthening Education and Refocusing Apprenticeship
Education is the key to a different future. As Nelson Mandela observed: “education is the most powerful weapon we can use to change the world”. Rather than cut school, college, polytechnic and university budgets, we should expand them but rationalize the system. Merge the polytechnics, create a single college system by merging all of the colleges, invest in our universities but stop them competing – demand collaboration and co-operation, especially in relation to research and development.

For the next five years, lower the cost of tuition dramatically for key skills in demand. Rethink apprenticeship around e-portfolios of demonstrable competencies and remove the focus on time-served as the basis for journeyman status. Introduce degreed apprenticeships for advanced apprentice skills. Lead North America in re-imagining this work.

Restoring trust and accountability in our government.

Citizens responded well to evidence based and science based decisions during COVID-19 lock-down. Learn from this. Learn that sharing the evidence on which decisions are being made, trusting science and evidence and those who work to ensure validity are all part of effective government. Restore democratic functioning and public accountability. Stop dismantling institutions and processes intended to hold government and its officers to account. Strengthen ethical and judicial oversight. Build a government driven by focused, evidence decision making and a commitment to social justice. Focus on trust-building. Stop the “smoke and mirrors” of politics as usual and develop the spirit of “politics as unusual” – truth telling, evidence sharing, option sharing, transparency and accountability should now be the norm.

Rethinking provincial and municipal financing.

Municipalities are the front-line in the work of community building and development. Yet their budgets are broken even if their spirit is not. They need assurance that agreements made in good faith will be honoured. All municipalities need additional powers to raise funds. Give them these powers but hold them accountable for outcomes.

Invest in young people.

We need young people to want to live,  work and play in Alberta. They need to see Alberta as place that values youth and provides for them. Strengthen education, cultural organizations and the community networks young people value. Provide support for their entrepreneurship and innovation. Enable their talents to be developed to the full and they will stay.  Make apprenticeship or a college / university education affordable. See learning and innovation investments as the new Alberta advantage.

Funding the Future

All governments fund the future through revenues and debt. Alberta needs a sales tax that stimulates economic growth, replaces oil and gas royalties as revenue sources for government and creates an economic playing field that makes sense. Jack Mintz has suggested in the past (2013) that a 13% harmonized sales tax and a raising of personal allowances would be more than sufficient to enable the work Alberta needs to do – 8% PST and 5% GST with the rise in personal allowances being significant enough to offset some of the impact of raised taxes. Do it now. Alberta is ready.

Borrow what you need to borrow to enable the next economy and the next level of social justice to be achieved in Alberta. Interest rates are low and the province has a low deb to: GDP ratio. Limit such borrowing so that net debt is no more than 40% of Alberta’s GDP. Increase oil and gas royalties so that we can rebuild the Heritage Savings Fund – all royalties go to it and stay there until the fund reaches a target of $500 billion.

Challenge ATB to become Alberta’s lender of choice for emerging industries and reduce their exposure to oil and gas. Do the same for AIM Co.

This is also the time to undertake a major rethink of all government activity. Do not focus on savings, focus on rethinking and re-imagining what government can do – focus on outcome and impact based budgeting, not just comparative costs.

Pulling Alberta Together

We need to stop the nonsense talk of Wexit and separation, especially given the clear co-dependency of all in Canada on each other. Now is the time to reimagine Alberta. It’s the big reboot. Make the most of it.


Mary said...

This is a brilliant article and truly a roadmap for Alberta's future- thank you.
Mary Samide

Marlow said...

it is an opportunity to renew the ecology of the regions what are your thoughts on preserving lands and wildlife?

Ruben Nelson said...

Please lead the charge on these ideas. They will push us about as far as we are wiling to go. Even to get this far we have to be really pushed.
We both know that these changes are only the beginning of what the 21st Century will demand from us. But they are a beginning... an attractive illusion that will get us moving. All good. We can learn along the way that that the Modern Techno-industrial imaginations, aspirations and polices which now dominate our media, governments and politics are a delusion which lead only to destruction of life as we know and love it. Your ideas begin to open us to the possibility that Albertans are capable of more then merely have the top 25% of us get rich.