We have yet to feel the full Alberta effect
by Margret Kopala

Published in the Ottawa Citizen, January 7, 2008

A friend of mine was surprised to learn this summer that her modest, northeast Edmonton home was worth a small fortune. Today, a glut of properties on the market suggests lower prices even as landlords charge exorbitant rents to meet oversized mortgage payments.

Shades of 1980?

Following the OPEC crisis of the 1970s, the price of oil reached record highs and so did Alberta property values. The resulting boom busted under the weight of the federal National Energy Program leaving speculators holding mortgages that eerily anticipated America's recent subprime meltdown.

Today's oil prices, well within range of those 1980 inflation-adjusted highs, are again breaking records. Free marketers assure us that this time the reason is surging demand from Asian economies and American motorists, not geopolitical instability or depleting resources, though The Times of London's William Rees-Mogg's observation following the declaration of martial law in Pakistan that we're in "an international crisis, a credit crisis, an energy crisis and a dollar crisis," seems closer to the mark.

Little wonder, then, that in a world lubricated by 81 million barrels of oil a day (three million of which will come from Alberta by 2015), Alberta is in Canada's catbird seat, even if it means sustaining a bit of a credit crisis of its own. Adjustments, repositioning and a few hiccups, even major hiccups, along the way will be inevitable if Alberta is to survive as something more than a wasteland of itinerant in-migration, endless urban sprawl and environmental degradation from tar sands extraction and upgrader activity.

So far, "Steady Eddie" Stelmach is holding his own. After a roller-coaster year including a by-election loss to the Liberals of former premier Ralph Klein's Calgary seat, the new Alberta premier from northeastern Alberta played his populist hunches accurately and squeaked his controversial oil patch royalty scheme through. This positions Stelmach to win any forthcoming provincial election though he can expect a fight from the (probably) soon-to-be-merged Alliance/Wild Rose Party. Comprising a motley crew of former Alberta Reformers strongly influenced by Calgary School veterans, it will be the new voice of the Calgary Effect promoting everything from constitutional change to hands-off policies in the oil patch.

If the Calgary Effect is making itself felt provincially, its national influence is already evident in Ottawa's minority government where a Calgary MP is the nation's prime minister. But as Thomas J. Courchene of Queen's University argues in his paper "Alberta: the New Dominant Player in Confederation?" published by the Institute of Research on Public Policy in June, Alberta's fiscal and economic pre-eminence has not altogether translated into a corresponding degree of political power and influence. To be sure, Alberta is endowed with world-class research and industrial centres and has also assumed a leadership role in promoting pan-Canadian provincialism through its landmark Trade, Investment and Labour Mobility Agreement with British Columbia. But it has yet to meet the challenge of devolving meaningful powers to municipalities, says Courchene, and allowing its corporations to play a bigger role in immigrant selection. Alberta also has the fiscal and "fossil" flexibility (in tandem with neighbouring hydro and nuclear resources) to forge its own world-class environmentally friendly approach to the energy sector.

And how to offset Alberta's boom-bust cycle that invariably triggers a similar, opposing, cycle in Ontario's manufacturing industry? Fixed exchange rates with the U.S. may be the only solution: "The underlying issue here is that the overall size of the Canadian economy is far too small to accommodate both one of the world's premier energy export clusters and a world-class export-oriented manufacturing sector -- under flexible exchange rates."

The Calgary Effect will be felt across Canada in other ways, too. Think increased demand for equalization from poorer provinces losing skilled and unskilled workers to Alberta, not to mention Alberta's income tax rate. Now the lowest in North America, it is generating competitive pressures across the country. And Alberta, like Quebec, will be a prime beneficiary of "open federalism" because "it provides the province with political room to manoeuvre, i.e., to become more of a nation within the Canadian state."

As the world changes, so too will Canada change. Are we ready? Courchene concludes that our federation will continue to work in "weird and wonderful ways, the only change being that Alberta is now about to take centre stage in this evolution."

To comment, please send Margret an e-mail.