Friday, December 14, 2018

The smart way for Western Canada to separate - don't invest in the East

If we look at what the separatist movement has cost Quebec it is enormous; in the billions if not trillions. All the corporate headquarters that have moved away resulted in incredible economic damage. Population wise Quebec has 8.5 million people that is nearly double of Alberta.
In terms of landmass, Alberta and Quebec are equal in size.  Alberta owns oil reserves equaling those of Saudi Arabia. Saudi Arabia counts 33 million people. In case Alberta forms a separate country together with B.C., Saskatchewan, Manitoba and the NWT it would count 11.8 million people or just over 30% of Canada’s total population. People forget how much the West has grown and how much land (nearly 51% of Canada’s landmass when the NWT are included and 37% of Canada’s landmass without the NWT in the new nation).

If the West separates, I don’t see Ontario, Quebec and the Maritime areas sticking together. Quebec would likely be losing lots of its influence in the world and it would become not much more than a poor cousin of France or possibly a French colony. Ontario on its own would probably be viable but its influence in the world would be down significantly. Sorry Maritimes, you are geographically located on the wrong side of these two misguided liberals. We bear you no ill and love Newfie screech.
The new West Canada nation would, on a per capita basis, be one of the richest in the world. If the excess tax payments that today go to the rest of Canada would instead go towards a national oil fund it would take less than 45 years to equal in size to the Norwegian oil fund. The latter was created in the early 1990s and are now 30 years in existence and counts about a trillion dollars including compound interest growth. Thus, critics who make fun of Alberta not having any savings except for the Heritage Fund should think again when claiming that Alberta is wasting its wealth. Yeah, it is wasting it on the rest of Canada – in particular on Quebec which leadership feels that they don’t want our dirty oil. Well Quebec think again!

Even if oil would be gone in 50 years, Alberta would have enormous wealth when going independent along with the other Western provinces whose wealth hasn’t been counted yet. Such as Saskatchewan’s potash and uranium – not to mention its and B.C.’s fossil fuels.  I am sure that the hydrocarbon industry will stick around a lot longer than 50 years, thus we have many decades to build our own wealthy society.
But an abrupt separation, no matter how attractive it sounds right now, would be just like it was for Quebec. The latter didn’t even succeed while the separation experience was very costly and painful. We in the West are Canadians, but we are basically forced out. Let’s do this the smart way rather than giving in to our emotions.

The smart way to play this is NOT to separate but build independence over time through economic strength rather than trauma. Look at how successful Brexit is! A disaster that is what it is! With all this affluence the West probably will grow in demographic strength as well as economically when compared to the aged East with its obsolete industries and industrial robotization on the horizon. They may promise each other a universal salary but that would likely be unaffordable without the West.   Don’t forget Western Canada is one of the youngest and best educated populations in North America (despite the name ‘Cow Town’).
Our separation is not about impoverishment but about economic power. For starters, we should move our private investment dollars away from eastern Canada and invest it where we get most bang for our bucks. If you watch BNN, then realize how many investment experts are putting their bucks south of the border and avoid Canada! We should put our investment dollars in the U.S. for now and later probably in emerging markets and invest in ourselves. We also will need to attract immigrants – immigrants that makes them and us wealthier and healthier. The oil industry is a technology and capital driven industry and combined with today’s internet, it may be easy to draw on our talents and develop our own high-tech industries as well as other innovative industries. This way we will be less dependant on large nearby population centers. Transporting our oil by pipeline makes sense and is much safer than refining it here and then transporting the much more dangerous distillates by pipeline or rail to population centres.

That is our current problem as well. The West has sufficient refining capacity to meet our own energy needs. We may find that all those abandoned oil wells are future sources of geothermal energy and lower our own dependence on fossil fuel. In the meantime, refineries pollute in more than one way and our population is probably the right size for achieving full employment rather than a worker shortages along with refining overcapacity. Let the East be our HC addicts who pollute through their consumption while we, their pushers, minimize our emission impact in the West.
Right now, the West has many young and well-educated people. Many attracted by our low taxation regime and our abundance of energy and other resources. Alberta is one of the few areas where it is relatively easy to grow wealthy. 

We should avoid investing in that business unfriendly portion of the country called the deluded East. If they want to sink in the liberal desert of self-delusion let them. We will invest in ourselves and the rest goes where we make most bucks for our money, i.e. the U.S. markets and emerging economies. It is possible that Europe turns more profitable as well. In other words, we must create a business-friendly climate here in the West; keep taxes low and be excellent allocators of our own savings. If we become the wealth creators of this world, we don’t need the East and we will grow apart on our terms rather than getting hosed and angry about those in that self-righteous and deluded portion of Canada that treats us with so much disdain. As they say, the best revenge is to lead a good life.

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