February 6, 2001
Why Canada is a kleptocracy
Tom Flanagan
National Post
Kleptocracy: the rule of thieves, from Greek kleptein, to steal, and -kratia, suffix
for power or rule.
The term "kleptocracy" is usually applied to Third World regimes where
the rulers loot the country and stuff the booty into Swiss bank accounts, but it
also describes the development of the Canadian political system over the past 40
years.
From the 1960s through the 1990s, Albertans contributed an annual average of $2,103
per capita more to Confederation than they received in federal benefits.
Ontarians and British Columbians were also net contributors, but at a much lower
rate -- $244 and $111 respectively. (All figures, furnished by Dr. Robert Mansell,
head of the department of economics at the University of Calgary and a leading authority
on federal fiscal balances, are in 1999 dollars.) Per capita income in Alberta, by
the way, was lower than in Ontario for the whole period, and lower than in British
Columbia for most of the time. All other provinces were on the take.
Much of Alberta's extraordinary contribution was confiscated through federal control
of oil and gas prices in the 1970s and 1980s, but the pattern continues in the workings
of the tax-and-transfer system.
With low rates of reliance on welfare and unemployment insurance, Alberta has a higher
proportion of employed people than other provinces. Hence Alberta contributes proportionately
more to all federal taxes, particularly to the income tax, with its progressive rate
structure. Federal programs, however, are designed to spend money elsewhere for a
variety of reasons, such as the location of the national capital in Ottawa, the protection
of French language and culture, and the alleged need for regional economic assistance
in Atlantic Canada.
Albertans might not grumble if all this largesse really helped other Canadians, but
it doesn't. As Fred McMahon showed in Retreat from Growth: Atlantic Canada and the
Negative-Sum Economy, the flood of transfers blocks real growth. What the subsidies
achieve is to underwrite misguided economic policies. Equalization encouraged Newfoundland
to reject a proposed nickel mine at Voisey's Bay. The billions Quebec takes from
Confederation each year allowed it to drive hundreds of thousands of its most productive
residents out of the province through restrictive language legislation.
Not surprisingly, Canada's overall economic performance has declined steadily throughout
the period in which kleptocracy has become entrenched. Our standard of living, formerly
close to that of the United States, is now substantially less; and our dollar, which
for a century traded around par with the American greenback, is now worth less than
two-thirds. The only people who have profited are the political power brokers who
run the kleptocracy.
Indeed, politics rules supreme. All federal programs are refracted through a prism
of regional advantage, deliberately designed to shore up government support in the
marginal constituencies needed to win a majority in the House of Commons. The rejigging
of pogey to win votes in Atlantic Canada in last year's election was only a particularly
blatant case.
In this sorry tableau, the denigration of Alberta is a systemic necessity. If Canadians
thought seriously about the political system they have constructed, they would be
embarrassed, so they have to convince themselves that Albertans don't really deserve
their wealth. Hence the clichés about Alberta that survive despite being contrary
to obvious evidence.
Fiction: Alberta is a fundamentalist Bible belt. Fact: Church attendance is lower
in Alberta than in other provinces. Fiction: Albertans are ignorant rednecks. Fact:
Calgary vies with Ottawa for being the most educated city in Canada. Fiction: Albertans
are greedy. Fact: Albertans give more to charity than the residents of other provinces.
Fiction: Oil and gas revenue is easy money. Fact: the industry is technologically
advanced and depends on a sophisticated legal, financial, and scientific infrastructure.
Fiction: Oil and gas are Canada's resources. Fact: The Constitution assigns natural
resources to the provinces, even though Alberta, Saskatchewan, and Manitoba had to
wait until 1930 to receive the resource rights other provinces had from the moment
they entered Confederation.
Ludicrously, Alberta's provincial government is busy paving the way for further assaults
on its own province. Improvising frantically before the impending provincial election,
the government has erected a ramshackle structure of rebates and price caps to protect
voters from soaring energy costs. The estimated cost has already gone over $4-billion
for two fiscal years, and Premier Ralph Klein is now musing about making the rebates
permanent. The example of rent controls in Ontario should remind him such schemes
are easy to enter, but hard to exit.
Alberta's long-term interest lies in maintaining property rights, free contracts
and market prices. When the province's political leaders, driven by short-term political
advantage, intervene so massively in the economics of its main industry, they are
only inviting politicians elsewhere to do the same. Does Mr. Klein really think he
can guarantee perpetually low energy prices to Albertans, while making other Canadians
pay the full shot? Say good-bye to any chance of dismantling the Canadian kleptocracy
and getting a fair deal for Alberta from the rest of the country.
Tom Flanagan is professor of political science at the University of Calgary and
one of six authors of the Alberta Agenda, a recently published proposal for Alberta
to make full use of its constitutional jurisdiction.
(This story was published by the National
Post and is archived here as they often drop the
links to stories after a short while)