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Our way or the Norway: Managing petroleum wealth in Canada

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One of goals in my paper, The Petro-Path Not Taken, was to compare Norway and Canada-Alberta's record in distributing petroleum wealth amongst persons and amongst provinces. Norway has been very effective in distributing oil wealth amongst it regions and its population. Its level of income inequality is one of the lowest in the world.

Canada's level of inequality, on the other hand, has been among the fastest growing and now among the highest in the OECD.

Moreover, inequality is substantially higher in Alberta than the Canadian average, and has grown dramatically the over the last decade. Alberta's rich­est one per cent have a much larger share of the provincial income pie than the one percenters' share of income nationwide. And Canada's super-rich are increasingly concentrated in Alberta.

The OECD's 2008 Economic Survey of Canada, noted that the petro-boom was having a profound effect on the fiscal capacities of dif­ferent provinces, and "the very unequal economic development between Alberta and the rest of the country is straining the federation."

Alberta continues to distance itself from other provinces in its fiscal or revenue-raising capacity. The goal of federal-provincial transfers, notably the equalization program, is to reduce the fiscal disparities among prov­inces by bringing the revenue-raising capacities of the "have-not" provinces up to a national average standard.

However, even as disparities amongst provinces are increasing, equalization and  other  transfer  programs, have been weakened  under the Conservative government.

In 2012, Alberta's fiscal capacity was 166 per cent of the national average, double Quebec's (83 per cent), and almost double Ontario's (93 per cent) fiscal capacity. Former Bank of Canada governor, David Dodge, estimates that Alberta's fiscal capacity could reach 180 per cent of the national aver­age by 2020, and by an even greater amount if oil sands growth continues at its current pace.

Frances Russell's column in iPolitics (besides reproducing a few numbers from my paper) contains an interview with one of Canada's leading authorities on fiscal federalism, Robin Boadway of Queen's University. His assessment of what this all means for Canada's future, is troubling.

Here are a few excerpts from the article:

Boadway also says Canada is likely the most decentralized federation in the world now. And he admits to being worried about the future "because this process of decentralization has been in place for many years."

"It's getting worse because of this natural resource boom … I think it puts pressure on the national fabric when you have these regional inequalities that are getting bigger and bigger and the will to deal with them becomes less and less because it becomes much more difficult for the federal government to deal with them…."

…He fears matters will "end badly" -- by which he means that Canadians "will lose our social citizenship, we've competed-down our social justice system. We've got a situation where people in different parts of the country have access to very different levels of public services, contrary to what it says in the Constitution, where we become a diverse country of individual provinces where people care more about themselves within their own provinces and don't care about the others …

"(Believing) in social citizenship for everybody is lost when we get so decentralized."

You can read the full iPolitics article, Canada's two new solitudes: one wealthy, one wanting, here.

Bruce Campbell is Executive Director of the Canadian Centre for Policy Alternatives. His study, The Petro-Path Not Taken: Comparing Norway with Canada and Alberta's Management of Petroleum Wealth, is available on the CCPA website.

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