Monday, September 17, 2012

History of Lougheed, History of Alberta

Something no one is saying amid all the tributes to Peter Lougheed. He was indeed a highly successful premier of Alberta. (Here is the Policy Options package arguing he is the best Canadian premier of the last forty years.)  But this should also be considered: more and more he seems the only competent premier that poor province has ever had.

An Alberta statistic that really sticks with me is this. When the world economy cratered in 2008, Alberta went from a forecast $8 billion dollar surplus to a forecast $4 billion deficit... in a single fiscal year.

Here is a province that has blessed with unbelievable oil wealth, arguably  since 1947, certainly since the early 1970s. And in the 2000s, it is still so dependent on each year's cash flow that a fluctuation in the world economy throws it, inevitably and predictably, into crisis.

Peter Lougheed came to power in 1971. In 1976 his government created the Alberta Heritage Fund, intended to give Alberta a permanent capital endowment long after the oil was gone. By 1984-85 the Fund was worth $12 billion. Lougheed left office in 1985.

After that?  By 2004-5 the Fund was worth $11 billion. It has crept up a little in the last couple of years. The latest annual report values it at $14.6 billion. Since Lougheed left office, they have not even been reinvesting the interest in the fund.

In the meantime, the fund  -- designed, let's recall, to provide Alberta with permanent wealth -- has delivered $34 billion into the province's general revenues.  Just annual spending.  In other words?  Except during the Lougheed years, Alberta has been pissing the oil wealth away just as fast as it comes in.

Compare Norway. Norway was later than Alberta to the oil boom, and did not start its own Oil Fund until 1995. But that fund totalled $570 billion by 2011 and may reach S900 billion.  Oil wealth could stop tomorrow, and Norway would still be pretty much permanently prosperous based on the investments in its fund.  Alberta? Well, they still have lots of oil, but if the world went off oil tomorrow, Alberta would be back to cattle ranching as its leading economic sector.

It's a great province.  But you can't help thinking what it could be.

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