You might assume the rest of Canada has observed Alberta’s unfolding economic implosion with a bit of concern, if not outright alarm.
After all, as hard as it may be to recall now, this province was the country’s undisputed economic engine for over a decade.
Between 2000 and 2014, Alberta’s energy-fired economy generated more than $200 billion of net wealth for the nation’s coffers, while employing tens of thousands of Canadians who couldn’t find decent jobs in places like Moncton, Windsor or Kelowna.
As John Rose, the City of Edmonton’s chief economist once put it to me, Alberta’s oil-driven economic boom helped prevent a “social disaster” in many Canadian towns and cities where jobless rates remain perpetually high.
Before oil prices cratered in late 2014, crude ranked as Canada’s top export, and the energy sector attracted a third of the nation’s capital investment. When crude prices tanked, it erased $60 billion of annual income from Canada’s economy.
That works out to $1,800 for every Canadian, the Bank of Canada says.
Yet, the meltdown in the Alberta economy has triggered little concern in most other parts of Canada, where Prime Minister Justin Trudeau’s sunny post-electoral honeymoon continues apace, and few seem worried by the country’s increasingly fragile economy.
Two years into the worst recession in history, Alberta’s economic meltdown rates little more than a mention in places like Toronto or Vancouver, where I spent 25 years of my adult life. In conversations with family members and friends who live there, it rarely comes up.
A recent interview with federal Finance Minister Bill Morneau did little to reassure me that the Liberal government really understands the magnitude of the economic earthquake that has occurred in Alberta. He offered no clear answers in response to our pointed questions about the pressing need for new oil pipelines.
Perhaps that shouldn’t be a surprise. Morneau, who represents the upscale riding of Toronto Centre, exudes the same aura as his boss — someone who never had to get his hands dirty like the rest of us to pay the bills.
Most of my old Ontario pals have seldom set foot in Alberta, either. Ditto for my ex-colleagues on the west coast. Several have lived in Asia, but have never taken the hour-long flight to Calgary or Edmonton. That’s life in this highly regionalized, parochial country.
But it begs an obvious question. Now that the source of Alberta’s wealth has evaporated, and the province’s NDP government finds itself grappling with a projected 2016-17 budget deficit of nearly $11 billion, who is going to fill the gaping hole in the national economy?
High-tech? Auto manufacturing? Financial services? Aerospace? I seriously doubt it. None of them boast the scale, the global stature or the inherent cost advantages over their global competitors to replace Alberta’s all-important energy sector.
While real estate has recently become the biggest contributor to Canada’s GDP — thanks to overheated housing markets in Toronto and Vancouver — that sector also looks wobbly. Sales volumes in Vancouver are dropping fast in the wake of a new 15-per-cent tax on foreign buyers, and many fear a long-overdue correction is here.
Meanwhile, Trudeau’s economic agenda — such as it is — seems vague at best.
His obvious desire to downplay the importance of resources, and his avid embrace of an emissions-light, post-industrial economy — presumably built around high-tech hotbeds like Kitchener-Waterloo — doesn’t align with Canada’s current economy reality.
Trudeau’s oft-quoted Davos speech touting Canada’s “resourcefulness,” his efforts to cultivate ties with the likes of Bill Gates and BlackRock chairman Larry Fink, and his calculated photo ops at tech giants like Google and Microsoft are clearly designed to appeal to millennial urban hipsters.
That’s fine. That’s his base. But that doesn’t change the basic math. Sure, Canada’s services sector is growing. But it won’t replace the value of a healthy energy sector anytime soon.
Like it or not, Canada’s banks, insurance companies, design firms and high-tech companies are minor leaguers on the global stage. Services account for just over 15 per cent of Canada’s exports, or less than the $60 billion that was erased from Canada’s export revenues when oil prices headed south.
At the same time, Canada’s factory sector has also stumbled. Despite the faltering loonie, it has failed to benefit. Investment in manufacturing remains subdued, and Canada’s non-energy exports have actually declined in recent months.
Without a healthy Alberta economy, and a healthy energy sector, it’s hard to see how the struggling Canadian economy can get back on its feet anytime soon.
So far, that hasn’t mattered in the nation’s power centres, where Alberta’s economic pain is little more than a rumour. But with summer waning and the cool days of fall just around the corner, Canadians’ complacency may soon give way to something else.
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