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Todd Hirsch

Todd Hirsch

TODD HIRSCH

We must all buy into regional redistribution Add to ...

A friend and his wife, both from Western Canada, talk about the time they were relaxing in the Upper Hot Springs in glorious Banff. They struck up a conversation in the pool with a Quebec City couple visiting the Rockies for the first time. Impressed with the view, one of the Quebeckers said: “I like your mountains.” To this, my friend’s wife astutely replied: “They’re your mountains, too!”

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The story still makes me tingle with warm, patriotic feelings about what a great country Canada is. But if those mountains could be mined, sold and accrued to Alberta’s government coffers in royalties, then a less generous response to the Quebecker might be: “Yes, they are my mountains. And you can’t have them.”

Provinces can get possessive when it comes to resources. And constitutionally, they have a right to be. Royalties from natural resources – be it oil, nickel, hydro, potash, fish or timber – are the jurisdiction of provincial governments. All the while, the federal government has a constitutional mandate to redistribute some of this wealth that flows so unevenly to the provinces. In 2014, Ottawa will have to renegotiate the equalization program. It’s not going to be a pleasant affair. Increasingly, the resource-rich “have” provinces are feeling like they’re carrying more than their share of the load.

Ever since the 1950s, when the equalization program of wealth redistribution was introduced, Ottawa has fiddled with the formula. How can we jig it so everyone’s happy? How can we keep equalization transfers from spiralling ever higher when the disparity between “have” and “have not” provinces keeps widening?

These questions will come up again in 2014, and experts and economists will be called on to figure out the math. But rather than asking “how,” our political leaders should be engaging Canadians in the bigger question: Why?

Why should provinces share? Aside from the Constitution Act demanding it, why should the resource-rich “have” provinces put up with Ottawa’s transferring cash to the “have nots”? There are plenty of good reasons why, but no one is making the case – at least not among our political leaders. And if they don’t, regional tensions could explode in 2014.

Part of the problem is that the regions don’t feel enough economic connection between them. We naturally see our jobs and our economy as things that exist within 25 kilometres of where we live. Former Bank of Canada governor David Dodge’s recent suggestion of increased pipeline connections carrying western oil to eastern refineries could do the trick (if we can find anyone to build and pay for it). Eastern Canadians would start to recognize that what builds one region of the country also builds another.

And Albertans, perhaps the grumpiest of all on the equalization file, need to recognize the tremendous benefits we enjoy from Canada’s open labour market. If someone summed up every year of education that every interprovincial migrant ever brought with them to Alberta, and estimated a dollar value of those years of education, it would amount to tens of billions of dollars – all transferred from the taxpayers in other provinces to Alberta, and all without a constitutional mandate to do so. Alberta’s gain in educated workers has been other provinces’ loss, and a lot of that education was paid for with equalization transfers.

Revisiting the equalization formula from time to time is a good idea, but if Canadians don’t buy into the broader notion of regional redistribution, there’ll be no point. We are a smallish-sized country in a big global economy. We need to stop accusing Western Canada’s resources as a problem for the rest of the country. And the resource-rich West needs to consider the broader benefits of living in a confederation.

What I’d like to hear the next time I’m soaking in Banff’s hot springs is someone from Saint John employed in the oil refinery or someone from the Gaspé working on a pipeline to Canada’s east coast, saying to an Albertan: “I like your oil industry.”

To which the Albertan can wink and say: “It’s your oil industry, too.”

Todd Hirsch is a Calgary economist and co-author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.

 

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