There is a lesson for British Columbia and for the rest of Canada in the sad story that is Alberta.
As Albertans prepare to head to the polls next month, a year earlier than they were supposed to, they are still coming to terms with how quickly their wealth disappeared and how fast their economy went down the toilet. Big dollars and good times hid how their lifestyle was built on a lie.
The fraud, of course, is oil and the idea that high prices were permanent. When a provincial economy is built on a single natural resource, with prices set internationally, that province does not control its own destiny and is dependent on others for its success. When the price crashes, as it has in the last year, the fairweather residents make their way home to other provinces, taking their expertise, their spending and their tax income with them.
Alberta likes to brand itself as Canada's Texas. Both jurisdictions, and their residents, like to live large, talk loud, work hard and play harder. They are both fiercely independent but socially conservative and traditional in their views. Both despise government in general and their meddlesome federal governments in particular, regardless who is in power. Once the surface is scratched, however, it turns out Alberta is nothing like Texas at all.
After oil, Alberta dabbles in agriculture, forestry and tourism. In other words, it's mostly a one-dimensional economy.
Meanwhile, in Texas, oil is just one of a number of lucrative industries propelling its powerful economy. Along with traditional sectors, such as agriculture and tourism, Texas is a global player in aeronautics, telecommunications, military equipment and computer technology. Silicon Valley near San Francisco gets all the press but Dell, AMD and, of course, Texas Instruments are all based in the Lone Star State.
The Texas economy continues to hum along, just like the many computers, software programs and microprocessors it produces, despite the drop in world oil prices. In fact, Texas is making matters worse for Alberta. Like Saudi Arabia, Texas is not cutting production. Its oil companies are continuing to send their product to market and apply pressure on high-cost-per barrel operations like the Alberta oil sands. Unlike Alberta, Texas also refines much more of its oil.
Texas learned its lesson from the boom-and-bust cycles of oil prices but Alberta has yet to have that lesson sink in.
Alberta could have been Texas. Alberta chose not to diversify its economy by plowing the tax proceeds from oil into education, infrastructure, research and development the way Texas did. Instead, it has kept taxes ridiculously low (Texas hasn't) and refused to introduce a sales tax (Texas has one, ranging from 6.25 to 8.25 per cent, depending on the county and region). Texas knows consumptive taxes are the most fair form of taxation for residents and the most consistently lucrative form of tax revenue for governments but Alberta still hasn't figure it out.
In other words, Texas invested in its future and is now reaping the rewards while Alberta, both its governments and its residents, spent like there was no tomorrow. Tomorrow has arrived and Alberta is receiving its just desserts.
Premier Christy Clark's LNG dream is already showing signs of being more dream than reality and maybe that's a good thing. Rather than making B.C. into a clone of Alberta, with a prosperous economy mostly based on a single natural resource, the slow increase in LNG capacity in B.C. will keep the province pursuing other development opportunities. B.C. should be trying to emulate Texas, not Alberta, meaning that if the LNG gamble pays off for B.C., that will just be a bonus for an otherwise healthy and diverse economic base.
"That's right, you're not from Texas, but Texas wants you anyway," sings its proud native son, Lyle Lovett, about a state certain of its past, present and future.
To borrow a cowboy phrase, our neighbours to the east with their oil economy appear to be all hat and no cattle. In B.C., we'd be wise to seek better examples to follow.
