Two prominent Alberta-based institutes recently released reports that risk feeding the politics of envy that says Alberta’s economic success is unfair. Fortunately, a closer look at the reports combined with a clear understanding of federalism suggests that Alberta’s success is more likely to lead to prosperity for all.
In the first, the Canada West Foundation documents rising disparities between the four western provinces and asks, but does not answer, the question of how those disparities might be bridged.
In the second, the Pembina Institute combines 12 economic, 22 social and 17 environmental variables on an equal basis into a Genuine Progress Indicator that shows, as one headline summarized, “Albertans pay for prosperity.”
All the Pembina’s GPI really shows, however, is that if you subjectively combine enough variables, you end up with a subjective summary measure. To their immense credit, the authors readily admit this, and call for a debate. Well, here goes . . .
Not surprisingly, Alberta is doing well on the economic front. To combine two measures, Albertans are making more and working fewer hours. In constant 1998 dollars, Albertans earned an average of $25.64 per hour worked in 1999, up from $9.52 per hour in the 1960s.
On the social front, Pembina concludes that Alberta is not doing as well. This is odd, because although some variables have worsened since the 1960s, a number of critical ones have shown a remarkable improvement during the 1990s.
For example, the number of Albertans living below Statistics Canada’s Low Income Cutoffs fell by a commendable 20 per cent between 1992 and 1999. Most of this occurred when Alberta severely tightened its welfare eligibility and lowered benefits. Economic growth no doubt played a role, but it is noteworthy that much stronger economic growth of the late 1980s did little to reduce the number of Albertans below the LICO. Clearly, the welfare reforms played a role in the 1990s decline.
But how? A 1996 C. D. Howe publication showed that youth employment growth in Alberta was by far the strongest in the country during this period. Simply put, Alberta was moving young people from welfare to work.
For another example, a broad measure of income inequality (the Gini Co-efficient) has been falling steadily for the past 30 years in Alberta — in 1999 it was three-quarters of what it was in the 1960s. Further, unemployment has fallen dramatically in the 1990s, which is drawing record numbers of Albertans into the workforce.
Sure, Albertans may be slightly fatter and die in more car accidents, but at the end of the tumultuous 1990s, we are doing better at sharing our wealth than the critics ever predicted.
On the environmental front, Alberta has much larger emissions, is using much more energy and has seen large increases in “greenhouse gas emissions.” This would be much more worrying if the headline measures — water quality and air quality — had not improved so much in the past 30 years.
My brief but also subjective ranking suggests that a better headline for the Pembina story would be: “Albertans sharing their prosperity.” Alberta restructured its government in the early 1990s, and the result has been economic prosperity, better employment prospects and a reduction in the number of poorer Albertans. And by Pembina’s own ranking, little damage seems to have been done to air or water quality.
And it wasn’t just oil and gas that brought these successes. During 1998, oil prices fell to their lowest levels in 30 years, yet Alberta’s economy continued to outperform other provinces. Further, Alberta is now much less dependent on oil revenues than in the past — if oil and gas prices had been two-thirds of their 10-year average, the Alberta budget would have remained balanced in every year since 1994. In other words, Alberta treats oil and gas revenues as a one-time sale of an asset, not as a sustainable revenue source, which is why most of it is being used to pay down debt.
Which takes me back to Canada West’s question. When other provinces look at Alberta’s prosperity, they would do well to put away the politics of envy and pull out the principles of federalism. The core idea of federalism is that provinces have the freedom to experiment, which includes the right to succeed or fail. Other provinces are given the opportunity to replicate success and avoid failure in a collective race to the top.
That is why you hear a lot more these days about bringing the Klein-Harris revolution to B.C. than bringing the Harcourt-Clark-Dosanjh revolution to Alberta or Ontario. And that is also why the question raised by Canada West is so timely, and why the answer buried in the Pembina study is so important not only for Alberta and the West, but for the entire federation. And finally, it is why a number of us continue to urge the Alberta government to continue to lead the way — it is simply the best ticket to prosperity for all.
Ken Boessenkool is one of six authors of the Alberta Agenda, a proposal urging Alberta to make greater use of its constitutional jurisdiction.
He was also the author of Back to Work: Learning from the Alberta Welfare Experiment, published by the C. D. Howe Institute in 1996.