Is Canada Becoming a Petrostate?
26 Jul, 2009 06:50 am
Canada's increasing reliance on energy exports, especially oil from the Alberta tar sands, risk unsettling its politics and economy and turning the country into a petrostate--an authoritarian society in which dissent is stifled and enterprises beyond the energy sector are de-emphasized or even discouraged.
Journalist Andrew Nikiforuk answers yes. In part of his book, "Tar Sands: Dirty Oil and the Future of a Continent," he examines how Friedman's law has begun to apply not only to the province of Alberta where the tar sands are found, but also to Canada as a whole. He and Friedman rely in part on the work of University of California at Los Angeles political scientist Michael Ross.
Ross detailed three ways in which oil wealth undermines democracy. First is what he calls the "taxation effect." Because petrostates derive so much of their revenue from oil extraction, they tend to tax their citizens lightly. While this is certainly not the case in Canada as a whole, Alberta has low taxes compared to other provinces. And, Alberta can always generate more revenues by approving yet another tar sands project. This lower level of taxation disconnects politicians from voters because the politicians have less need to worry about voters who pay little or no tax. And, voters themselves care less and less about government as their direct contribution to funding it declines. Nikiforuk points out that in the 2008 Alberta provincial election voter turnout was 40 percent, the lowest ever in the history of Canada.
Second, oil revenues pave the way for greater government spending that can be used to reward political friends, buy votes and even squelch dissent by beefing up police and security services. Alberta's ruling party has certainly curried favor with voters with well-timed rebates shortly before elections. Political friends in this case mean those in the oil industry, and they have gotten pretty much whatever they have wanted in Alberta.
Third, the oil industry can crowd out more diversified economic development. Alberta and Canada still have a diversified economy. But much of that economy is resource-based, and over-reliance on oil exports could narrow Canada's economic diversity by making its manufacturing economy uncompetitive in world markets as the Canadian dollar rises along with oil prices in the future. (In fact, Canada already experienced the pain of a strong currency in 2008 when oil and many other commodity prices hit record highs. The currency has since retreated with the slump in commodity prices.)
Nikiforuk documents how secrecy has become an obsession with the current Conservative government in Ottawa, especially in matters of oil and environment. The environmental damage done by tar sands development is almost unimaginable. Yet, to watch over this development the Conservatives chose "the daughter of an oil executive." A report on the security vulnerabilities of the gargantuan toxic wastewater impoundments associated with tar sands processing was ignored in Ottawa until a Freedom of Information Act request extracted it from the dusty shelves of the Canadian bureaucracy.
Many provincial government officials in Alberta have either worked for or have strong ties to the oil industry. And, many find lucrative employment with the industry when they leave government. It's no surprise then that joint Alberta government and industry panels assigned to monitor the environment and public health in the tar sands areas have produced data and reports that are considered a joke in the scientific community. These reports predictably say that tar sands operations are having little effect on water quality or fish and wildlife and that no human health effects have been documented. The reason no human health effects have been documented is that there has been no attempt to do so. The one medical doctor in the tar sands region who spoke out on the need for a health survey was smeared and threatened to the point that he finally left the province altogether.
Other modern, industrialized oil states such as Norway have chosen to segregate oil revenues and put them into a special fund to finance government pensions and other long-term needs. Norway chose to direct carefully the development of oil and natural gas in its portion of the North Sea via a government-owned oil company. Alberta actually set up a similar scheme--i.e. a segregated fund for oil revenues and a government-owned oil company--when the oil sands were first being developed; and Norway, in fact, used the Alberta scheme as a template for its own. But subsequent Alberta administrations stopped funding the so-called Heritage Fund in 1987, and, according to Nikiforuk, have occasionally used it as a "slush fund" for various projects. The Alberta Energy Company, which was set up to allow Albertans as whole to prosper as the tar sands were exploited, was sold to EnCana Corporation by the provincial government in 1996.
All of this has enormous implications for Canada's relationship with the United States to which the lion's share of its energy exports go. Will Canada simply become yet another authoritarian petrostate from which the United States extracts oil in order to maintain its lavish level of energy use? Or will the people of Canada decide that oil and oil companies shouldn't determine the fate of their country?
As Canada sleepwalks further and further down the petrostate road, the people of that country may find it increasingly difficult to turn back.