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Alberta's Throne Speech laid out a plan to diversify the province's economy by providing loans to non-energy sector companies. (Sergei Karpukhin/REUTERS)
Alberta's Throne Speech laid out a plan to diversify the province's economy by providing loans to non-energy sector companies. (Sergei Karpukhin/REUTERS)


In Alberta, history is about to repeat itself Add to ...

Mark Milke is a Calgary author.

If, as Karl Marx wrote in 1852, history repeats itself first as tragedy and then as farce, the Alberta government’s recent Speech from the Throne signals how it intends to resurrect and repeat a 30-year-old failed policy experiment. The recycled attempt would be comical if it were not about to be an expensive lesson, again, for taxpayers.

In the speech, Premier Rachel Notley’s government announced a plan to try and diversify Alberta’s energy-dependent economy. This is a copycat policy from the later years of the Peter Lougheed government and the entire reign of the Don Getty government.

Diversification always sounds good, in theory. But Alberta has been down this government-engineered path before and with abysmal results. In the 1980s, the last time Alberta’s economy was tanked by a recession – by the policy action of a Prime Minister Trudeau (Pierre Trudeau’s ill-advised National Energy Program) and finally by low Saudi Arabian crude oil prices – the Alberta government responded by handing out loans and loan guarantees to multiple corporations. It was an attempt by politicians to “jump-start” non-energy sectors that could, theoretically, diversify Alberta’s economy.

Thus, companies involved in pulp and paper processing, high-tech, meat-packing, waste treatment and many other industries were given loans and guarantees.

Problematically, then and now, businesses that cannot attract private capital and that are not naturally profitable are not changed by the injection of taxpayer dollars. By the early 1990s, many of the loans and loan guarantees went sour as companies underperformed or went bankrupt. The price tag for the province, by 1993, was $2.4-billion. By 1996, the practice of corporate welfare in Alberta had become so toxic that the Ralph Klein government passed legislation greatly restricting the practice. His government mostly stayed out of the business of being in business.

But in a 1980s retro move akin to bringing back 1970s disco or 1980s hairstyles, the newest Alberta premier wants taxpayers back in the diversification business. She also offers up a second justification, how the province wants to “invest in” – political-speak for “subsidize” – a “greener, more sustainable economy.”

One can desire a greener world and yet realize windmills and solar panels won’t replace traditional energy sources any time soon. Also, the former won’t be made any more economical through subsidies. Subsidies in fact delay innovation by shielding companies from market realities. One can also like diversification but realize a natural limit exists to the type available in Canada: The Prairie provinces will not soon replace Hawaii, California or Florida for sun-seeking winter vacationers, for example. Realism here would be welcome.

Alberta’s Throne Speech ignored such realities. It instead announced the province will funnel $1.5-billion in taxpayer money to the provincially-owned bank, Alberta Treasury Branches, “to support lending to small- and medium-sized businesses.” The province will also direct AIMCo, which manages the Alberta Heritage Savings Trust Fund, to loan $500-million to “Alberta companies with growth potential.”

This, too, is reminiscent of the 1980s where the province used the Alberta Heritage Savings Trust Fund and other entities in now-failed diversification efforts.

For the record, after Alberta’s mid-1990s decision to cut off most taxpayer subsidies to business, the province did just fine on job creation. Between 1995 and 2014, 861,000 jobs were created in Alberta. As for diversification, as a share of Alberta’s economy, oil and gas accounted for 37 per cent of the province’s GDP in 1997 – the year after official government diversification efforts ended. By 2014, at the height of the last energy boom, oil and gas accounted for 24 per cent of Alberta’s economy. Point: Alberta was already diversifying without government direction.

In its recent Throne Speech, the province announced it intends to “pursue a coherent and effective economic development strategy at last.” Put aside the hubris in that statement – a government whose caucus contains no member with any significant private sector experience purports to know how to pick economic winners – and instead look back: History is about to repeat itself in Alberta. The costs to taxpayers will not be cheap.

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