CALGARY, AB, Aug. 28, 2010/ Troy Media/ – The next time you want to berate a politician for lying, think about the price they pay when they serve the truth straight up.

Such is the case with Alberta’s Finance Minister Ted Morton, who found himself knee deep in a barnyard for simply refusing to feign shock and horror on cue at the idea of a provincial sales tax.

Morton is charged with managing finances in a province where resource revenue has provided a long and profitable free ride. Those revenues have helped Alberta remain a PST holdout. But with conventional resource revenue in steep decline, and the economy in a protracted recession, Alberta is forecasting a $4.8-billion deficit.

After Morton provided reporters with an update on Wednesday, he was asked what options are being considered to deal with this financial threat. Everything, Morton affirmed. He said the government wants to come up with a long-term solution to erratic oil and gas revenues, and the Premier’s Council for Economic Strategy is examining tax options as part of that discussion.

No new tax, for now

Would you rule out a provincial sales tax, he was asked? Morton explained the government has no intention “for the time being” of imposing any such tax – honest words, but also enough rope to see him hanged next day in the province’s daily newspapers.

“Sales tax on table in Alberta,” reported the Calgary Herald.

“Morton doesn’t rule out provincial sales tax,” screamed the Edmonton
Sun.

Opposition parties quickly seized the opportunity to make (modest) political hay.

“We don’t have a revenue problem. We have a spending problem,” cracked Liberal MLA Hugh MacDonald.

“They’ve got to get their spending under control,” fumed Wildrose Alliance leader Danielle Smith. “This is not going to be resolved by just loading up new taxes on Albertans.”

Now, let’s look at his exact words. Morton said: “Albertans are rather happy with the fact, and even proud of the fact, that there isn’t a sales tax in this province. And for the time being this government doesn’t have any intention of changing that.”

The truth hurts

That may not be the easiest, or most politically expedient answer, but it is the only honest one.

The easiest answer would have been to say, “Read my lips,” or “Over my dead body,”  which is basically what Premier Ed Stelmach’s office said the next day in a bid to limit the political fallout. After all, a provincial sales tax is anathema and any government that tries to impose it could very well be signing its own death warrant. (Under current law, it could only be imposed following a provincewide referendum.)

But, as easy and rewarding as it would be to utter those words, it would also be somewhat dishonest. The simple truth is that if the economic cards do not fall Alberta’s way, new taxation may be the least worst option.

Certainly, the opposition is right to point out that the incumbent Progressive Conservatives have been wasteful in their spending. One has to wonder what state this province would be in today, if only its government had handled those billions of dollars in precious royalties more prudently during the boom of the late 1990s and early 2000s.

The same opposition politicians are less right – in fact, downright disingenuous – when they assert that cost controls alone will solve our $4.8-billion problem. Alberta has a seemingly endless list of infrastructure needs; its educational institutions are financially besieged and health care is a monster with an insatiable appetite for cash. It is an inescapable fact that Alberta needs more money than it’s taking in right now to function as a modern province.

PST has been suggested

It might come as a surprise that some economists actually think a sales tax would be a good thing for Alberta. In 2009, Jack Mintz, head of the School of Public Policy at the University of Calgary, said a PST of – say – eight per cent would be OK, if the revenue was used to reduce personal and corporate taxes.

Now, if voters want to be anesthetized by hollow assurances from politicians who know they can’t keep their promises, then people like Morton should give up and tell them what they want to hear. Benign ignorance is just another way of forsaking our democratic rights and obligations.

If, on the other hand, we want to reward candor, then we have to stop punishing politicians who decline to deceive. Refusing to rule out a PST doesn’t mean we have to have one; it just helps Albertans understand the depth of our current economic ills.

That’s worth talking about – honestly.

Doug Firby is Managing Editor of Troy Media Corporation, and former Editorial Pages Editor of the Calgary Herald.

Store photo: Myke2020; Rose photo: John Haslam

Channels: Didsbury Review, Sept. 1, 2010

August 24, 2010

By Robert Roach
Director – West in Canada Project
Canada West Foundation

Editor’s Note: Where does Canada’s future lie? What can Canadians do to help ensure their future prosperity? The following is the first part in a series, the basis of a forthcoming book entitled Re-Writing the Code: Changing Canada’s Economic DNA, by Todd Hirsch and Robert Roach. Hirsch is the senior economist at ATB Financial (and Alberta Business Columnist for Troy Media), and Roach is director of the West in Canada Project at the Canada West Foundation.

Part five, using Alberta as an example, looks at the importance of the environmental sustainability in ensuring future prosperity. Final column in the series.

Robert Roach

CALGARY, AB, Aug. 27, 2010/ Troy Media/ – There are many ways to ruin a cocktail party. One tried and true way is to bring up the environment: “Are you aware that the pork in that pig-in-a-blanket you are eating creates toxic runoff that contaminates our rivers?” “No, but it sure is tasty!”

This is why we did not start this series of articles on changing Canada’s economic DNA with a piece on the importance of thinking and acting green. However, while it may be a buzz kill, addressing the environmental piece of the economic competitiveness puzzle is critically important.

This is especially true because we are nowhere near where we need to be when it comes to environmental efficiency (see what we mean – what a buzz kill). We have an economy that is really good at exploiting the environment and we are trying to stick this square peg into a round environmental hole. There has been progress: Recycling has become commonplace, dumping industrial waste directly into rivers has been banned, and we have greatly reduced the use of ozone-depleting hairspray. Despite these and other minor adaptations, our basic economic DNA is black and red (as in black and red ink) rather than green.

Out of the Stone Age

The point here is not to be ashamed of what we have accomplished as a civilization. The modern economy and its roots in transforming the land and harvesting the earth’s resources have taken us out of the Stone Age. For most of us, at least, this is a good thing.

Nonetheless, we don’t want to become an economic dinosaur staring into a future where we are just a bunch of bones in a museum. We have to move beyond tinkering at the margins of how our economy operates and embrace a completely different approach to how we weld our economy to the short-, medium-and long-term health of the planet.

The first thing we have to admit is that this will not be easy and it will not come without short-term costs. It will pay off, but like anything worth having, it requires sacrifice. There will be winners and losers, and the losers are not going to be happy. If we plan for this rather than think that the transition to a green future will be painless, our chances of success will be much greater.

The second thing we need to understand is that one-off reactions to the crisis of the day – be it greenhouse gases, oil spills, birds getting chewed up in wind turbines or the disappearing rainforest (remember when we cared about that?) – will not get the job done. It is like training a duck not to quack – you might have some success, but it would be better to change the duck’s genetic code so it has no need to quack.

As an economy, we need to change the basic equation of exploiting land, labour and capital to a much more complex algorithm that incorporates the value of ecological goods and services, establishes the primacy of creativity and innovation and erases the notion that “protecting” the environment is either a cost or a moral obligation. Sustainable practices must be as natural as breathing. If they are only the result of laws, guilt or religious fervour, they will always be on shaky ground and open to fierce opposition.

We need business practices, investment strategies, production systems, accounting methods, entrepreneurial norms and market signals that integrate both the efficiencies that can be gained from green economics and its respect for the natural processes that sustain life.

A change of this magnitude is a massive undertaking, and for this reason alone it cannot be centrally controlled. It has to happen at the level of the individual firm, investor, entrepreneur, worker, parent and teacher.

Two things make this transformation increasingly likely: First, there are many potential advantages to a greener economy, including lower production costs and higher profits; new jobs in the green services sector; a decrease in onerous government regulation and the related compliance costs; and less money spent on reacting to environmental challenges (thus leaving more money in the hands of consumers).

Rediscovering what ancient cultures already knew

Second, we know more today than we used to. Some will say that we have only rediscovered what some ancient cultures already knew, but either way, the next generation of Canadian entrepreneurs, investors, managers and workers are much more savvy about the need for, and value of, greater balance between harvesting the earth’s bounty and ensuring that it continues to be bountiful.

Alberta can take the lead. Or, we can become the dinosaur while Germany, the U.S., and yes, even China, push us out of the way.

Special Report: Changing Canada’s Economic DNA

Channels: The Edmonton Journal, Aug. 9, 2010

August 26, 2010

By Todd Hirsch
Senior Economist
ATB Financial

Editor’s Note: Where does Canada’s future lie? What can Canadians do to help ensure their future prosperity? The following is the first part in a series, the basis of a forthcoming book entitled Re-Writing the Code: Changing Canada’s Economic DNA, by Todd Hirsch and Robert Roach. Hirsch is the senior economist at ATB Financial (and Alberta Business Columnist for Troy Media), and Roach is director of the West in Canada Project at the Canada West Foundation.

Part four, using Alberta as an example, looks at how our aversion to failure can hold us back.

Todd Hirsch

CALGARY, AB, Aug. 26, 2010/ Troy Media/ – Most of us are familiar with a little blue-and-yellow can of spray in our garages or under the kitchen sink called WD-40. That is the trademarked name of a lubricating spray developed in 1953 by a Californian named Norm Larsen. It was originally designed to repel water and prevent corrosion, and later was found to have a variety of practical household uses. WD-40 stands for “Water Displacement — 40th Attempt.”

Fortieth attempt? Can’t you just hear Larsen’s wife, yelling down into his workshop, “Norm, forget it! You’ve tried over 30 formulas – it’s not gonna work!”

Intolerant of mistakes

Has the aversion to failure in our society gone too far? We’ve become so intolerant of mistakes and errors that we go to enormous lengths to either hide them or pass them off as success in disguise. This cult of nothing-less-than-success may have serious economic consequences, too.

There’s a reason author Aritha Van Herk called many of Alberta’s early pioneers “mavericks.” They went against the herd mentality, took risks and accomplished great things – but a lot of failure accompanied these mavericks along the way, as well. The history of Alberta’s energy sector offers compelling examples of spectacular failures on the road to eventual success.

The now-famous Leduc No. 1 oil well, drilled in 1947, followed a string of dry holes. It was that well that triggered the conventional crude oil industry in the province.

Had the original prospectors given up on advice that there will probably be no big oil finds in the region, they never would have struck it rich in Leduc.

More recently, the oilsands offer the same lesson in perseverance. As far back as the 1960s and ’70s, researchers were busy trying to figure out an economical way to extract oil from the thick, tar-like sands in the Athabasca basin. For years it looked like the entire project might prove to be a complete waste of time and money, since no one seemed able to make it commercially viable. But eventually, with improved technology (and with help from rising energy prices), the oilsands paid off.

Today, Alberta’s energy sector is up against a new and formidable challenge: how to supply a world still hungry for energy, but in a way that is less damaging to the Earth on which we tread. There are all kinds of innovative, creative minds busy figuring out ways to do this, but there will certainly be many more ideas that don’t work than ones that do. Now more than ever we must be willing to try and fail. Carbon capture and storage (CCS) is a prime example of a new technology in its infancy, and one that probably has a lot of failure ahead of it on the road to proven success.

Many readers will wrongly conclude that I’m suggesting we should wallow in failure, accept mediocrity, and ask for government programs to prop up incompetence. But this is exactly the opposite of what is being proposed.

A tolerance for failure

Albertans may need a higher degree of failure tolerance as an unpleasant yet necessary means by which we succeed. This may be a hard principle to accept in a culture where failure is punished and success rewarded. But tolerating failure doesn’t end with the failed attempt. The failure needs to be accompanied by learning – why didn’t that attempt work? What did I learn that I can apply to my next attempt?

Ultimately, Alberta’s economic progress will rely on risk-taking. An entrepreneur has an idea, a scientist has a hunch, a designer has a vision. To act on any of these notions, someone needs to stick his neck out and take the chance, failure or not. But if the consequence of failure seem overly dire, it will crush the incentive for the risk-taker to try anything less than a sure bet. And the economy will suffer.

As Brazilian architect Ruy Ohtake said, “Every project should be a little bit impossible. That is how we progress.” But those little bits of impossibility along the way will result in some failed attempts.

Failure should not be devastating. Taking a chance on a hunch should not be punished with a zero-tolerance approach to failure. We can’t sit and wallow in failure, but we can come to embrace failure for what it is – a necessary stepping stone to success.

Todd Hirsch is Alberta Business Columnist for Troy Media.

Special Report: Changing Canada’s Economic DNA

August 24, 2010

By Robert Roach
Director – West in Canada Project
Canada West Foundation

Editor’s Note: Where does Canada’s future lie? What can Canadians do to help ensure their future prosperity? The following is the first part in a series, the basis of a forthcoming book entitled Re-Writing the Code: Changing Canada’s Economic DNA, by Todd Hirsch and Robert Roach. Hirsch is the senior economist at ATB Financial (and Alberta Business Columnist for Troy Media), and Roach is director of the West in Canada Project at the Canada West Foundation.

Part three, using Alberta as an example, looks at the importance of innovation in ensuring future prosperity.

Robert Roach

CALGARY, AB, Aug 24, 2010/ Troy Media/ – Back in the days when people were sent to poorhouses for falling on hard times, there was a job called “picking oakum.” Prisoners were forced to untwist old bits of hemp rope by hand until their fingers bled. The resulting product was then used for other purposes, such as stuffing mattresses. As such, picking oakum was a value-added industry: a raw material was processed and, in turn, value was added and “jobs” were created.

It is easy to imagine a local oakum producer stressing how much better it was to untwist the bits of rope locally, as opposed to exporting it in its raw form.

Looking beyond value-added

Picking oakum is an extreme example, but it highlights the need for economic strategies that go beyond simply promoting more value-added activity. A new meat-packing plant, bitumen upgrader or auto-parts factory is not going to maintain Canada’s economic prosperity in the global economy of 2010, let alone 2025 or 2050. We have to aim higher — much higher — than the modern equivalents of picking oakum.

This does not mean that we should not make more pasta, furniture or other value-added manufactured products here in Canada when and where it makes economic sense to do so. What it means is that we need to fully understand that “making things” (especially things that our competitors can make cheaper) will not keep Canada prosperous.

For example, we have lots of oil and natural gas, the extracts from which we could produce plastic patio chairs. But the reality is that, even after shipping the chairs across the sea to North America, the Chinese can still make plastic patio chairs cheaper than we can (assuming we don’t try to compete by dramatically lowering wages or loosening environmental standards — something we definitely do not want to do). As a result, when Albertans need patio chairs, we buy the ones made in China. After all, at $10 each, we’d have to sell a lot of patio chairs to fuel our economy.

So where does this leave Alberta? Believe it or not, it leaves us in a very enviable position. The Chinese know that their country’s long-term economic future will be bleak if it involves making stuff that ends up in dollar stores, and they’d love to have the advantages that we have in Alberta right now: a modern, service-based economy, a high average level of education, a relatively low level of poverty, and great transportation and communication infrastructure.

We have everything we need to aim for the top of the global value chain.

The good jobs of tomorrow and the industries in which we have a chance to develop a comparative advantage are largely at the upper end of the value chain. You don’t want an army of workers assembling iPads. What you want are workers who design iPads and other marketable innovations. You want businesses that not only figure out how to extract oil and gas here in Canada, but that sell their expertise to drilling companies around the world.

We might make lots of pasta out of our wheat or we might ship it elsewhere for processing, but what we really want is to become the centre for research for developing strains of wheat and other agricultural staples that will help feed the world’s growing population.

Focusing on key ingredients

We have the ingredients — wealth, education, entrepreneurs, great cities, infrastructure and a record of success — to play at the upper end of the value chain. We just need to make this our focus.

Exporting natural resources and upgraded products will remain a key component of our economy, but if we don’t aggressively pursue the profits and jobs to be found in medical research, education services, financial services, biotech, information technology and other types of design, we will find our standard of living falling as our competitors get better and better at both the bottom and top ends of the value chain.

But all of this comes with an important caution. The bursting of the dot. com bubble a decade ago showed us that economic activity at the top of the value chain still has to have real substance. If it is just a bunch of young people playing pool in the lunchroom and getting paid in soon-to-be-worthless stock options, it won’t work. We need good ideas that are turned into real innovation and real value.

Alberta has all of the necessary ingredients to do this. Now is the time to stir the pot and make it happen.

Special Report: Changing Canada’s Economic DNA

CALGARY, AB, Aug. 5, 2010/ Troy Media/ – Dressed in her ubiquitous navy blue business suit, Danielle Smith bursts into the room smiling, apologizing for being 20 minutes late. She was chatting with a certain well-known female Calgary politician, and lost track of time.

Smith likely apologizes often for running late for appointments. After all, she’s a busy woman, with crowded days talking to politicians, business leaders and reporters who want to get a reading on this smartly dressed, intense and articulate woman, intent on becoming the next premier of Alberta, heading the upstart Wildrose Alliance.

Smith wastes no time explaining the Wildrose Alliance’s mission.

“We’re not running to defeat this government,” Smith said in a recent, exclusive interview with Troy Media Corporation. “We’re running to replace it.”

David and Goliath

Sitting in her office in the heart of the oil capital of Canada – so  barren voices echo throughout the high-ceilinged room – it’s hard to imagine how this David will topple Goliath, the 39-year-old Progressive Conservative juggernaut. But the PCs have made a series of unpopular policy gaffs, and stubbornly supports a leader who stumbles more frequently than former U.S. president Gerald Ford.

At 39, Smith is a polished, media-savvy leader, riding high from her October 2009 election as leader of the WA. The party was created from the merger of two fringe parties in January 2008, and over the past year membership jumped to more than 15,000. The party’s rapid growth is the result of not only Smith’s political skills, but also rising disaffection with the PCs, who are showing signs of encroaching collective senility. The WA, meanwhile, is poised to overtake the Liberals in the upcoming election (expected in 2012) as the official Opposition. (The Liberals have nine MLAs, the WA four.)

“I think this is our opposition term,” says Smith.

Updating the image of an icon

The WA is built around Smith’s image of modernity and professionalism. And in that respect, she echoes an Alberta icon from another era: Peter Lougheed. This Calgarian, who started the Tory dynasty in 1971, was called Alberta’s “blue-eyed sheik” for the way he stood up to Ottawa and effectively laid the groundwork for the province to become the resource-fueled western power it is today.

Modern, professional, but above all, confident; when asked what new PC leader she would most hate to face, she responded without hesitation: “I can take on any of them” – even Ted Morton, a one-time role model who has stayed loyal to the PCs, and is now the Finance Minister.

Smith comes by her fiscal conservatism honestly. A life-long Albertan, she studied economics at the University of Calgary, where she chummed with the likes of Rob Anders and other well-known conservatives. After she graduated, she served a one-year internship with the Fraser Institute, a well-funded lobby group noted for its free market ideology.

It was at Fraser, she said, that she learned that “market failure is really government failure.”

Rebounds from political misstep

Her first venture into politics was a misstep that would’ve been fatal to a lesser politician – she was a trustee with the Calgary Board of Education that was fired by the province in 1999, after it was deemed dysfunctional. She sulked away, and landed at the Calgary Herald, just as it was being restocked with conservative thinkers during the Conrad Black ownership era. She stayed on for six years as a columnist and editorial writer, and hosted a national affairs program on Global Television. Some of those columns, she admits, may not serve her political objectives well.

“I can’t hide my history, ideology, or my personal opinions,” she admits. “I’ve been on the record for 10 years. Obviously, there are a few columns out there that will come back to haunt me.”

Bedrock support in Calgary

There is another edge to this sword, though, and it works in her favour. In her hometown, the oil patch loves Smith’s small-government fiscal conservatism and her scepticism about the theory of global climate change.  As one Tory insider put it, “the PCs can barely raise a nickel in Calgary – the money has all gone to the WA.” (It also doesn’t hurt that former premier Ralph Klein’s father has endorsed the party and Hal Walker, a personal friend of Klein, and an influential Calgary fundraiser, has come aboard.)

Only in Alberta could a leader question the theory of climate change, but Smith insists: “The scientific debate is not settled.”

“There’s still a huge amount of scientific debate over the extent to which manmade emissions are impacting the environment.”

For that reason, the WA opposes costly emissions control programs, like the cap-and-trade emission credits program, as well as government subsidies for the capture and storage of carbon emissions. She calls those two programs “costly and stupid” and subsidies “foolhardy.”

The WA also finds rural support in Alberta’s south, where large number of Latter Day Saints families find the party’s social conservatism in line with their own values. The going is tougher in Alberta’s other major city, Edmonton, where voters consistently favour opposition Liberals and New Democrats (and some critics dismiss Smith as little more than an oil patch toadie). But Smith believes she can reach the conservatives there, too.

Rewriting the political script

Smith’s ambition extends beyond forming the next government. She says she wants to realign the province’s political structure, moving away from the “big tent” Progressive Conservative model of consensus politics, and becoming more ideologically pure conservative.

“In this province, we will probably see a realignment around those of us who are conservative and those of us who are progressive. And in that realignment, I don’t think there’s room for a Progressive Conservative party any more. I think the conservatives will coalesce around our party and progressives will coalesce around something else.”

Like her parents, Smith was a long-time PC, but says she lost faith in the party when it shifted away from the hard-right “true conservatism” of the 1990s.

Today, “A number of people who make up that caucus are no longer identifiably conservative,” she says.   The government has gone on “autopilot” – budgeting for a record deficit this year and allowing regulations to run amok.

And “some ministers,” she assets, her voice rising, are “openly musing about the merits of a sales tax. This is no longer a conservative party. They’re conservative in name only.”

Six different adjustments to the energy royalty regime “drives business crazy,” Smith said. Farmers, ranchers and health-care professionals are up in arms.

“There isn’t a single voter base that hasn’t been disrupted,” she added.

A history of electoral sweeps

But can the WA really topple the Tory dynasty? History is on the WA’s side. Since the province was formed, the United Farmers of Alberta swept away the first government – Liberals – and, in time, the UFA was also overtaken by Social Credit, which eventually fell to the PCs.

“That’s what happens in Alberta,” says Smith. “When we don’t like the conservative government we’ve got, we create another conservative government.”

Not quite. In fact, the UFA was a progressive group, which had a number of socialist members. The Social Credit, which succeeded the UFA, was socially conservative but fiscally communitarian. In fact, with the exception of Klein’s first decade as leader in the 1990s, the PCs have also been centre-right moderates.

Smith sees the WA replicating the conservative movement that occurred at the federal level with the election of the reunified right under Prime Minister Stephen Harper’s Conservative party. It’s not a perfect model. The Harper Conservatives are stuck in a minority, and don’t appear to be gaining the popular support that would assure them a full electoral mandate. Eastern Canadians, in particular, seem wary of true conservatism.

Smith believes Alberta is different: “Albertans aren’t liberals and they’re not socialists,” she explained. “In Alberta, the political centre is in a different place than the rest of the country. I don’t know if the Wildrose would be as successful running in downtown Toronto as we are in Alberta.”

Even so, Smith has moderated her views: “Fundamentally, I’m a democrat,” says Smith. “In my acceptance speech, I said let’s not focus on how right wing we can be, let’s focus on how grassroots we can be.”

Members vote for moderation

Party members have taken the cue, voting for notably moderate policies at the party’s recent convention, including endorsing a publicly funded health-care system. Edmonton Journal columnist Graham Thomson quipped that some of the resolutions were so mainstream, “they would have been at home in a New Democrat convention.”

Smith hopes the “next wave” – announcing their team of candidates – will produce a new level of support that will break the polling deadlock with the Tories. But it’s premature to declare the incumbent party dead; past obituaries have triggered unexpected PC turnarounds.

The critical question for the WA remains: Are there enough “true conservatives” out there to carry the vote?

Not in the mind of Peter Lougheed, the leader Smith has been often heard to invoke. Asked what he thought of the rise of the hard right in Alberta, recently, Lougheed fumed: “I’m a PROGRESSIVE Conservative.”

Albertans must now decide what kind of conservatives they are.

Doug Firby is former Editorial Page Editor for the Calgary Herald.

Channels: The Calgary Beacon, Aug. 6, 2010 

July 27, 2010

By Robert Roach
Director – West in Canada Project
Canada West Foundation

Editor’s Note: Where does Canada’s future lie? What can Canadians do to help ensure their future prosperity? The following is the third part in a series, the basis of a forthcoming book entitled Re-Writing the Code: Changing Canada’s Economic DNA, by Todd Hirsch and Robert Roach. Hirsch is the senior economist at ATB Financial (and Alberta Business Columnist for Troy Media), and Roach is director of the West in Canada Project at the Canada West Foundation.

Robert Roach

CALGARY, AB, July 27, 2010/ – Back in the days when people were sent to poorhouses for falling on hard times, there was a job called “picking oakum.” Prisoners were forced to untwist old bits of hemp rope by hand until their fingers bled. The resulting product was then used for other purposes, such as stuffing mattresses. As such, picking oakum was a value-added industry: a raw material was processed and, in turn, value was added and “jobs” were created.

It is easy to imagine a local oakum producer stressing how much better it was to untwist the bits of rope locally, as opposed to exporting it in its raw form.

Have to aim higher

Picking oakum is an extreme example, but it highlights the need for economic strategies that go beyond simply promoting more value-added activity. A new meat-packing plant, bitumen upgrader or auto-parts factory is not going to maintain Canada’s economic prosperity in the global economy of 2010, let alone 2025 or 2050. We have to aim higher — much higher — than the modern equivalents of picking oakum.

This does not mean that we should not make more pasta, furniture or other value-added manufactured products here in Canada when and where it makes economic sense to do so. What it means is that we need to fully understand that “making things” (especially things that our competitors can make cheaper) will not keep Canada prosperous.

For example, we have lots of oil and natural gas, the extracts from which we could produce plastic patio chairs. But the reality is that, even after shipping the chairs across the sea to North America, the Chinese can still make plastic patio chairs cheaper than we can (assuming we don’t try to compete by dramatically lowering wages or loosening environmental standards — something we definitely do not want to do). As a result, when Albertans need patio chairs, we buy the ones made in China. After all, at $10 each, we’d have to sell a lot of patio chairs to fuel our economy.

So where does this leave Alberta? Believe it or not, it leaves us in a very enviable position. The Chinese know that their country’s long-term economic future will be bleak if it involves making stuff that ends up in dollar stores, and they’d love to have the advantages that we have in Alberta right now: a modern, service-based economy, a high average level of education, a relatively low level of poverty, and great transportation and communication infrastructure.

We have everything we need to aim for the top of the global value chain.

The good jobs of tomorrow and the industries in which we have a chance to develop a comparative advantage are largely at the upper end of the value chain. You don’t want an army of workers assembling iPads. What you want are workers who design iPads and other marketable innovations. You want businesses that not only figure out how to extract oil and gas here in Canada, but that sell their expertise to drilling companies around the world.

We might make lots of pasta out of our wheat or we might ship it elsewhere for processing, but what we really want is to become the centre for research for developing strains of wheat and other agricultural staples that will help feed the world’s growing population.

We have the ingredients - wealth, education, entrepreneurs, great cities, infrastructure and a record of success - to play at the upper end of the value chain. We just need to make this our focus.

Understanding the value chain

Exporting natural resources and upgraded products will remain a key component of our economy, but if we don’t aggressively pursue the profits and jobs to be found in medical research, education services, financial services, biotech, information technology and other types of design, we will find our standard of living falling as our competitors get better and better at both the bottom and top ends of the value chain.

But all of this comes with an important caution. The bursting of the dot. com bubble a decade ago showed us that economic activity at the top of the value chain still has to have real substance. If it is just a bunch of young people playing pool in the lunchroom and getting paid in soon-to-be-worthless stock options, it won’t work. We need good ideas that are turned into real innovation and real value.

Alberta has all of the necessary ingredients to do this. Now is the time to stir the pot and make it happen.

Special Report: Changing Canada’s Economic DNA

Channels: The Edmonton Journal, July 26, 2010

July 21, 2010

By Todd Hirsch
Senior Economist
ATB Financial

Editor’s Note: Where does Canada’s future lie? What can Canadians do to help ensure their future prosperity? The following is the first part in a series, the basis of a forthcoming book entitled Re-Writing the Code: Changing Canada’s Economic DNA, by Todd Hirsch and Robert Roach. Hirsch is the senior economist at ATB Financial (and Alberta Business Columnist for Troy Media), and Roach is director of the West in Canada Project at the Canada West Foundation.

Part two looks at the importance of right-brain attributes – skills such as imagination, creativity, intuition, and relational abilities – to ensuring Canada’s future prosperity.

Todd Hirsch

CALGARY, AB, July 21, 2010/ Troy Media/ – In much of the thinking on economic competitiveness, there tends to be an emphasis on science, math and applied technical skills. Without question, these are essential if Alberta’s economy has any chance of success in the coming years.

But a test tube can solve no problems. A hammer can build nothing. And even the most powerful computer can’t create a thing. What each of them needs is a human brain to operate it in order to solve, build and create. Obviously, knowing how to use a test tube, a hammer and a computer is essential, but what we need now more than ever are clever ideas of ways to use them to solve 21st-century problems. We don’t need a Fountain of Youth; we need a Fountain of Smart!

A few years ago, Daniel Pink authored a book entitled A Whole New Mind . He argued that linear-thinking, “left-brain” occupations such as medicine, engineering and computer science contributed significantly to our economic wealth in the 20th century. But increasingly, because of competition from Asia and the advances in computing ability, what North America’s workers really need in the 21st century are more “right-brain” attributes – skills such as imagination, creativity, intuition, and relational abilities – to complement our linear thinking.

What does creative mean?

The problem now is that so much as been written on the importance of “the creative culture” that some of us are growing frustrated with not knowing exactly what “creative” means. Does it mean that our cities need to be artsier? Will trendy cafes and poetry readings bring prosperity? Do we really need to turn our old warehouses into avant-garde theatres or face economic extinction?

Not at all. Art and culture have extremely important roles to play in the economy, but the notion of creative students and creative workers goes far beyond Bach, Shakespeare and Monet.

Creativity is an essential element in every occupation. In its broadest definition, creativity is the application of a clever idea to solve a problem, seeing something in a new way, or making something unique. Even something as simple as putting a telephone book under your computer monitor to raise it a few inches is a creative (albeit very basic) solution to a common problem.

People say all the time, “Oh, I’m not creative.” But in fact, everyone is creative, or at least has the potential to be. And most of us have no idea of the creative capacity we possess. There is not a single sector of the economy that would not benefit from clever solutions to problems, new ways of seeing things and unique products.

What can we do, then, to foster a clever society?

When it comes to our children, the answer is almost comically simple: stop pounding the creativity out of them. Much of our education system over the past century had sadly evolved into a system that practically punishes creativity. Thankfully, huge strides are being made by some of Alberta’s most thoughtful education practitioners in trying to correct that. And the recent report from Alberta Education has some very profound things to say about the way we can deliver education.

One example of how to foster children’s creative abilities is found at the Calgary Arts Academy. This K-9 charter school is not an art school; rather, it’s an arts-immersion school that delivers the standard provincially approved curriculum through art. Teachers work alongside artists to design the program. Kids learn math through music and dance, for example, or social studies through drama. Don’t just make the kids read about and memorize types of cloud formations — get them to write a play and act like clouds. By doing so, they engage their whole brain in learning the defining characteristics of different cloud types.

Clever workplaces

Being clever must also extend to the workplace, and here we need an effort from both employers and employees. All sorts of courses and seminars are offered to stimulate the whole mind and train ourselves to think critically. At the very least, an emphasis on correcting basic literacy deficiencies would go a long way in making the workplace safer and more productive. Certainly there are many who will quickly dismiss these activities as a waste of time and money. But activating all parts of the human brain is no silly diversion, and it could do amazing things to help Albertans work more productively, get more enjoyment out of their jobs and find clever solutions to the problems they encounter in the workplace.

All of us are clever in ways we can’t even imagine, and exercising that cleverness is an economic imperative. Clever kids aren’t the ones who simply memorize information; clever kids are the ones who learn how to learn. Clever workers find simple solutions to the complex problems they encounter in their daily jobs. And the future of Alberta’s economic prosperity needs them both.

Todd Hirsch is Alberta Business Columnist for Troy Media.

Special Report: Changing Canada’s Economic DNA

Channels: Canadian Voices, Aug. 13, 2010

July 19, 2010

By Robert Roach
Director – West in Canada Project
Canada West Foundation

Editor’s Note: Where does Canada’s future lie? What can Canadians do to help ensure their future prosperity? The following is the first part in a series, the basis of a forthcoming book entitled Re-Writing the Code: Changing Canada’s Economic DNA, by Todd Hirsch and Robert Roach. Hirsch is the senior economist at ATB Financial (and Alberta Business Columnist for Troy Media), and Roach is director of the West in Canada Project at the Canada West Foundation.

Part one, using Alberta as an example, looks at the importance of strong international relationships in ensuring future prosperity.

Robert Roach

CALGARY, AB, July 19, 2010/ Troy Media/ – Manhattan is full of restaurants, galleries and art studios that inhabit buildings once used for packing meat, tanning leather or sewing clothes. Those industries and jobs left Manhattan long ago, but the city continues to prosper because it found other economic activities to replace the old ones.

In the not-too-distant future, Alberta’s shiny office towers may not be filled with energy analysts and geologists. Like Detroit’s, our towers may sit empty. But if we are careful, they may be bustling with people doing something else entirely, perhaps in industries that don’t even exist yet. If we prepare now for this eventual shift, we will enjoy continued prosperity both today and tomorrow.

Competition and partnerships

One thing Albertans can do is build on our already strong international connections and make the province a truly cosmopolitan place.

The economy is a global system, and successful jurisdictions are those that not only compete with other jurisdictions, but also those that team up with them to generate new ideas for how to create wealth.

We need to see the rest of the world as more than a market and as more than a threat (although it is both of these things). That requires us “getting out there” and building international business relationships with individuals, firms and governments - not to simply sell our wares, but collaborate on new ventures, as well. We have done a great job shipping oil, gas and beef to the U.S., but it’s time to make some significant additions to our economic repertoire. We can become a global trendsetter.

Cynics will say “this is wildly naive - we are a small player and we will never be a trendsetter or leader in international business ideas.” This sort of self-defeating nonsense needs to be ignored.

There is absolutely no reason why Albertans cannot be partnering with Indian firms to develop biotechnology, or with Russian gas explorers to provide new gas field services, or with the Chinese to design more sustainable cities. The province is full of highly educated, entrepreneurial people with a great deal to offer the global economy - we just have to take more advantage of these assets. We have wealth, we have a multicultural society, we have political stability, and we have the freedom to experiment and create.

Some practical things that we could do to up our game include transforming our colleges, polytechnics and universities into hotbeds of international study and research. What if Alberta had the largest body of international students in the world? What if thousands of researchers from across the globe were in labs at our universities? The connections made with these students and faculty would facilitate all sorts of future business partnerships. Some of this is already underway, but we’ve got a long way to go.

We could also encourage Albertans (especially young adults, but older ones, too) to spend a year or two in another country, or at least in another part of Canada — not as tourists, but as students and workers seeking new perspectives and broader minds. Some of those who go abroad won’t come back, but most will — and they’ll come back smarter, brighter and full of new perspectives.

It’s not that outrageous an idea. In many countries, particularly Australia and New Zealand, the “overseas experience” (or OE as it is commonly called) is practically an expected rite of passage for young people. It requires the buy-in from parents to encourage the OE, but that’s not yet part of our culture in Alberta. It may also require a shift in thinking for employers, too. Finding ways to encourage staff to go on a work exchange program for six months (similar to the sabbatical leave for academics) would be a powerful investment in the creative powers of its employees.

Working overseas

The OE also works in reverse. If Alberta can attract young people from other countries to do their OE here, some will stay to make up for the Albertans who don’t come back. They’ll inject new perspectives and ideas into the labour force. Others will go home with all sorts of personal connections to Albertans that will expand our international presence.

We are already working hard to attract regular tourists to Alberta, and there is an economic benefit in that. But a truly cosmopolitan frame of mind demands that we move beyond welcoming tourists for a week or two.

Ultimately, the future of Alberta’s economy lies in the ideas we generate and turn into commercial ventures. The more international our outlook and the greater our ties with international partners, the more likely it will be that our ideas will turn into profitable ventures — now and in the decades to come.

Special Report: Changing Canada’s Economic DNA

Channels: The Calgary Herald, July 19, 2010

By Mark Milke
Research Director
Frontier Centre for Public Policy

Mark Milke

CALGARY, AB, May 17, 2010/ — When Stephen Harper and other Albertans wrote the Alberta Agenda letter to Ralph Klein nine years ago, the authors called on Albertans to “take greater charge of our own future.” As I detailed previously (Read Dump the (old) Alberta Agenda), as a general recommendation – Alberta and Ottawa should have complete and independent responsibility for constitutionally-assigned areas of jurisdiction – the call made sense.

But many of the means proposed by the firewall folk were never the proper way to reach the end goal. If ever adopted, most Alberta Agenda ideas would be inconsequential at best, or costly policy failures at worst. 

No change in matters of substance

After all, suppose Alberta did have its own pension plan. How would this (or provincial cops and income tax collection) make Ottawa and the other provinces change on matters of substance?  Canadians didn’t protest over a doubling of Canada Pension Plan premiums between 1997 and 2003. If Alberta withdrew from the federal plan, I doubt substantive federal change on an Alberta wish-list would result from slightly higher CPP premiums for other Canadians.

In informal conversations with some firewall folk over the years, the responses to my critiques have been varied. Some admitted this or that firewall idea was flawed but the last defence has always been that Alberta needs more power vis-à-vis Ottawa.

A more powerful Alberta and West is a desirable end. There is a general lack of corruption in the West (compared, say, with Quebec politics), an entrepreneurial spirit both as it applies to business and environmental solutions, and a constant openness to new ideas and policies. All of this benefits the entire country. It’s an influence that should be heightened.

But for strengthened Western clout, another vision and another set of proposals are required and it starts with understanding what constitutes real power.

In a democracy, influence is wielded via population, voters and wealth. In the United States over the last half-century, the south and the west counted for much in national politics and not because Texas, California and Florida possessed their own pension plans or flirted with other, useless symbols of imagined but not real power. Those states mattered because of their population and wealth.

In Western Canada, a larger population and more seats in Parliament is a long-term project. But there are measures Alberta can take that would lead to a richer and more populated province, and also serve as examples to be copied. Insofar as other Western provinces enact such measures, they too would only boost the region’s influence within Confederation.

Consider some examples. First, Alberta could help restore a clear division between Ottawa and the provinces by picking one transfer (as a start), and press Ottawa to give up federal tax room to all provinces in exchange for an end to that federal subsidy. Health or social transfers are obvious first candidates.

Given that two original firewall authors are now in a position to do something here – Stephen Harper occupies 24 Sussex and Ted Morton runs the Alberta Finance file – the only problem might be that some provinces prefer continued cash rather than extra tax room. It’s easier for premiers to blame Ottawa for not giving out enough money than to be directly accountable to voters for their own provincial taxing and spending. But if Alberta and a few other provinces press for this reform, it has potential. 

Second, on health care, Alberta should introduce health care savings accounts as suggested to the Alberta government years ago by Don Mazankowski in his provincial report. The demographics of an aging population need to be dealt with; also, such accounts have the potential to transform health care finance and delivery in positive ways.

Third, Alberta should streamline government by ending long-term obligations for any new public sector employees. The province should imitate the private sector where most companies provide pensions for employees through matching defined contributions, not defined benefits. The latter approach unwisely promises future unsustainable GM-type, legacy benefits at the expense of taxpayers; it also promotes an earlier retirement age than is possible in the private sector.

Cut corporate tax

Fourth, Alberta will collect $3.8 billion in corporate income tax this year. Once the province returns to a surplus position, the province should slash the business tax take in half. That will lead to more investment and then more people in Alberta.

There is more that can be done. But the political ramifications of these wealth-and-population boosting policies for Alberta and other Western provinces are more voters and federal ridings over time. Moreover, on policy innovation, Alberta’s “magnet-status” would mean other provinces must imitate us or decline in relative terms. Either way, Alberta wins.

In short, a useful and updated Alberta Agenda is one that increases Alberta and Western power in real ways, both by policy example and that also lead to real increases in Western wealth, population, voters and eventually more seats in Parliament.

Mark Milke is the research director for the Frontier Centre for Public Policy, www.fcpp.org.

Channels: The Calgary Herald, May 16, the Winnipeg Free Press, the Calgary Beacon, May 18, the Red Deer Advocate, May 19, the Flin Flon Reminder, May 21, Canada Free Press, May 26, the Vegreville Observer, June 16, 2010

May 10, 2010

By Mark Milke
Research Director
Frontier Centre for Public Policy

Mark Milke

CALGARY, AB, May 10, 2010/ — Just over nine years ago, in early 2001, six Albertans signed a now-famous letter to then-Premier Ralph Klein. The authors included Stephen Harper and Ted Morton, both of whom went on to political offices of some distinction. The Alberta Agenda, or “firewall” letter as it became known, recommended five major initiatives. They were born out of frustration with the 2000 election campaign after federal Liberals used Alberta as the “whipping boy,” especially on health care.

As with any move that results from momentary passion, the initial firewall advice looked less desirable with the morning light. But even nine years later, many people still assert the proposals are desirable. The most recent example is how the Wildrose Alliance platform contains two firewall ideas: Alberta should collect her own provincial personal income tax and withdraw from the Canada Pension Plan (to set up an Alberta variety).

Problems with at least 3 ideas

Three other firewall suggestions were to replace the RCMP with a provincial police force, take policy responsibility for health care (including foregoing federal funding if necessary), and force Senate reform back on to the national agenda. 

There were problems with at least three of the five ideas right from the start. For example, while Senate reform is desirable in theory, the trend to elected Senators might have some undesired consequences. Imagine an unchanged but elected Senate where the four Atlantic provinces, with 2.3 million people, have more elected Senators (30) than the four Western provinces with 10.5 million people (24). I have no magic bullet on Senate reform, but abolishing it rather than reinforcing the existing disparity with elections seems preferable.

On provincial personal income tax collection, the cost of creating a new bureaucracy to collect, process, hear appeals, deal with inquiries and audit tax forms has never been estimated by its proponents. When I looked into this several years ago, Alberta paid just $20,000 to Ottawa to have the federal government process provincial forms. When, in 2004, the Alberta government estimated the annual cost of duplicating what the federal government already does, the additional annual cost ranged between $71 million with 1,000 new staff (using Quebec’s administrative costs as a model) or $160 million and 2,000 new staff (using federal costs as a baseline).

Albertans file almost 1.9 million returns every year. The notion these filers will happily fill out not just a few additional provincial pages as they do now, but an entire, additional duplicate set of provincial forms for every federal piece of paper they now touch, and then deal with two bureaucracies on questions, appeals, differing notions of taxable income and the like, is fanciful.

As for the RCMP, the Solicitor’s General Office informs me Alberta pays $184 million for the RCMP, or 70 per cent of the cost. That means Ottawa’s bill is $78 million. There may be other reasons to move to a provincial police force, but on cost at least the firewall folk have not yet made a convincing case.

On pensions, firewall proponents argued that because Alberta’s population is on average younger than the rest of the country the province could withdraw from the CPP and have lower contribution rates but similar benefits. Perhaps. But rare is the politician who, when given a discount on the cost of a program will lower taxes/pension contributions. It’s more likely vote-getting benefits will be increased. This is especially true when the cohort that would soon gain from topped-up benefits – retirees or near retirees – vote in much greater numbers than do younger people.  

The firewall crew’s strongest point was on resuming policy control over health care. This makes sense. However, in the present deficit environment and on the related point of foregoing federal cash if necessary, Alberta would not forego $2 billion just to get creative on health care policy. In the medium-term, Alberta and every province should seek to end federal transfers in exchange for tax points. That would result in flexible, innovative provincial policy.

Alberta shortchanged

In general, one major complaint that animated the Alberta Agenda was that Alberta is massively short-changed in Confederation due to federal transfer programs. I agree. So why, until tax points are given up by Ottawa to such a degree that the disparity is greatly reduced, should Alberta take on the few bills Ottawa does pay – the cost of income tax collection and partial contributions to policing and health care? That would only increase the disparity.

In addition to the lack of defensible number-crunching (save perhaps on pensions), the original Alberta Agenda cited Quebec as an example to follow in four out of the five issues. That too would be a mistake. Instead, Alberta and the rest of the Western provinces should come up with a more realistic agenda, one which better positions the West and heightens her influence in Confederation. More on that newer and more desirable agenda next week.

Channels: The Calgary Herald, May 8, the Winnipeg Free Press, May 17, 2010