economics

It has come to this…

I have been placed in a very weird position. This week’s election results in Alberta, in which Rachel Notley handed Jim Prentice an historic electoral slapping, has made me agree, I think for the first time, with something said by Kevin O’Leary, the bloviating former CBC in-house tycoon.

In his reaction to Notley’s win, which naturally he wasn’t real happy with¬†(caution, clicking link will produce a visual of Kevin O’Leary speaking words), he predicted “disaster” in what “was the shining light of capitalism in North America”.

I disagree with the certainty of the coming disaster, but I cannot agree more that Alberta was the shining light of capitalism in North America. Well, at least the modern incarnation of capitalism. The reason, to put it bluntly, is that modern capitalism has little to do with the actual production of goods or services and more to do with the blind extraction of money in the most direct way possible. Alberta, sitting on lakes and lakes of liquid money, was indeed a veritable nirvana of “capitalism”.

The problem for Albertans with that is obvious – what happens when the oil, the oil companies, and the high-paying oil company jobs, are all gone? This “shining light of capitalism” has done relatively little to build an economy that is equipped to make this transition, and the transition is going to come one way or another, very soon. Whether it is because the last oil is drained from the last reservoir or because technological advances motivated by climate change reduces our reliance on hydrocarbons, the time is coming.

Of course it’s not the job of modern capitalism to plan for this. Modern capitalism is not much more than a shareholder demanding quarterly gains, details and future be damned, and when the money stops coming from one location, he simply moves to another more profitable place like a modern-day pilgrim.

Notley, by all accounts, is a pragmatic politician and will know both that right now¬†petroleum is a large part of Alberta’s economy and that it is a rapidly diminishing resource. It’s not really a secret that the main reason the tar sands are being exploited now is that they are the last large petroleum¬†reserve left in the province. Sure, production and exploration continue elsewhere, and new fields are being discovered, but new discoveries are few and small in comparison, and significant finds are becoming increasingly unlikely.

By exploiting a controversial, expensive, and damaging resource like the tar sands, it is obvious that Alberta is beginning the transition to a post-petroleum economy, whether they will admit it or not. They need someone at the helm that can steer the transition. Whine as O’Leary might, the grown-ups have to worry about the future of the province, and the Progressive Conservatives have shown no indication that they were at all interested in doing that. They chose the easy way out every time – expanding resource extraction while keeping regulations and taxation as corporation-friendly as possible in order to keep the easy money flowing.

It is too early to say how Notley will handle these challenges, but O’Leary’s contention that Alberta “was” the shining light of capitalism is absolutely right, but not for the reasons he thinks. Capitalism in it’s current form is broken, plain and simple, and Alberta is a fine example of why.