Heading off the bitumen cliff

Staples trap: Canada's economic dependence on dirty oil threatens global environment.

by Mel Watkins

Canada is headed for a bitumen cliff and it risks taking the rest of the world along. That's the chilling forecast from the Canadian Centre for Policy Alternatives and Polaris Institute — who also offered options to avert disaster — in the most comprehensive discussion to date on the "Dutch disease".

Their new report, called The Bitumen Cliff: Lessons and Challenges of Bitumen Mega-Developments for Canada's Economy in an Age of Climate Change, broadens the definition of Dutch disease, including an impressive array of collateral damage.  The Bitumen Cliff report is far and away the best contribution yet to this important debate, which is coming to dominate our politics.

The report's authors are heavy hitters from Canada's progressive community — Tony Clarke, of Polaris, former Parkland Institute research director Diana Gibson, the well-known Jim Stanford of CAW, and rising star public policy researcher Brendan Haley from Carleton University. Together, they raise worrisome questions about what can be done to mitigate the consequences of a bitumen boom promoted by oil-friendly governments. They also set out positive alternatives. 

Canadians, Stanford observes, have moved from being hewers of wood and drawers of water to a new and equally even less flattering status — scrapers of tar. The tar sands have now mired us up to our necks in this latest staples trap.

Haley, in on-going research on his part, brilliantly links this staples trap — Canada's historic economic dependence on exporting unrefined raw materials — with the carbon trap, in which the carbon emissions from bitumen overheat the planet and escalate the wild weather, to our detriment and the detriment of the world.  He gives new life to the famous staples approach of the economic historian Harold Innis, while making Dutch disease a Canadian-made contribution to global catastrophe.

Each trap feeds the other in a frightening way: the more bitumen we produce the more carbon is emitted; the more carbon is emitted the more, for example, the Arctic warms, and the more bitumen we can drill for. And so on, until we’re all toast.

Most of the debate about Dutch disease has focussed, to this point, on its economic effects on the manufacturing sector and jobs therein. This report shows how much more adverse and widespread the impacts are than the conventional wisdom admits.

What is new is evidence of how the bitumen boom has worsened the distribution of income, feeding inequality — above all, surprisingly, in Alberta itself. The reason, as the report demonstrates, is that corporate profits boom while real wages of workers stagnate.

Of course, bitumen exports create economic benefits, but they are weak and badly distributed. The issue is not just economic growth but the quality of that growth. By that standard, the bitumen boom leaves much to be desired — comparing most unfavourably, for instance, with the wheat boom of a century ago.

If we allowed for all the costs — above all the contribution to global warming for literally centuries to come — it is possible that there is no net economic growth at all but rather that oxymoron called negative growth.

Innis, the great guru of staples, rightly insisted that each staple left its own distinctive stamp, and not only on the economy but on its politics. Our authors compile an impressive list of all the many ways in which the Harper government has worked to further the interests of the oil companies, not only at the expense of the environment  but also by the infringement of Aboriginal rights and to the detriment of freedom of speech and dissent, of democracy itself. In Canada, as in Texas, oil brings out the bully boys who smear and dirty us.

How oil has come to drive Canada's politics and economy is a home-grown example of Naomi Klein’s disaster capitalism. We’ve seen the future — as weather dominates the news — and it doesn’t work.

With the country caught in the two big traps, present politics merely tighten their grip. That pattern must somehow be broken, for politics of a very different kind is the only way out, the only solution.

We all know what the alternatives are. Track 1, as the report calls it, is proper government regulation of bitumen production. Easier said than done, of course, for the fossil fuel industries will fight us at every step. Track 2, the big challenge, the essential leap, is shifting to green energy.

Our authors tell us that the long view, which is getting shorter by the day, is that fossil fuels will be phased out anyway because of their terrible and intolerable destructiveness. Meanwhile, oil fracking in the US is making our bitumen uncompetitive, that worst of capitalist fates.

At some point, like it or not, we’ll be wakened, and kept awake and afraid to go to sleep, by the extremes of the weather, and the end of the bitumen boom with no alternative growth path in mind. We’ll have no choice but to act.  Better to start now.  Let this report be your guide, your diagnosis and your prescription.

© Copyright 2013 Mel Watkins, All rights Reserved. Written For: StraightGoods.ca