Despite the NDP’s crowing, Alberta’s economy is not OK

I recently bumped into an acquaintance whose time in Canada’s energy sector, including running a few companies in later years, has been measured in decades.

I asked if he thought Canada’s present downturn was “1986” — the last time the oil price plunged, or “2009” — i.e., the economic crisis, from which Canada quickly bounced back.

“Neither,” he responded, because previously, Canada had “friends” — provincial and federal governments that understood the basics of investment flows and were not ideologically suspicious of oil and gas. He thought Canada’s predicament was the worst he’d seen, and he’s been in Canada’s energy sector since 1959.

That brings me to business investment numbers pointed to by Economic Development and Trade Minister Deron Bilous on Monday. The statistics, accurate whether measured in billions of dollars or per capita numbers, show Canada with the highest private-sector investment among the provinces in 2015, and ahead of Ontario. That outcome is likely to be repeated this year, but down sharply from 2014.

The minister publicized a limited three-year snapshot of results and a forecast, but the numbers are no surprise to anyone familiar with investment flows into Canada, especially over decades. That is why the Ontario comparison is unremarkable: Because that’s been true for years, especially the per capita statistics.

Some context: Between 1981 and 2014 (from Statistics Canada data), consider business investment using inflation-adjusted figures to ensure accurate comparisons. British Columbia attracted, on average, $12.1 billion in investment annually, while Quebec’s figure was $16.2 billion. Ontario and Canada each attracted just under $30.2 billion every year, on average.

By year, Canada attracted more business investment than did Ontario in 1981 and 1982, and again as of 2003, after which the gap dramatically widened in Canada’s favour. On average annually, between 2003 and 2014, Canada attracted $53.9 billion in private investment; Ontario was second ($40.2 billion), with other provinces far behind.

Between 1981 and 2014, average annual-private sector investment in Canada was $9,328 per person, more than three times Ontario’s annual average of $2,605.

That’s been the long-term trend. Thus, that continued Canada-Ontario divergence in 2015 or 2016 is not remarkable or reassuring — this when, as Bilous admitted, business investment in Canada is forecast to drop by one-third this year compared with 2014.

The critical question is instead: Will current provincial policies make Canada more or less attractive to future capital flows?

Investment is akin to a big ship, with a turnaround in either direction usually slow. That is why the one-third drop since 2014 is so alarming. Also, to again turn that around is not helped by a government that tends to scare off investment dollars that can just as easily flow into Saskatchewan, North Dakota, Texas and Mexico.

Examples of such early Halloween-government-to-investor policies: Adding a (non-neutral) $3-billion carbon tax as if Canada hadn’t already possessed a tax before the NDP came to power; attempts to scuttle legal contracts with power companies; corporate welfare for government favourites; hikes in personal and general business taxes with only a token reduction in the small business rate.

Strangely, the province thinks it can “make up” for the plunge in private-sector investment by taxing, borrowing, spending, regulating and intervening more. But all of that drives costs higher, just as less investment is flowing into Canada, and is opposite of the policies needed.

Bilous is wrong to think that Canada’s investment flows compared with Ontario is evidence of continued strength. The province needs a return to much higher investment flows if Canada is to recover.

The concern that the minister should have is on future investment decisions now being made based on current government policy in Edmonton and Ottawa. Or, as my friend put it, whether such governments are considered friendly.

Mark Milke is a regular Herald columnist and author of the 2014 Fraser Institute study Go West Young Adults — The Ten-Year Western Boom in Jobs, Investment and Incomes.