Skip navigation

 Login or Register | Member Centre

Shifting sands, Part V

Frugal Norway saves for life after the boom

DOUG SAUNDERS

From Thursday's Globe and Mail

Latest comment posted at 3:16 PM EDT 09/03/08

The lesson Norway can teach Alberta about oil wealth. ...Read the full article

This conversation is semi-moderated What is moderation? | How do I report a comment?

  1. S Lucht from Canada writes: The top marginal tax rate on wages is about 48% in Norway, and there's a 28% flat tax on corporations. VAT ranges from 13% (for food) to 25% (for other things). Canada's mean top marginal tax rate isn't about 45%, though we'd generally pay less GST/PST. Corporate tax rates are generally higher.

    So given that there aren't dramatic differences between our rates of taxation, how is it that Norwegians enjoy one of the best standards of living in the world and still have a high disposable income? Where's all our money going?

    No Canadian government in my memory has ever had the foresight, intelligence, or integrity to invest royalties, taxes, etc. in order to create a stable contingency fund for the country. Rather than do something financially useful for the country, our politicians stick to a simple formula: Tax, spend--repeat. Pathetic, but as long as it keeps their pensions safe, they're happy.
  2. ghostofpatbuchanen buchanen from Victoria, Canada writes: The problem in Canada is that politicians get their hands on that oil money. So naturally it's used to buy votes, not a better future for ourselves and our kids. Pretty straightforward.
  3. 20 20 from Canada writes:
    "In exchange for the right to drill, they must hand 78 per cent of their profit over to Mr. Slyngstad's fund."

    And yet the Big Oil companies including Talisman and Petro-Canada are there. This goes to show that Canadians can and should be demanding more of the oil profits here in Canada and should not be so easily conned by dire warnings that it will "kill the golden goose".

    Besides having the government oil fund, Norwegians also have their widely-respected state-owned oil company, Statoil.

    We used to have Petro-Canada, which according to the US Department of Energy's website, the Canadian government formed "in 1975 in an effort to reduce the dominance of U.S. companies in Canada's oil industry."

    So of course Mulroney began selling off Petro-Canada in 1991, and Conservative-Lite Paul Martin completed the sell-off in 2004. What they privatized for just $5.7 billion, giving taxpayers an estimated profit of just $0.75 billion, is today worth some $23 billion as valued by the markets.

    That's some $17 billion in gains Canadians missed out on, and at least another $2 billion in dividends, without even counting interest. Since Petro-Canada is majority foreign-owned, the majority of those gains went to foreigners.
  4. 20 20 from Canada writes:
    Another key point from this article is Dutch Disease, where too much oil revenue coming in too quickly inflates the currency and destroys exports, jobs, and a country's diverse industries and economy.

    A meeting in Houston, Texas, kept secret from the Canadian public for over a year before Radio Canada got a hold of the minutes, called for a "fivefold expansion" in Canadian oilsands production in a relatively "short time span" and encouraged decision-makers "to streamline the regulatory approval process" with a "one-stop-shop" for project proposals to facilitate that expansion.

    Snapping right to, "Harper has said the oil sands could produce 4 million barrels per day by 2015 and has indicated he would work to see that happen," and established the "Major Projects Management Office" to "streamline the regulatory system for major resource projects" and "provide a single point of entry into the federal regulatory process for industry".

    That too rapid acceleration of oil sands production for the sake of the Americans is a sure recipe for Dutch Disease. We see it already damaging many of our other export industries, and Harper has offered cheap bandaid solutions to them all while practically ensuring Dutch Disease.
  5. Owen Perry from Windhoek, Namibia writes: Excellently written and highly informative article.
  6. D. G. from Burnaby, BC, Canada writes: Doug Saunders- Exactly what expertise does this guy have, about anything? He wrote articles in the G&M "Focus" section. He should write about politics, ....oh wait, I guess this really IS a politically driven article, my mistake.

    First, the oil belongs to Alberta, NOT Canada.
    "Saving the revenue for a rainy day" like Norway does, suits Norway, because they lack any ideas on how to grow their economy, they just hope their government knows how to invest it properly, which governments rarely do, because they normally like to spend on buying votes, they make POLITICAL decisions, not economic ones, which do not benefit the country, just their party, especially in Canada, where they pay-off one end of the country for votes at the expense of another. Keeping the money out government hands at all costs is sound economic policy ,and has been proven true worldwide for decades.

    Norway also produces more oil than Alberta, with about the same population, so they should take more revenue per capita.
  7. D. G. from Burnaby, BC, Canada writes: .... In addition, because the oilsands are MINED, the oil EXTRACTED, and then PROCESSED, all before it ever sees a refinery, the capital costs are freaking HUGE compared to platform drilling. Consequently the RETURN after EXPENSE will be less, and thus the revenue $ per barrel will be less as well. And because these oilsands projects will COST around $20 Billion EACH, the RISK will be higher, therefore the shareholders (this means anyone in Canada with a pension fund or RRSP) should get a better return for that increase in risk. But this is great news economically speaking, because that $20 Billion spent for each plant goes primarily into labour cost (country-wide), whether it is engineering, fabrication, construction, or services, IT ALL GETS DISTRIBUTED to INDIVIDUAL Canadian WORKERS. What could be a more PERFECT way to distribute wealth in an economy. And on top of that, yes, ON TOP OF THAT, any profit the companies ever make will be paid out to shareholders that comprise the majority of Canadians who hold any RRSP's, Pension Funds, or Mutual Fund. Would you rather have the Federal government piss it away on free loans to Bombardier, or start a farce of a gun registry in New Brunswick? The Oilsands and Norway are not similar in anyway. The Alberta energy minister is right, Norway has nothing to teach him or any other Albertan, unless its how to pickle herring. But I think it would be well worth Doug Saunder's while to sit in a few classes on basic economics, starting with free market theory.
  8. Ron Pacific from Victoria, Canada writes: Canadians are far too complacent about their future. Norway is investing in its future now while living modestly in the present. Unfortunately, we as individuals are too busy pissing away too much of our resource wealth on monster SUV's and granite kitchens. We salivate (or our media and political hacks tell us we should be saliviting) at the prospect of sales tax cuts so we can spend more on Starbucks and less on our grandchildren! How has the Alberta government fared? Not well - their solution is to dish out vote buying "Ralphbucks" to be blown on trips to Vegas, Mexico and casinos. Meanwhile, our federal government is too busy blowing billions of wads of cash on a silly and unwinnable war to properly plan for our future. Very sad!
  9. Robert Miller from Halifax, Canada writes: Here's the key quote:

    "In exchange for the right to drill, they must hand over 78 per cent of their profit over to Mr. Slyngstad's fund..."

    78%!!!

    Anyone kow what Alberta gets. Have a look:

    http://economist.com/displaystory.cfm?story_id=10091402

    Yes, that's Alberta way down at the very bottom of the list -- where Stelmach and Klein seem quite content to keep them.

    Meanwhile there are a number of posters (whose posts obviously do not emanate from this country) on these Albertan threads who clearly have vested interests in perpetuating their lies to Albertans and polarizing Canadians...

    I just realized that many Albertans actually still believe that Atlantic Canadians are living off employment insurance as the Federal Government maintains an employment insurance surplus of $55 BILLION AND GROWING!!! Time to get the Feds off our employment insurance.

    Very sad, indeed!
  10. Robert Miller from Halifax, Canada writes: The big picture that is emerging here just keeps getting uglier and uglier... We need a Federal inquiry/royal commission to understand what these politicians are doing with our money in Canada...

    Canadians need to be more vigilant... Albertans who claim to be the most aggressive about these issues should take the lead in this country because their province seems to be the one getting screwed the most by politicians (both Federally and Provincially)...

    The NEP was 25 years ago... time to wake up and look at the present...
  11. old curmudgeon from Armenia writes: Looks like D.G. from Burnaby is one of the Albertans who retired to BC. Having worked for the federal Energy Department during the NEP programme, I find it illustrative that the companies that were screaming then about illegal confiscation are now content to participate in a regime where even more of their profit is turned over to the government. Actually, it was during the NEP period that I--as someone born and raised in Alberta--lost all respect for the oil industry and Albertans oft-trumpeted but infrequently-observed commitment to "principle". During the good times, the talk was all about expropriation, unfairness, that-damned-commie-Trudeau, etc., and the government was being urged to keep its hands off the oil industry (which was--and still is--conveniently US-owned). When the crash came, who was first to the trough for handouts? You guessed it--the oil industry. How quickly capitalists change their views to become welfare recipients when the market which they adored whilst becoming wealthy turns against them. I have had occasion to visit the Nordic countries in connection with their pension systems. What most struck me was the truly universal concern of citizens with their country's interest rather than their own local interests. Norway's approach works because its citizens buy in to the broader public good on a willing and informed basis. This approach can never work in Canada, where what is Alberta's must remain Alberta's, and the national interest is followed only where it coincidentally parallels self and local interest.
  12. Raymond Conway from London, United Kingdom writes: We have to stop blaming the politicians for all our ills. The voters of Canada complain about how the politicians buy peoples votes, but who votes for those that do? Unfortunately, elections in Canada (and many other countries) are more like elementary school student elections. Vote for whoever promises you the most.

    Look at the economic achievements under the Mulroney Government and the fate of the Progressive Conservative Government. They fundamentally restructure the Canadian economy and prepared it for the 21st Century. Their reward? Political oblivion.

    So stop bellyaching about politicians and look in the mirror! I have seen the enemy and he is us!
  13. Robert Miller from Halifax, Canada writes: Raymond Conway from London, United Kingdom:

    Are you kidding me? Canadians are far too easy on their politicians...

    I check the comments section in The Times of London frequently, and am amazed at how knowledgeable some people are about their own governments...

    In Canada, we blame the "creeps and bums" for taking our money that we pay in employment insurance while the Federal Government is running up surpluses of $55 BILLION DOLLARS AND GROWING on Employment Insurance...

    I think that says alot about how politically naive that we are being in Canada...
  14. Robert Miller from Halifax, Canada writes: Raymond Conway from London, United Kingdom:

    Sorry -- I have re-read your post.

    Yes, you and George Bernard Shaw are correct that we still do get the lousy government that we deserve...

    However, our limited and partisan media in this country is pathetic... The G&M, at least, seems to be trying to be more inclusive of others' opinions...

    Lord Black's old paper, the National Post, forget about it! Lost cause!
  15. JT From TO from Toronto, Canada writes: Can you imagine the howls from all the special interest groups to spend the money on their pet cause if Canada followed this sort of model?
  16. Ludo Segers from Outside Canada, Canada writes: The taxation issues are correct. However, add the provincial sales tax (a non-issue in most European countries) and we are close to that basic VAT rate in Norway.
    It is always sad to comments; made earlier, stating that Canada has no lessons to learn. How is that possible in an integrated 'global' economic context?
    Moreover, at a gathering of the world's top economist in the summer of 2006, Norway with a mixed economy (and substantial government intervention) was voted the best economy in the world.
    A number of recommendations have been made to the Government of Alberta to deal with the oil wealth and to position itself for the future. Heavy investment in higher education was one of them...
    I think we live in a world, where governments (with a vision and leadership) can learn a lot from each other. Just leaving it up to 'industry' and 'free economics' will not accomplish a lot for the future of the citizens of Alberta and Canada. Alberta's government and Heritage Fund have (comparatively) have so far very little to show for. Given the present reserves it is high time for action.
    The Saunders article is a good eye opener and a starting point. Do not wait too long!
  17. Bob Macdonald from Liverpool, United Kingdom writes: Yeah, Canada is soo not in need of advice that it has been slipping down the global human development index year-after-year. It is doing this because the country has become lazy, complacent and arrogant about its achievements. Its cities are littered with homeless people and hundreds of thousands exist on food banks.

    Public infrastructure is falling apart, you can't travel across the country cheaply, there isn't a fast train service from Toronto's Pearson Airport to downtown, the highways are clogged with cars and trucks, vast tracts of ugly houses are plopped down with no plan, and the suburban rings around the cities are areas of despair and hopelessness than the New Canadian Dream.

    The country needs fresh thinking and a plan.
  18. Robert Miller from Canada writes: Bob MacDonald from Liverpool, United Kingdom:

    As you have correctly identified, not only is there no vision, but there is far less "openess and accountability" in government and media on this continent than ever...

    The secretive cabals (ie. Council of Foreign Relations, SPP, PNAC, etc.) look after their own special interests at the expense of the citizenries while their media brethren look the other way... or even worse while employing high school drop out, former deejay pundits from Canada to tell us all lies like the Iraq War is over, Bin Laden is dead and that his old boss, Lord Black, should be acquitted...

    Before we could even get on with the process of fresh thinking and a plan, Canada needs to recognize what is currently happening with their government.

    I am really not sure that enough Canadians are there yet.
  19. della baird from vancouver, Canada writes: dee vancouver: scandanavian countries have been at the forefront of taking care of their own. i believe that is why there isn't the huge migrations that other places experience. why doesn't this country wise up and follow the the best example. scandinavins generally have more respect for their leaders because they are shown more respect. bravo!
  20. Bob Van Derlay from Toronto, Canada writes: DG from Burnaby has summarized much of what is wrong with this article. However it is good to see the Norwegian situation presented. Norway escapes most of the press reports and statistical reviews because of its small population. During a visit to Norway I noticed that there were signs in the buses asking Norwegians to be more considerate of people of various ethnic origins. I asked my host about Norway's immigration policy. He said we tried it, we didn't like it so we don't do it anymore. I investigated immigration to Norway on the web. The Norwegian government hosts a site, aimed at potential immigrants, many from Russia, that says that Norway does not have an immigration policy and urges potential immigrants to consider countries that do have immigration policies, like Canada and Australia. That policy together with relatively cheap oil is what produces $78,000 per head in Norway. Also all those spin off businesses are possible in a rich country with a vast government account surplus and current account surplus. They are a little more difficult in a country with a massive debts at most levels of government. Very few Canadians, although familiar with the terms, debt, deficit, and surplus, cannot remember the name used to describe the situation when the government actually has money in the bank.
  21. Globe Insider subscriber content
    black dog from canada, Canada writes: old curmudgeon, your post is hilarious in its bias. You ignore a very key point: Norway does not send massive amount of its revenue outside of its jurisdiction! Start shipping Norwegian money to central Europe on a per capita basis comparable to what Alberta sends to the rest of Canada (via taxation) and then see how warm and fuzzy Norwegians feel.

    I'm not saying Alberta shoudln't send its money out, or that Norway should, all I'm saying is that of course (!) Norwegians have more money in the bank - they haven't given credit cards to their neighbours... And of course this impacts their universal outlook, which you observed.
  22. Robert Miller from Halifax, Canada writes: Norway also seems to do a better job at limiting GHG emissions.

    Although Norway is listed as the third largest oil exporter behind Saudi and Russia, here is an interesting comparison:

    Norway GHG (2003) - 56, 500, 000 tonnes CO2

    Alberta GHG (2004) - 109, 503, 697 tonnes CO2

    Houston (and I mean that) -- we have a problem!

    Maybe, tell your boy, Stelmach, that he should do something about it!
  23. dallas mcquarrie from Regina, Canada writes: Norway just shows how stupid oil producing provinces like Alberta and Saskatchewan are. In Canada, government exists to service the oil industry and the needs of the people - both short and long term - come second. In Norway, the oil serves the nation. Canada could learn a lot from Norway's approach if our leaders weren't so short-sighted and spineless.
  24. Bob Macdonald from Liverpool, United Kingdom writes: Let's address a number of points: saying Alberta should not be sharing its wealth with the rest of Canada is idiotic. Alberta is a province of Canada, not a nation unto itself. Why don't you get really stupid, and say that Edmonton should not be giving money to Alberta.

    Immigration is an interesting question. While at one time it was seen as a driver of wealth in Canada, it has now morphed into being a social service. This is a big distinction and a reason why Canada is not getting the wealth kick it should be from immigration. Strangely, Canada educates and then exports large numbers of Canadians to the US etc., while turning around and importing people to make up the loss.

    Canada would get a wealth kick if it reformed its immigration programme, stored its wealth and invested it in modern infrastructure and business creation, and anchored all of this in some imaginative and thoughtful planning for the future. At present, Canada is a nation adrift.
  25. garlick toast from Canada writes: i bet danny williams will be studying the norwegian method.
  26. Robert Miller from Halifax, Canada writes: Garlick Toast from Canada:

    Norway's, Norsk Hydro, is one of the partners in the Hebron Oil field?

    What do you think? -- I think that it must actually be challenging for Williams to deal with the likes of Chevron and Exxon when he has partners from China and Europe who have been used to playing by the rules that Norway uses...

    Think what may have been if only Steve had originally helped Danny develop Fallow field legislation (similar to that in Alberta) for the Offshore of NL as Williams had requested...
  27. old curmudgeon from Armenia writes: Hey Black Dog!!! I think I know what you mean, although you actually said the exact opposite. The whole point of the article was that Norway avoids the Dutch disease precisely because it DOES send its money outside. I think what you're getting at, though, is that Alberta gives a lot of its money to other parts of Canada, through the progressive tax system, redistribution programmes, etc. And that may be true (although with all the toing and froing it's hard to get an accurate picture of who ends up the winner at the end of the day). And that would also get us into the old "we subsidized you when wheat was cheap" etc. debate, which is a matter for another day. But that wasn't the point of my earlier contribution, which was that people in Canada think along local rather than national lines, unlike Norway and other Scandinavian countries. In fact, what you have said is a perfect example of that. And I don't agree that Norway's policies or circumstances impact its citizens' outlook. Quite the opposite--their citizen's outlook determines the policies and circumstances. I'm not trying to pick on Alberta--it's just the most graphic illustration that regional interests trump national ones. Canada's political structure is indeed different from Norway's. It is based along provincial rather than national lines, which creates and promotes the regional approach. As a result, it can never do what Norway is doing unless the provinces all agree to act in unison, something that will never happen. So my point is that it would be nice if Canada could adopt the Norwegian approach, but for constitutional and cultural reasons, it can never do it.
  28. Globe Insider subscriber content
    Terry Quinn from A proud free Canada, Canada writes: I would think that if one added the pension assets of each provinical government along with the CPP Canada might not look so bad in terms of saving for the future. We simply have a different system that Norway's.

    Just between Ontario, Quebec and the feds alone I believe there are over $400 Billion in pension assets under their control.
  29. Globe Insider subscriber content
    Terry Quinn from A proud free Canada, Canada writes: I also think people are also forgetting the very high cost of producing oil in Canada as opposed to the North Sea.
  30. old curmudgeon from Armenia writes: But the whole point of the article is not whether Canadian oil is more expensive, or whether Canada has more or less money than Norway, or whether Norway is capable of saving more or less than Canada. It is what is done with the current income to ensure future prosperity. It is not oil-revenue specific, although that is currently the resource producing the windfall profits. If gold or diamonds or whatever were suddenly to return similar profits, the same issues would arise. The choice is between using income for current consumption or saving it for the future. Norway as a nation has chosen to forego current benefits in favour of future ones, while Alberta/Canada have chosen the other direction. In Norway, it is a decision made by the people themselves, based on their dedication to their own country as a whole. In Canada, due to the constitution, it is a decision made by regional politicians to appease their constituents and extend their political tenure.
  31. Tony Mareschealle from Mississauga, Canada writes: As one of there next biggest hurdles is finding labour - lets hope they do not make the same mistake as Canada and adopt similar free for immigration laws.
  32. P Martin from St. John's, NL, Canada writes: It is useless for Danny Williams to study the Norwegian way when you have 50% of non-renewable resources removed from the equation, a fiscal capacity cap tied to Ontario and a per capita debt more than double the national average. Of course if that billion per year stolen from NL by Ottawa was there and that billion per year stolen by Quebec was there, there would be an opportunity to look at some sort of strategy similar to Norway, or even Iceland.

    But good luck to Norway. They seem to have more foresight and economic smarts than our bunch. You have Harper spending like a drunken sailor, whether it is for buying votes or increasing the government. You have a government divided upon itself, with short-sighted policies and destructive governing tactics. And you have a population so disgusted by our thieving, greedy politicians that we keep voting in self-proclaimed slime, because the alternatives are no better.

    Of course Norway is doing well, they are happy with their government. And their government is trying to look out for their future. The chances of our government being like that are the changes of that snowball in hades.
  33. Lee Thompson from Sarnia, Canada writes: Surprise!

    Short term thinking from the small-minded Government of Alberta.

    Some things will never change.
  34. Rollo Tomasi from Ann Twerp, Belgium writes: Sounds like a bunch of farmers, saving their money in the bank, no imagination. I bet the banks Love the cut, 78%. It looks like a much better model than Alberta's, but, what is the evironmental footprint of leaky oil platorms up and down their coast?
  35. Dan Green from Palm Beach Gardens Florida, United States writes: Have been in the oil and gas industry many years, as a supplier to the Oil companies. It is true, most Oil rich nations, cannot seem to get the revenue to their people. Seems a pattern. Arabs of course need to keep their folks in poverty, so the leaders can keep their kingdoms, and support Terrorist. Hugo Chavez still has astounding poverty, and now food shotrages. On and on the list goes. I would predict, that eventually, Ottawa will have to take controling interes,t and see if they can spread it around. Quebec probably would get the biggest slice, followed by Ontario. The mega Oil companies know how, and what to expect, dealing with governments. Usually if they don't toe the mark, they get nationalized, or they pack up and leave.
  36. George S from Toronto, Canada writes: One small area that Norway has invested in a big way is its public transit system in Oslo, a city of roughly the same size as both Calgary and Edmonton are. That city's T-bane system has roughly about the same amount of kms that the city of Toronto's subway system has, and the greater Toronto area has roughly 5 times the population.

    To me this shows that the government cares much more about its citizens and the environment by investing much more then we do in urban transit. This investment will pay off when the oil runs out and their workers and students will still be able to make it to their destinations without breaking their bank accounts or hurting the environment as much. Oslo is preparing to keep on working in the changing world, wish Canada would have such foresight.
  37. Alex Yaxmos from Canada writes: THe Canadian governemt just lacks forward thinking plans, self-discipline and has no long-term learning process. I think that's more our fault for not demanding it from them. We are happy with we get.
  38. Thomas t from Hong Kong writes: One model is the save for the future model the other is send all the profit to American shareholders model.
  39. Der Kommissar from T.O., Canada writes: Rollo: Norway's Oil Fund is one of the world largest investors. The fund invests outside of Norway following strict ethical guidelines (i.e. they pulled out of Wal-Mart, because of Wal-Mart's labor exploitation policies).

    As for the leaky platforms, I suggest you go and have look at the Norwegian cost line for yourself - it is one of the prettiest areas of the world. I am not saying that drilling in the seabed is without environmental impact but compared to what is happening with the oil sands in Alberta it is fairly benign.
  40. Robert Miller from Halifax, Canada writes: Dan Green from Palm Beach Gardens, Florida, United States:

    Agree with what you say, but unfortunately, the peripheral areas of Canada particularly Atlantic Canada and Western Canada no longer trust the Federal Government possibly with good reason.
  41. Dave Roberts from Toronto, Canada writes: Norway's "great example" is actually a lesson in over taxation. Norwegians pay significantly higher taxes than the average Albertan, this allows them to save 100% of resource revenues directly into their savings fund. Albertans by contrast save about 30% of resource revenues in their basket of various endowment funds.
  42. John Cameron from Red Deer, Canada writes: I am not sure what the eventual rate of extraction from the oil sands and other may be but if it was to get to say 5 million barrels a day the resource has a lifespan of about a 100 years with present technology.

    Alberta has to spend at present a lot of money to provide infrastructure up front and will be waiting at least 10 years for meaningful returns from current projects under construction.

    It definitely is time for debate on optimizing deployment of the cash flow but it will be hard to do in isolation since there are 13 competing jurisdictions.

    Personally I favor inclusion of all in the discussion, as long as all parties are working together.
    Instead of beating up on our present and past premiers every time they shows up at a conference perhaps the agenda could include some discussions about planning.

    As it is the premiers only agree on one thing, how to extract as much from Ottawa as they can.

    Change that and you just might change this country.
  43. Bart Farquart from Calgaria, Canada writes:
    As a voting Albertan I would like to thank the Globe and Mail for it's unsolicited advice on how my province should manage it's resources revenue. And in particular I would like to thank Robert Miller of Halifax for all his brillilant comments (I shall henceforth watch out for those "secretive cabals" Robert speaks of).

    Don't worry all. We in Alberta are quite capable of kicking Stelmach in his backside with our size 12 cowboy boots if needed.

    Finally, I will let Alberta energy minister Mel Knight, quoted at the end of this fine article speak for me:

    [“But our Constitution in Canada dictates that the province of Alberta has the mandate to deal with our own natural resources. We feel that wealth generation in the province of Alberta is worth something, and that to put that money back in the hands of Albertans, and let those people do what they do best with their money, is a better opportunity for us.&8221;]

    Thanks again fellow Canadians!! Bart
  44. Farm Boy from Big City, Canada writes: Countries get the governments they deserve and that are a reflection of themselves. Stupid is as stupid does.
  45. Globe Insider subscriber content
    Jimmy K from Toronto, Canada writes: Nice. Meanwhile we allow inflation to run rampant and for the "Dutch Diesease" to take hold without any plan as to what to do when we get hollowed inside out.
  46. Jasper the Black Lab from Vancouver, Canada writes: Tough to follow Norway's model here in Canada, because Alberta does not charge reasonable royalties on oils and gas, and the avenues for the Federal government to collect adequate funds from these projects would be large carbon production taxes and large export taxes, which for some reason are unpopular. I say bring them on: a 23-cent per litre gasolinetax would directly cost me about $200 per year, but if the system is "revenue neutral" I should save thousands on income tax, and if the money is spent wisely I would have better bus and train service.
  47. Northern Pike from Canada writes: Any anti-Newfoundland posters in here now? People in here are happy to question why Norway appears so much wealthier than Canada yet when it comes to Newfoundland they say Ontario is supporting them? How many articles have I seen whereby Newfoundland (not Canada) is compared to Norway (it's oil, fish, timber, hydro, etc..,). I believe it was on wikipedia whereby the breakdown and compare provinces to countries in the world. Alberta and Newfoundland match up with Normawy while Ontario with? The Republic of Ireland. Newfoundland's GDP per capita is a few hundred dollars off Norway's in the $47,000 range. With an increasing interest and need to diversify Newfoundland's economy is branching out as well. I was actually surprised to see some surprise forms of agriculture starting up as well in the past 5 years. If Newfoundland keeps going at the rate it's going - getting more involved with manufacturing and farming and manages to hook up with the mainland powergrid w/o going through Quebec it will likely surpass Norway's GDP per capita. As a whole many of the provinces aren't too far behind so for a country it's surprising Canada isn't better off. Canada ranks 11th on the GDP per capita as opposed to Norway sitting 4th.
  48. Dave Roberts from Toronto, Canada writes: Northern Pike, if Newfoundland has a higher GDP per capita than Ontario why is Ontario a net contributor to equalization while Newfoundland is a net beneficiary - is this not contrary to the concept of equalization?
  49. lynn H from Canada writes: If you examine Norways model it looks something like this: government takes cut of money from oil companies then saves the majority and invests the rest outside of the country which gains a them a return on investment. In our country the constitution makes Alberta the owner of resources not the feds. But if you looked at Alberta as a individual country instead of a province then it could work the same way while still benefiting all Canadians. The Alberta government could continue to save money in the heritage fund but invest the rest in private companies in the Alberta or the rest of Canada. That way Alberta would get an actual return on their investment instead of just a forced handouts to the ROC. They would get to determine who and where the money goes. The money would more likely go to wealth/job generating companies instead of new federal vote -buying social programs.
  50. Der Kommissar from T.O., Canada writes: John Cameron's observation about how Alberta is investing in infrastructure to facilitate the oil production addresses a key omission from G&M's article: Norway's government spent 30 years investing in the oil production before it was able to start saving. Between 1964 and 1994 the was not a single dime in the 'Oil fund' - only in the last decade has the investment in infrastructure paid off.

    The other thing which wasn't said in the article, concerns the Ts & Cs oil companies operating on the Norwegian sea shelf had to comply with: A significant amount of the work on the oil platforms themselves had to be delivered by Norwegian companies. Over time this has helped Norway develop world leading engineering capabilities and technologies on everything off-shore related; which is why the Norwegian non-oil economy is doing as well as it is today.

    I believe that is a much more important point for Albertan's and New Foundlanders to take into consideration when engaging with the oil companies; leveraging the oil activities to facilitate the development of high tech capabilities which will benefit the economy as a whole.

    One obvious opportunity for both provinces would be to ask the oil companies to voluntarily develop technology that will reduce the carbon emissions related to oil production. The incentive would be that they would face a tax on carbon emissions from a certain date, say 2015. By having the oil companies fund research at local universities and work with local technology providers there is a good chance that Canada would end up with much sought after technology, competencies and employment opportunities - something that is much better than 'money in the bank'.
  51. Henry Cunningham from Edmonton, Canada writes: Mel Knight is a fool that lacks vision, he is one of many individuals in Alberta responsible for the mismanagement of the oil industry. Just because Alberta isn't a central government doesn't mean that it can't operate the heritage trust fund like that of Norways. Dumping oil revenues into the budget means Alberta suffers high inflation, there is a role for the provincial government in making sound macro-economic. That $400 cheque I recieved was easily the biggest waste ever, a program that cost 1.3 billion made no meaningful difference in my life, and broadly speaking that of many (if not all) Albertans. That cash didn't make me rich, and now I hear we're funding 17 new schools through P3s...what incompetent boobs.
  52. CD W from Canada writes: Norway is culturally monolithic and does not to have spend a dime on crybabies and whiners. No truck or trade with the self infantilizing downtrodden, unless you count the reindeer herders.
  53. Kevin Cochrane from Clear Lake, Manitoba, Canada writes: DB from Burnaby has it exactly right and again the G&M drops the ball. There isn't going to be another nation wide sharing of the oil wealth because Trudeau screwed that up royally with the NEP, so get that thought out of our minds right now. Next, if it was explained to the readers in minute detail as to what exactly is required to turn dirt into oil the reader may understand why the province of Alberta cannot possibly get 78% for a royalty rate. Bitumen requires huge amounts of labour and capital to mine and process. As the oil sands develop to a global-size provider of oil next-thing-next comes the requirement of developing the process to fit our 21st century's environmental-impact needs. There is no question that the companies making oil have to clean up their act, they currently are relying on technology that is decades old, the low price of oil for 30 years saw to it that there was little to no R&D in the tarsands until very recently. Long story short, oil sands very, very expensive but tremendous reserves, conventional deep sea oil, comparatively easy to extract, no upgrading however will run out much much sooner. Could we please have an article that has some understanding as to what is actually going on in the tarsands, please??
  54. Go Oilers Go! from Canada writes: I support more oil revenue being diverted into the Heritage fund; however comparing Norway to Alberta is disingenuous.

    Norway is a sovereign nation. Every dime of income tax, corporate or personal, stays in Norway.

    Not so in Alberata. Over $100 billion in the last ten years alone has been removed from Alberta and redistributed across Canada in the form of equalization.

    If all of the income tax I and other Albertans paid as well as the corporate income tax paid by the oil companies stayed within Alberta exclusively the Heritage fund would be considerably larger.

    Over the next 20 years the Federal gov't stands to bring in more revenue from the oilsands operations than Alberta's provincial gov't. The Feds take is estimated to be $50 billion or more.
  55. The Prytanis from Ottawa, Canada writes: D.G.:
    "First, the oil belongs to Alberta, NOT Canada."
    "I think it would be well worth Doug Saunder's while to sit in a few classes on basic economics"
    Here's his bio:
    theglobeandmail.com SaundersBio.html
    What have you done, D.G.?

    Joseph Stiglitz, a pro-globalization, Nobel Peace Prize winning economist, and Former head of the World Bank seems to think that the Norwegians have the right idea on how to manage Dutch Disease. Read his book MAKING GLOBALIZATION WORK, especially the chapter on "Lifting the Resource Curse". Perhaps you'd like to criticize his credentials in an ad-hominem logical fallacy as well?

    As for you idea that Alberta exists in a vacuum, I'd like to remind you firstly that a province can suffer from Dutch Disease too. Any production in Alberta not connected to oil can also suffer. Secondly, that it's Canadian Dollars that are being effected by this, not Albertan dollars.

    Sounds to me like you still believe in mercantilism. Now who needs a course in economics?
  56. toronto,canada's only city that counts from Canada writes: where do all you oil millionaires get the time to post. from your postings its 24/7 work hard play hard. looks more like play hard.
    by the way if you stuck calgary next to toronto what would you get?
    another toronto suburb.
  57. Alan Burke from climatechange.dynalias.com in Ottawa, Canada writes: Northern Pike I'm afraid you're right. What's tragic is that having destroyed one resource (e.g., cod) you appear to be happy to move on to the next rapacious strategy.

    Sustainability.
  58. Doug - from Canada writes: Look at it another way. Couldn't you say that the Federal budget surpluses are due to Alberta oil and by paying down the debt we are in fact saving? Its funny how the NDP are the exact opposits of the Norwegians

    And all the illinformed comments on Alberta's royality amounts. They have increased and the money is going to BC and Sask. Also for every billion extra Alberta takes the Feds lose $400 mil not including the loss on less economic activity. Now if you want to raise royalities to reduce the pace of development OK that is a plan but don't do it to provide extra money for schools because in the long run it won't.
  59. scarlet pimpernel from Canada writes: alberta sells to u.s. exclusively. its a free world champs, why not get the best price you can get? some of you say all the wealth generated by the oil sands goes to all those lazy, unemployed canadians.
    where do most of the profits go or does the "s." in u.s.a. mean santa claus?
    when all the beef producers ran into trouble with mad cow disease the u.s. producers didn't offer to take our cattle, nor should they. its a business - get the best dollar you can. americans are our best friends and i'd be hard put to think of a better neighbour, but business is business.
  60. R M from Toronto, Canada writes: I think the article has a lot of merit. Norway's model is a way of forcing savings. If you believe economic theory, the only way to move to a higher standard of living in the long-run is to encourage savings and investment in industry and R&D. I lived in Norway for a year, and they seem to have it right -- the differences between rich and poor are relatively narrow and everyone seems to have a roof over their head and food on their plates.

    Sadly we seem more intent on increasing our consumption today by putting more money in our pockets now, than on saving for the future. For all the talk of the government squandering tax dollars, as Canadians we haven't been great savers (on average) when money has gone into their own pockets. I agree with old curmudgeon though in that we seem to lack the political will to actually make things change.
  61. Go Oilers Go! from Canada writes: R M from Toronto, Canada writes:

    Sadly we seem more intent on increasing our consumption today by putting more money in our pockets now, than on saving for the future.

    Why do you assume that because individuals are being paid more money that none of it is being saved?

    I don't need the gov't to save and invest money for me.
  62. Bottom Line from Picton, Canada writes: Norway is showing the world that its oil policy means that long-term gain is more important than short-term pain when it comes to the future well-being of its citizens.
  63. Go Oilers Go! from Canada writes: scarlet pimpernel from Canada writes: alberta sells to u.s. exclusively. its a free world champs, why not get the best price you can get?

    That's not true at all.

    The US is by far the largest consumer of Alberta oil; however Alberta oil is sold also sold to Asian markets...and all at full market value.

    It's interesting you ask "why not get the best price you can get?"

    The answer is we do...why do you think Albertans were chapped when the NEP forced Alberta oil to be sold to Central Canada below market value?
  64. Joe Canadian from Canada writes: Norway has not grown its population via immigration like Canada.

    Since 1975 they have grown by about 500,000

    Alberta has more than doubled its population and is still spending like mad to catch up with infrastructure.

    So with Alberta having to spend more internally and shipping out billions to the rest of Canada we are comparing apples and oranges.

    Most Canadians would also revolt if the price of gas was raised to over $2/l next week by a tax increase/ carbon tax etc.
  65. Philippe Baillargeon from Ottawa, Canada writes: Two points:

    First, the article underlines the need to refocus standard Canadian comparative political analysis away from, say, Australia, U.S. and Britain, to Scandanavian countries.

    Second, while not specifically cited as such in article, note emphasis by Norwegian policymakers on inter-generational equity. State oil coffers are not used to, say, reduce current taxes. Oil is essentially seen as a public resource belonging to FUTURE generations; current profits cannot be made without due consideration to paying back a loan made - really, without their consent - by future citizens yet to be born.

    The latter practice is actually good economics for the current generation because, as the article points out, it helps curtail and contain current inflation and a rise in the country's currency (which can make exports uncompetitive).

    Essentially, an intergenerational economic pact to help each other.
  66. Globe Insider subscriber content
    Joshua Albert from Toronto, Canada writes: Trudeau and Lalonde killed any ability to do something like this as a result of the disastrous NEP.
  67. h p from comox valley, Canada writes: Lynn H from Canada writes: "But if you looked at Alberta as a individual country instead of a province then it could work the same way while still benefiting all Canadians. The Alberta government could continue to save money in the heritage fund but invest the rest in private companies in the Alberta or the rest of Canada."

    With all due respect Lynn, reinvesting the majority of those petro-bucks in Canada will raise/buoy the Loonie versus other currencies. In order to negate that, investments should be in foreign lands. So even though we British Columbians might happily accept Alberta's largesse/investments, Canadian exporter's of most products will have a tougher go of it, with a "Loonie on steroids."
  68. Rocky Zhao from Canada writes: Joshua Albert from Toronto, Canada writes: Trudeau and Lalonde killed any ability to do something like this as a result of the disastrous NEP.

    Joshua, the NEP has not been in effect for over 20 yrs now. Time to move into the 21st Century.

    And btw, here's a refresher in case you are stuck in this revisionist time warp:

    http://www.youtube.com/watch?v=Op6XLJCXagk
  69. Kevin Cochrane from Clear Lake, Manitoba, Canada writes: Saunders is essentially comparing apples with oranges if he is trying to draw some correlation between the tarsands and Norway, but what the hey, why have informed opinions, that requires research and effort. Far better to do something off the cuff and have everyone believe we are one vote away from a perfect utopia.
  70. Non Conformist from Alberta, Canada writes: "In exchange for the right to drill, they must hand 78 per cent of their profit over to Mr. Slyngstad's fund."

    This isn't a royalty. It's a tax. On profits. This makes more sense than charging royalties. Companies will always try to maximize profits. Which will maximize the taxpayers share of their oil wealth.

    Canadian companies are operating in Norway and paying a tax of 78% on profits for only one reason -- because they are still making a good return on investment -- otherwise they wouldn't be there.

    Alberta should scrap it's royalty scheme and replace it with the Norwegian model. It makes much more sense....
  71. L Harder from Canada writes: The Albertans who think that their management can't possibly be better while being proud of being suckers confound me. But it is typical of all Canadians. In a world needing resources, we are incredibly unaware of the clout we have to negotiate better terms.

    The lack of dependence on oil revenue in running government has one other big effect. Norway has tremendous leverage when dealing with oil companies. If prices are low, just leave it in the ground. Somebody doesn't want to play ball, just outwait them. Their strategy also shows a steely resolve/discipline that can't easily be undermined.
  72. W Ross from Up North, Canada writes: Yep, we're screwed!

    We have neither the governmental direction or the individual discipline to avoid the "Dutch syndrome".
  73. J T from Victoria, Canada writes: The first of many mistakes in the article that destroys credibility: Quote: "It's a phenomenon known to economists as “Dutch disease,&8221; after the tragic experience of the Netherlands, which discovered oil in the 1970s." The Dutch actually discovered natural gas, not oil.
    And gee, old curmudgeon, I have you to thank for the NEP. Fortunately I worked for an American company so I kept my job and career, as well as my house. My friends who proudly worked for Canadian companies lost their jobs, and much more. Nice going old curmudgeon. Be proud. And that American company bought all the assets of the Canadian companies that went under at distress prices. They now have one of the biggest and shiniest towers in downtown Calgary - from 4 floors in 1980 to about 20 now. Be proud, you certainly helped their US shareholders. And trudeau called me a "bad Canadian" for disagreeing with his deliberate attack on Alberta and Albertans. I have been a very bad Canadian ever since. Be proud. I hope filling your Kcars and Volares for a nickle less, and the satisfaction of needlessly damaging Alberta was worth destroying 60,000 jobs and careers and permanently rifting this country. Be proud.
  74. Globe Insider subscriber content
    Richard Roskell from Canada writes: As usual, those damned socialists are ruining Norway with their meddling ways and so-called "economic oversight". And you call that $380 billion nest-egg a contingency fund? Hah!

    And once the oil dries up and that highly diversified economy has to fall back on high-tech manufacuring, knowledge-based industries, and the rest- along with the pitiful trillions they have in the bank- where will Norway be then? I say "hah!" again!

    Thank god Alberta and Canada have chosen to sell off our resources to foreign-based companies for a song. Rather than give in to the bleating calls from those who would see a system that benefits Canada first, Alberta wisely saw the communist-inspired thinking behind that premise. Unbridled, unfettered corporate greed-and-profits is the way of the world, and the hope for the future.
  75. Robert Miller from Halifax, Canada writes: Remember NEP is 25 years in the past -- this is the present.
    • Posted 31/01/08 at 12:43 PM EDT |