After five years in Calgary, business dean Leonard Waverman is coming back to Ontario with more than just a collection of fancy belt buckles. You cannot live in Calgary, he says, without gaining deeper insight into the place of the West in Canada – and what is at stake in the debates over energy and pipelines. The economist left the post of dean of the Haskayne School of Business at the University of Calgary to take up duties this month as dean of the DeGroote School of Business at Hamilton’s McMaster University.
What did you learn in Alberta?
I’ve seen the sense of confidence growing in the West – and at the same time, a much greater sense of being Canadian. They are more confident in themselves and yet they know they can’t do it alone. The pitch is that oil and gas is a Canadian engine of growth – and it’s true. I don’t think the rest of Canada understands that. Tours of oil sands by high school students could be very useful – just to see the monumental size of the projects. At the same time, Alberta can’t get pipelines through, it can’t get foreign access, and needs the federal government for all kinds of things.
You are sounding very pro-oil-patch. Will you have to tone that down in the common rooms of McMaster?
I don’t think so. And as someone born and raised in Toronto, I was embarrassed by David McGuinty’s remarks. [The Liberal MP from Ottawa characterized Alberta MPs as narrowly focused shills for the oil industry and suggested they go home. He later apologized.] There is nothing wrong with politicians from the West. I don’t know what drove that, but having the West have a bigger say in Canada is not to the detriment of Ontario or Quebec.
I know there are issues with the exchange rate, and how Ontario suffers from the higher rate. But the road to productivity and prosperity is not from degraded exchange rates – it is from being competitive and efficient. In a sense, I understand the curse of resource wealth, but it is wealth – it is not a liability.
Did the West change in those five years?
A year ago, I was trying to hire two people in accounting; one lived in Philadelphia, the other in Chicago. They were a couple but they weren’t living together because they could not get jobs in the same city. So we offered them a joint [position]. They loved Calgary but they said, “Why should we come here? We hear it is such a boom-and-bust province.” I said they were absolutely right and they looked horrified. I said, “Yeah, I said, the price of natural gas has not been this bad for years and they are shutting down production.
“And,” I added, “the unemployment rate is 5 per cent. I can’t wait for the boom.”
Did they come to Calgary?
So what is the lesson?
At the beginning of 2008, when I came to Calgary, energy prices were high and the boom was there. Then we saw the bottom fall out of the market, but it wasn’t like in the past. Even with gas prices so low for so long – and some companies are in trouble – it is still business as usual. The attitude is: No panic, things will change. It is a different energy industry now [in terms of the scale of investments and longer-term perspective.] But there is also realization that the biggest risk is being shut in [geographically], of being a high-cost producer on the northern periphery of markets. There is shale oil around the world; there are the problems with the Keystone Pipeline and difficulties getting access to the west coast. It is not just an Alberta issue but a Canada issue. We have to solve those problems because it is our wealth and it is for generations.
But can Canada work better economically?
Alberta needs Canada to act as a nation. For example, my wine is still in Alberta; most shippers won’t transport my personally owned wine from Alberta to Ontario because it crosses provincial boundaries. Our [household] movers will eventually do it, but specialized wine shippers would not cross the border with it. We are worrying about pipelines and we can’t even move wine – and then there are things like mobility of doctors and professionals. There are a lot of issues in nation building, and pipelines are one of them. And they are the big issue to solve now. We need those exports and jobs.
What are the most prized possessions you are taking from Calgary?
I’ve got a couple of cowboy hats and a nice oil painting, but just having lived there changed me. Seeing Canada through the eyes of the West gives you a different perspective and a more distant lens on what is happening federally and in the other provinces. And there were the mountains – spending time at Banff and Lake Louise.
So is there a different perspective?
It struck me that when Naheed Nenshi was elected mayor of Calgary, it was not a big surprise [in the city]. We know how diverse Calgary is, but many Easterners don’t. Last year, I welcomed the new class of 120 MBA students, and I asked how many were born in Calgary. It was maybe 15 to 20 per cent. How many were born outside Canada? More than half. This is Canada.
What did you think of Ottawa’s decision allowing a Chinese state-owned enterprise to buy energy company Nexen, while placing limits on future takeovers?
No one phoned me for advice, but they pretty much followed what I advocated. I was surprised by the decision of no further majority takeovers [of oil sands companies by state-owned enterprises]. Of course, you can still get 49.9 per cent – in fact, effective control can be exercised with 25 per cent with a widely held stock.
So there will be more clarification of the rules?
I actually like the ambiguity. I don’t think we need checklist takeovers – that is, to check all the boxes and say we’re through. There has to be some discretion.
What will be the effect on investment?
I was against the takeover of Potash Corp. of Saskatchewan and when that was stopped, people said there would be a freezing of investment. Yet there was no perceptible impact on anything. Investors are very shrewd. They would love a checklist and they love certainty. But these people don’t expect certainty in daily business life, so I don’t see why they would expect it from governments.
If we had said no [to Nexen], we wouldn’t have sold any oil to China. They can buy oil anywhere in the world. Why would they take Canadian oil, when we were slapping them around? Now we have access to the market – if we can get it there.
Title: Dean, DeGroote School of Business, McMaster University, Hamilton
Personal: Born in Toronto; 71 years old. Holds dual French and Canadian citizenship.
Education: BCom, MA from University of Toronto; PhD from Massachusetts Institute of Technology.
Thirty years in the department of economics at University of Toronto, including a period as director of the Centre for International Studies.
Joined London Business School in 1997, became chair of economics department.
Became dean of Haskayne School of Business, University of Calgary, in 2008.
Began work as DeGroote dean earlier this month.