The Canadian province of Alberta held elections on April 16 and the implications of their results are anything but usual.
Alberta is an interesting place. Strong economic growth, a robust energy sector, and center-right political leanings - trends broadly disconnected from the reputation and reality of the rest of the country.
Within that disconnect lies the problem.
Alberta has long been the Canadian province suffering from the largest gap between what it pays to Ottawa compared to what it gets back in terms of federal spending.
And the rest of Canada doesn’t even use much of Alberta’s crude, opting instead for lighter imports, stymying the energy industry that forms the backbone of the Albertan economy with everything from carbon taxes to blocking transport routes for the landlocked province’s crude to reach refineries along the Gulf of Mexico.
If you think restricting a region’s economic growth while depending on its tax payments is not a promising long-term strategy, you’re not alone. While more people are aware of Quebec’s independent streak, plenty within the Albertan political mainstream have had enough. And thanks to Quebec’s long-standing desire to separate from Canada, any future Albertan separatist referendum would be perfectly legal.
The Albert’s United Conservatives now hold 62 seats in the 87-seat parliament, and, with victory cemented; many Albertans now look forward to a shift in the provinces’ fortunes.
The United Conservatives are running on public dissatisfaction against carbon taxes, a lack of pipelines, and an unequal system of taxation by a federal government. With Canada’s population aging into mass retirement, transfers from Alberta to the center can only increase in the future.
The problem is, that Canada’s provinces lack the legal standing to challenge the central government on such topics. Prime Minister Trudeau needs Alberta’s tax dollars to hold Canada together, and what Alberta is asking for is quite literally an end of Canada.
This Alberta Question has two possible outcomes.
The first is an Albertan collapse. Economically, the province’s strength is resource extraction. The Albertans inability to bring their crude to market leaves them staring down an economic depression while also facing ever higher financial demands from Ottawa.
Outcome Two requires a sharp break with convention, as it is nothing less than Albertan secession.
Alberta isn’t dependent on the federal government’s financial handouts like other provinces. It has an energy sector, public infrastructure, educational system and workforce that has drawn plenty of international investment interest on its own. Negotiating export pipelines directly with the United States would be infinitely easier than with Canadian governments, especially since the U.S. Gulf Coast is home to the only concentration of refineries in the world that can process Albertan heavy crudes.
Add to this the fact that Canadian provinces work better north south then east west. Its an unusual design of a country: Quebec and Ontario have more in common with the US East Cost than with Vancouver for example. Saskatchewan and Manitoba naturally gravitate towards the Dakotas, and British Columbia has more connections with US West Coast that with the rest of Canada. What is also resurfacing are the regional differences within Canada.
The structure of the central banks was originally intended to manage the domestic capital flows, but it doesn’t function like this anymore.
One-size-fits-all interest rate policy of central banks pits provinces against each other, because it ignores the fact that domestic economies are not the same from one province to the next. The commodity – producing provinces are booming when the financial provinces are at their lows.
Farmers, oil producers and miners in central Canada are forced to pay higher interest rates when their economies are declining because of speculative booms in Toronto and Vancouver.
Add to this the rising tide of environmentalists that has seriously impacted Alberta’s economy to the point that people no longer seek engineering degrees in energy or exploration. In Canada, the left is urging lawsuits against oil companies to force them to pay for the damage to the climate. Maybe they all should just quit, lay off workers, stop paying taxes and we go back to the campfires to survive the winter in the North.
In Alberta, none of the major parties campaigned on separation, either in 2015 or 2019, but that doesn’t mean that the topic isn’t about to show up in provincial political discussions.
For Canadians everywhere, that alone should be terrifying.
License plates on the black Cadillac parked outside the restaurant read “TRMP TRN”. And it was no surprise, Midwest is Trump’s territory, and I was in a small town in southwestern Ohio ready to order my breakfast, enjoying the sunny Saturday morning.
“I will have the kippers,” I said when the blonde waitress showed up.
“Supertramp fan?” she was quick.
“Just took a jumbo across the water,” the great song was still on my mind.
And actually I just did take a Jumbo across the Atlantic.
She laughed briefly and I wondered why a person of this mind is waiting tables.
Maybe it’s because our education is a protracted system of university entrance and the consequence is that many highly talented, brilliant, creative people think that they’re not.
Interestingly, there was no public education before the XIX century; it all came into being as a need of industrialism.
The industrialists set out to figure out how to get people to buy lots of stuff but also how to make sure that the workers were willing to be interchangeable cogs in the machine. And the solution of course was – public education.
We’re running an education system where mistakes are the worst thing you can make. The result is, that we are educating people out of their creative capacities. And creativity is as important as literacy and we should treat it with the same status, but instead we built a system that teaches people to fit in. Notice that in life, if you fit in good enough, all it means is that you’re easy to replace.
Did you know that the Icarus story was changed over the years? In the original, the young man was not supposed to fly low, where the sea moisture will get into the feathers, destroy his wings and kill him. He was told by his father to fly high.
I’m a father too, and I would never give any other advice to my kids.
Education is supposed to get us into the future that we can’t grasp, and the unpredictability is extraordinary. The kids in schools now will have their careers in full swing around 2050. We don’t know how the world is going to be in five years, so how can we know what to educate them for?
All we know is that mandatory education makes no sense – nobody ever learned anything against their will, so let’s start with the notion of meaningful work and let’s call it art.
Art is when one human being is doing something that others couldn’t do.
There is no manual how to do it and people who figure it out are worth something. These are people who take the intellectual risk instead of doing repeatable work.
Not financial risks, but emotional risks - putting something out to the world and be willing to let the world respond and react.
So I heard this great story about a girl, who was six in the drawing lesson sitting in the back of the room and the teacher said she never paid attention, and in this drawing lesson she did. The teacher walked to her and asked, “what are you drawing?”
And the girl said – “I’m drawing a picture of God.”
And the teacher said: “but nobody knows how the God looks like.”
The girl said: “they will in a minute.”
The kids will take a chance; they’re not frightened to be wrong.
It’s not that being wrong is the same as being creative, but if you’re not prepared to be wrong, you will never come up with anything original.
And by the time they become adults, most kids have lost that capacity. We got brainwashed into asking for roadmaps instead of asking for compass.
Later that weekend I drove north in a nice black Jeep from the Warren County towards Detroit.
The landscape changed, showing how globalization destroyed businesses and people’s lives like a tsunami.
What used to be the industrial heartland of America is now hollowed out and no wonder that people lost trust in career politicians who watched the destruction happening and did nothing.
We were having a dinner at the Belvedere restaurant, just south of Warsaw, in the historical complex that used to be the summer residence of Polish kings. I was having a glass of wine and the man I was talking to, a glass of orange juice.
I have known him for a long time, he is a pilot for life - I think he knew how to fly before he knew how to drive. For the last twenty something years now he flies the big airliners all over the world.
“How is the Boeing 737 Max flawed?” I asked, “it’s been grounded all over the world by now.”
“Well” he said slowly, not rushing to a judgment, “Boeing is really a big plane company, 747, 777, 787, this is what they’re good at. The smaller ones may be out of their comfort zone.”
“And why does the software to control the dive and the stall on the 737 confuse the pilots?”
“Talk to the people who found the black boxes, which are yellow actually.”
I was quiet for a while looking through the big window at the brightly lit Castle on the Isle, the center point of this area.
Think Central Park infused with beautiful history.
“It could be the lift,” said the pilot after being silent for a while.
“You get the plane to fly evenly if the center of gravity matches the center of lift, obviously. But this is far from easy, can’t predict weight distribution of the passengers or the luggage, plus the fuel burns down as you fly and then there are other variables, so you need a control system to compensate.”
“Which part of the plane does it?” I asked.
“The rear wings, they have a movement built into them, up to 20 degrees or so. But if the controls fall apart, things really fall apart.”
He got up, “talking about places where things fall apart, I’m flying to Riyadh tomorrow morning. They appointed a 30 year old prince to modernize the country and limit oil dependence. If that’s not a sign of desperation, I don’t know what is. Anyway, he said he would modernize the country within 20 years. It didn’t happen in 2000 years, so good luck with that.”
He left me thinking about the Arab peninsula and the House of Saud.
When the Middle East was stable, it was because Turkey dominated the region.
When Turkey fell in the World War I, the Europeans re-drew the borders in a way that was useful for the French and the British, but they make no sense in the Arab world. There never was a country like Iraq or Syria or Jordan, the divide is totally artificial. And everybody seems to have forgotten about it.
For many years the United States guaranteed the stability of the region, so that oil would flow. When the price of oil collapsed the importance of Middle East declined economically and U.S. willingness to support the region and the House of Saud pretty much evaporated. Nobody else from the outside has any interest to intervene, so it is going to be stabilized by one of the regional powers: Turkey, Iran, Saudi Arabia or Israel.
Israel is unlikely to make this move. Saudi Arabia has to many economic problems to even imagine it. The Iranians have internal issues too, even though they’re hungry, so it really comes down to Turkey. And they have the power, economically and militarily to do it, but the thing is – it may just not be worth doing.
The obvious question that will define the future of this region is this:
What is the future of hydrocarbons?
We’ve been using them for 200 years and this is clearly not going to go on forever in an economy that is transforming quickly. There are new energy forms that are going to come, like space based solar for example.
Energy comes from the sun, but on earth we can’t take a full advantage of it because of clouds and nights. Not so in space, it’s pure energy there and you can beam it to the earth using microwave radiation. There is no coincidence that Branson, Musk and the likes hang out in Western Texas working on their space programs. Not for space tourism, I don’t think, – there is no money in it. It’s the energy they’re after.
Whoever gets out there first will be the Saudi Arabia of the future.
It was late Saturday afternoon and I was in Lyon, France, looking for a way to detach myself from the shopping routine, park in a bar somewhere with a glass of wine and kill the time until dinner.
So, I made my way through the Place Bellecour, one of the largest open squares in Europe, with the statue of Louis XIV in the center.
The Yellow West protesters were gathering around the statue holding a big sign “La France n’est pas a vendre”, France is not for sale, and the Gendarmerie troops were taking positions in the little streets leading to the square dressed up in heavy fighting gear. Welcome to the week 20 of the protests.
A little later I was sitting in the panoramic bar on the eight floor of the hotel seeing them fighting on the Raymond Poincaré Bridge. The police tossed tear gas grenades and started moving towards the crowd. People were running away down the river, so the blues fired some more gas after them to keep things moving and suddenly that was it. Just lots of flashing blue lights and everybody went home.
In the bar on the top floor I heard only French language around me – no Russian or Chinese, which is different from just a few years ago.
Times are changing, but these people are not going anywhere, in the sense that they are a big part of reality.
Euro-Asia is the heartland of humanity – of the seven billion people alive today, five live there. What happens there defines how the international system works.
And now something extraordinary is happening - for the first time since the end of World War II the entire region is destabilizing. Whether it is the European Union, Russia, China or the Middle East, there is one important thing to understand – if this region changes, the world changes.
We’re into something unique, which is crisis of exports and exporters of everything.
In 2008 USA and Europe went simultaneously into recession. Their appetite for exports collapsed and country that took the biggest hit was China. China exists on exports, first to Europe and then to the United States. It’s domestic economy couldn’t buy, because the majority of Chinese live in poverty. The average income of a family west of the coast is about that of Bolivia. This is a poor country and if you’re earning $2 a day, you can’t buy an ipad.
As the crisis unfolded, China did what every company would do under these circumstances – it fabricated statistics. As result there was this great illusion in the West that China will soon go back to the rate of growth it had before. The one thing businessmen believe is that we can go back to the way it was. It just never happens.
We’re now in the new normal, and president Xi will rule with iron fist making use of all the power he was given.
Another export addict is Germany – it sells abroad half of its GDP. A 10% drop in exports, not something unheard of, would reduce the GDP by 5% and put at risk the German welfare social model, likely resulting in a change of power.
There is a reason why the Germans were landing money to the countries in the south of Europe – it was so the Italians, the Greeks, the Spaniards could buy more German products. And I don’t believe for a moment that the good folks at Deutsche or Comerzbank didn’t know how this is going to end. Everybody new.
So, what’s next? Germany can’t go anywhere because they need the EU and European markets for exports. The south of Europe is not going anywhere, with the youth unemployment rate of 60% they can’t even afford a bus ticket.
So who is going? Those who can, hence Brexit.
France is slowly boiling; it could be an interesting summer.