It’s as easy as it is fair to blame Justin Trudeau’s reckless policies for our current economic woes. After all Trudeau has set out to hammer Alberta’s oil and gas industry and grab up as much of our wealth as possible to ladle out in his big city Liberal strongholds of Montreal and Toronto. Trudeau has evidently been all-in on the motto of Keith Davey, campaign manager for Pierre Trudeau, who summarized the Ontario/Quebec-centric Liberal strategy in the 1980 election as, “Screw the West. We’ll take the rest.”
But enough with the Trudeau-berating for a moment.
It’s much harder for Albertans to look in the mirror and take their share of the blame for our lack of sound economic policy, in particular our failure to build up the Alberta Heritage Savings Trust Fund.
How unpopular is such self-reflection? Not in the least.
In 2015 then-conservative leader Jim Prentice suggested if any of us ever wonder about Alberta’s ballooning deficits “we need only look in the mirror.” For his fair and accurate assessment, Prentice was scorched on social and mainstream media.
But in his new political autobiography Strong and Free, former Alberta conservative finance and energy minister Ted Morton, a leading public intellectual, argues that Prentice was “100 per cent correct.”
Morton spares no Alberta leader, nor any other Albertan, in his convincing critique of our lavish provincial spending habits.
Morton argues Alberta is a petro-state afflicted by the “resource curse,” an over-reliance on annual oil and gas revenues to fund government spending. As economic historian Daniel Yergin described oil royalties and revenues, “In a petro-state the competition for these revenues and the struggle over their distribution becomes the central drama for the nation’s economy.”
Businesses, public sector unions and citizens all clamour for an ever greater share of the bounty, with Venezuela being the prime example, a democratic country that was once the wealthiest in South America now descended into corruption and poverty.
In Alberta, Morton points to numerous examples of our leaders winning favour from Albertans with massive hand-outs financed by oil wealth:
- In 1982, then-premier Peter Lougheed brought in a home-mortgage interest rebate program funded by resource payments that would otherwise have gone to the Heritage Savings Trust Fund.
- In 2001, then-premier Ralph Klein brought in subsidies for natural gas, then in 2005 spent $1.4 billion to hand out $400 “prosperity bonus cheques” to every Alberta resident.
- Before the 2008 election, then-premier Ed Stelmach bought labour peace and favour by assuming the Alberta Teachers’ Association’s $2 billion unfunded pension liability.
- In 2011, Alison Redford won the conservative party leadership by promising to restore $110 million in education funding, thus recruited many teachers to vote for her.
- In 2015, then-NDP leader Rachel Notley won an election partly on the strength of promises for no spending cuts in major areas of spending such as health care, eduction and government services.
“All the political incentives are to spend energy revenues, not save,” Morton said.
For a time in the 1990s, Klein got the province’s budget under control, Morton said, but Klein ramped up spending in his final years in power. When the Progressive Conservatives were finally voted out in 2015, the provincial debt was $11.9 billion. After four years of Notley’s NDP in 2019 it was $85.9 billion.
Of the $263 billion in resource revenue collected from 1977 to 2022, only six per cent was saved, Morton said.
“Oil and gas revenues became the crack cocaine of Alberta politics. The politicians became addicted to spending it. And their ‘customers’ — Alberta voters — became equally addicted to enjoying it, not having to pay for much of the government services we used.”
As for Premier Danielle Smith’s government, we can appreciate her commitment to balance the budget and bolster the Heritage Savings Trust Fund, but I note her new promise to quadruple spending on new schools in the next three years to almost $9 billion. This feels like more of the same old spending cycle, correct?
How to break out of it?
Morton argues the only antidote to the resource curse is for petro-states to bring in sovereign wealth funds, such as seen in Norway and Alaska, where it’s a matter of constitutional law and/or treated as a near-sacred responsibility for government to put a large portion of resource revenues into a national trust fund.
One can imagine the howling and outrage if Smith were to cut spending in health care, education and government wages and delay tax cuts in favour of such saving. I can’t imagine her taking such action, not unless she took the high ground and ran an election on such a promise, ensuring she had majority buy-in on a radical trust fund scheme, as wise and beneficial as it might be.