In a speech from the throne on August 31, 1993, the Alberta government proclaimed the "Alberta Advantage."
"Unlike some others, my government will not try to buy prosperity through higher taxes. Instead, it will build on Alberta's existing advantage of low taxes and its free enterprise spirit to develop the most competitive economy in North America. The government will strengthen the Alberta Advantage and sell it aggressively around the globe."
Rousing words with a clear economic vision but how did it do?
For the better part of a decade, Alberta outperformed the rest of the Canadian economy. From 1990 to 2003, its economy grew by 57 per cent compared to 43 per cent for all of Canada (B.C. was slightly ahead of the nation).
By all accounts, this would seem to indicate the Alberta government's vision and strategy was the right one.
Except it was based on a one-industry approach. At the early 1990s, oil accounted for around 35 per cent of Alberta's GDP declining to 25 per cent by 2013.
This was not a consequence of a decrease in production. Alberta has been diversifying their economy as fast as possible. But the oil industry still provides the base. It is the source of the Alberta Advantage.
So it is perhaps not too surprising the advantage disappeared when starting in 2014 the worldwide inventory of oil hit record highs. The oil glut drove the price of a barrel of crude oil down with West Texas Intermediate, which had been selling at $125 per barrel in 2012, dropping to $26.55 by 2016. And Alberta's benchmark oil - Western Canadian Select - dropped to $14.10 per barrel making it the cheapest oil in the world.
The Alberta economy responded in exactly the way you would expect. It tanked.
Government revenues collapsed. Oil-based businesses struggled.
It is estimated close to 100,000 Albertans lost their jobs. The unemployment rate hit a high of 8.1 per cent and has only recovered slightly to 6.6 per cent this year (compared to 4.7 per cent in B.C. and 5.8 per cent in Canada as a whole).
Which leads to the question - what exactly was the Alberta Advantage?
I raise this issue for two reasons. The first is our good neighbours to the east are heading into a provincial election. The United Conservative Party - formed in 2017 by a merger of the Conservative and Wildrose parties - is running on a campaign of restoring the Alberta Advantage.
It is a promise to get back to the way things used to be - when Alberta was a "have province" with money to throw around and some of the lowest tax rates in the country.
None of this progressive nonsense. None of these restrictions on oil production. And, of course, leader Jason Kenney will see a pipeline built to tidewater.
Except Alberta doesn't control its own fate. As a country, we are price takers. In a world where commodity prices are set by large economies such as the United States and China, we function off of their good graces. Add in a restrictive free trade agreement and there is very little Alberta can actually do to alter its present circumstances.
A pipeline sounds good but the more oil Alberta sell overseas, the more it must sell south of the border at substantially reduced prices.
In the explanatory notes for our agreement with the U.S. it says "For example, if Canada in the future decides to implement measures to limit the consumption of oil, it can reduce exports to the United States proportional to the total supply of oil available in Canada."
And vice versa.
Any increase in production to satisfy a foreign market requires a similar increase in the amount of oil being shipped south. They are guaranteed a constant percentage of whatever we produce. As a consequence, for Alberta to start making money as it did in the old days, it would need to sell into the world market at prices far in excess of currently world prices to compensate for the losses on sales south of the border.
But is anyone going to actually see this?
Or is the promise of a return to the good old days going to win out and the United Conservative Party going to rise to power?
The second reason I raise this is Alberta is an example we should learn from. It put its eggs in one basket and when the basket fell apart, its economy followed suit.
In 2018, 18 per cent of British Columbia's GDP was tied up in Real Estate and Leasing far surpassing the Construction and Manufacturing sectors at 8.9 per cent and 7.1 per cent, respectively, and tending to a "one-industry" economy.
At some point, the bubble will burst and our real estate sector will tank. The consequences will be pretty much the same. Any economy built dominated by a single industry is not healthy. It is time to develop a plan to diversify our economic base.
