Thursday, June 12, 2008

"Alberta defends spending oil cash OECD wants saved"

Having been through England, Bulgaria, Macedonia, Albania, Montenegro, Serbia, Hungary, and Slovakia over the past 3 weeks, I am now in Stockholm, Sweden, and expect to be here for a few months.

What should we make of the fact the OECD is taking the Alberta government to task over its spend instead of save mentality? The fact the OECD is criticizing a government is not notable in the slightest, but the fact the government here is sub-national is unusual.

The Globe and Mail has an excellent article on this. Note the bit about "the report was reviewed by senior government officials who had the chance to comment before its release". One of my jobs while working for Finance Canada was to respond to OECD requests for pre-release reviews. National governments might be able to ensure greater accuracy than a Paris-based organization could achieve on its own. you see. It wasn't often that there would be much to really say, however, beyond occasional revisions to raw data. Fact is, Finance Canada and the OECD are both staffed by and large by professional economists, so in terms of policy prescriptions, any objection would more likely come from one of the Minister's political people on the 20th floor that a civil servant on a lower floor.

... there's a growing recognition that Alberta's excess of cash is overheating the economy and causing it harm, Mr. Drummond said.

I'm not sure what Mr. Drummond's sources are, but as a candidate in this year's provincial election, I'd say "recognition " was pretty close to zero. If there was REALLY "recognition", the provincial Tories would not be so foolish as to be responsible for the Reuters wire headline you see at the top of this blog post.

That said, my former U of A economics prof says "In Alberta there is more and more pressure for people to think of this more seriously," and he (Andre Plourde) is far more connected than I am so there must be something to it. However, at this point I have to disagree with Dr Plourde's advice, "Don't be surprised if that kind of messaging comes out from the Alberta government in the next while." I would continue to be surprised, especially if the "messaging" was accompanied by real action. The academics and experts can publish report after report, but if I learned anything from the provincial election earlier this year, it's that it is very difficult to get political traction for such studies in a populist environment.

The past few months have, in fact, disabused me of some of my notions about politics. From my Ottawa office tower, I thought Alberta would be more amenable to fiscally conservative policies. It's younger, Western (which generally means more libertarian), and more dynamic in its approach to problem solving. But having lived overseas, it's rather painfully apparent that the populist tradition in Alberta, something I'd trace back to Social Credit, means Alberta will continue to be behind global trends, whether it be the building of sovereign wealth funds, movement towards consumption based taxation (which would include a carbon tax), electoral reform, etc.

The "dynamism" of Alberta problem solving applies to the private sector, not the public. I believe a key challenge for the public policy is the province is the populist skepticism of elites. According to C. H. Douglas, a pioneer of the social credit movement in Britain, "Systems were made for men, and not men for systems". Having travelled and/or lived in at least 34 European countries over the past 4 years and having a completed a "Master of European Affairs" degree in Sweden, I'm astounded at the power of Brussels' bureaucrats given the cacophony of languages, cultures, and varying levels of development in the European Union. I believe this to be in part because Europeans understand that the secret to government is protecting it from the daily mob. The Germans are so insistent on ensuring the someone with a PhD be addressed as "Doctor" that one of my Swedish professors said he was called "Doctor Doctor" because he had completed PhDs in two fields. More significant than any such isolated anecdote, however, is the fact that Europe's establishment learnt its lesson after the Dutch and French public shot down the proposed European Constitution in referenda, such that this time around 26 of 27 member states will not be putting ratification of the Lisbon Treaty to a vote. The exception is Ireland (and the Irish vote today, as a matter of fact!).

The point here is that the Globe and Mail article observation,

The idea that Alberta and Ottawa should take excess revenues from the energy boom and invest outside the country, Norway-style, has been bandied about for years. It's a concept that has gained credibility with intellectuals, but one largely dismissed by decision makers who would rather use the money here and now.

is quite telling. The "intellectuals" in Europe have influence, such that if they decide a common currency is efficient, start preparing for a common currency. In Canada, economic logic suggests Alberta should have either have its own currency or there should be a common North American currency, but you may be assured that the loonie will remain legal tender in Alberta throughout my lifetime and yours. As for Asia and the Gulf States, the masses are ignored not because they are vulgar because they simply don't have much use for democracy in the first place. So it is that Dubai's reigning Sultan is essentially the country's CEO.

Does this analysis, which further references my "cosmopolitan" experience, make me a snob? Of course. But note that I started from the opposite perspective: I was born and raised a proud Alberta conservative, who had little use for latte liberals. But I now see that while the good earth has more to teach us about human experience than ivory tower abstraction, there needs to be a firewall between the economic/fiscal and socio-psycho-spiritual realms such that conservative skepticism of the power of reason re the latter does not extend to the former. But more on that later...


Socred said...

Hi Brian:

In your article you state that C.H. Douglas was "a" pioneer of the Social Credit movement in England. Actually, C.H. Douglas is the originator of the Social Credit movement.

I do however like the use of his quote from Economic Democracy as it sums up the philosophy of Social Credit.

The article on Social Credit at Wikipedia has been expanded and would appreciate any comment on its content.

Take care.

Catherine said...

Hi Brian. I hope socred is right.

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