The Business Case for an Independent Alberta

by Patrick Reilly

Alberta independence is a scary concept to many people. They fear the hypothetical outcomes of what would happen if Albertans chose independence from the rest of Canada. What would happen to healthcare, what would happen to military protection, how would borders and trade work with the rest of Canada or the world. But is the angst justified or is it just fear of inevitable change?

Alberta Would Be In the Top 10 Wealthiest Countries in the World

Many countries around the world far smaller than Alberta manage just fine. In fact, most of the top ten countries by GDP per capita are far smaller than Alberta. In fact Canada falls well down into the 20’s on the list only thanks to Alberta’s contribution otherwise it would be lower.  Alberta as a country would be in the top ten with approx $78,000 GDP per capita (per person) but what if it was more? The numbers indicate that Alberta would be wealthier without Canada just based on GDP per capita alone but when you add in the vast amount of additional taxes Albertans pay into ‘Canada’ via income tax and GST, the debt Canada borrows on behalf of Albertans and the economic magnification of keeping Alberta money within Alberta and the benefits of independence are massive. So where exactly is Alberta’s wealth going and why is it not coming back? 

The per capita GDP for the rest of Canada is somewhere between $46,000 and $51,000 per person counting Alberta’s disproportionate contribution meaning that each year, the average Albertan unwillingly donates a net $27,000 to $32,000 per person to other parts of Canada. In exchange, Alberta receives little infrastructure spending and a fraction of the outflows back in payments for health and education due to our small and relatively young population. The net outflow from Alberta to Canada is over $30 Billion but that doesn’t account for all the fees and taxes paid by Albertans nor does it account for the multiplier effect of the lost wealth. 

It also fails to consider the vast inefficiencies of Federal governments, such as the amounts spent in Ottawa on everything from administration, expensive meetings, golden severance and pensions to politicians, contributions to the UN, donations to wealthy family charitable trusts or jetting the PM around the country and world in a private jet for photo ops. When the government does spend Alberta money, it is given to groups and individuals that work against the interests of Albertans. This includes grants and funding to organizations that oppose pipelines and the energy industry as well as other organizations working behind the scenes to block Alberta’s economic prosperity.

The 1 for 3 Rule – How Spending $1 in Alberta Generates $3 in Economic Growth

Let’s say that you got paid $1000 for a weeks work. Most young people will spend that money on food, shopping, entertainment, clothes and living expenses. Older people will often spend the money on their kids. However when you spend that $1000, you do not just generate just $1000 of GDP. Its far more valuable and incrementally accretive. The restaurant that you visit hires workers, purchases supplies like farm produce and pays the owners, all who spend the dollars again. Each time the cycle repeats with those successive organizations hiring employees, buying goods and services, paying owners, etc again and again in a cycle of economic growth. When money stays within a jurisdiction, it grows exponentially in terms of economic value and drives the wealth of the entire province. This is why “shop local” is an important concept that most people get behind. However when it leaves the jurisdiction, it erodes and undermines the local wealth cycle. In some cases this is acceptable, as in the case of trade where items we cannot produce in Alberta, like fruit in the winter, are offset by our exports such as oil and gas. In most cases, the money taken by the Federal government and spent outside of Alberta not only cost Albertan’s the value of the money but also the incremental value of the economic wealth that money generates over time. It is simply money flowing out of the province to benefit others in other places.

The cost of this lost economic growth could be as much as between $50 to $100 billion each year. To add to these pressures, the youthful average age of the province means that in the future these outflows will grow as younger Canadians, especially in Alberta, are forced to bear the burden of ever increasing Federal debt and debt servicing that are the result of aging parts of Canada such as Quebec whose aging population will contribute less in taxes.  

When the cost of the federal governments debt is added to the per capita equation, that creates an additional $30,000 per person the federal government has borrowed on your behalf. That means that you not only owe the money to someone else (mostly wealthy offshore investors and pension funds) but you or your children must pay interest on that money which also goes outside of the province. 

An independent Alberta would be able to run surplus budgets at low tax rates, which means it would quickly become debt free, meaning that Albertans would not have to pay interest outside of the province and would not be placing the financial burden on millennials. Without transfer payments or Federal tax payments the province would be easily able to fund health care and education and improve vastly on service delivery currently kept inefficient thanks to government policy designed to ensure the size of the Federal government continues to grow. Investments comparable to Norway’s Sovereign fund would help cover social services, old age pension, unemployment insurance and infrastructure for 4+ million people and still leave sizable net contributions into the fund as was seen during the growth era of the Heritage Fund under Peter Lougheed. In a few years, such a fund would allow Alberta to invest for the future even in other countries comparable to what Norway is doing.

Access to World Markets

Right now, access to world markets for Alberta biggest export, oil, is blocked by federal policies that effectively remove the free and open access to tidewater for Alberta products. Access which should be a right for each and every Canadian. However provinces such as Quebec and BC block access to the coast with impunity while demanding Alberta do nothing comparable such as blocking cross Alberta transit of goods from the port of Vancouver. In doing so, the federal government and provinces are directly undermining the economy of Alberta and openly taking money from Albertans. Part of this comes from opposition to pipelines but a larger impact comes from the uncertainty that surrounds the rules of business that impede the future valuation of Alberta investments.  This causes capital to be invested elsewhere in less risky environments where stability of future cash flows is more predicable and less fickle to social trends. 

If Alberta wasn’t currently part of Canada and someone proposed to join under the current terms, the idea would be considered ludicrous.

The Future is Here

An independent Alberta would better control its future and the future direction of its citizens. The current political climate of placating every ‘group with a gripe’ is causing our federal and provincial politicians to spend extravagant amounts of Albertan’s tax money to placate an ever growing assortment of special interests such as environmental groups. One of the most prevalent outcomes of this was the Federal, and until recently, provincial carbon tax which took more money from average working Albertans to be spent outside of Alberta mostly into the hands of the wealthy elite for offshore technology, research and policy advisement. 

A sovereign Alberta could work to reduce the impact of humans on the environment in a far more economically equitable way by ensuring that any innovation that seeks to reduce human impact on the environment was an Alberta made solution that not only benefited Albertans but did so without taxing the average worker just trying to get to a job or heat their house. However, perhaps Alberta could start charging a high tax on every non Alberta based private jet that travels over Alberta such as the Prime Minister’s personal jet or by taxing transport trucks crossing through Alberta until BC opens access to tidewater. That money could then stay in Alberta funding new innovation and jobs possibly even viable green technology such as geothermal heating which levers Alberta’s strengths for drilling and piping. No longer would tax dollars be spent on special interest lobbies and issues that are of no relevance or benefit to the average Albertan.

These changes would also help create a more stable investment environment by ending the knee jerk reaction of our politicians in response to the shouts of those who demand immediate action and that result in a dizzying array of new laws, fees, taxes and change, all for the benefit of the few at the expense of the many. An independent Alberta would be free of the whims of a Prime Minister’s and Federal governments vote buying policies that exclusively benefit other parts of the country at the expense of Albertans. A highly stable independent Alberta akin to Monaco, Lichtenstein or any of the other wealthiest 10 countries on the list, would not only prosper, it would flourish as the province took back full control of education, health, trade and innovation and built a highly stable investment environment open to fair trade that benefits Albertans. 

The Potential for A Brand New World of Freedom and Wealth for All Albertans

You need look no further than Norway. A country similar in population and size to Alberta but who have $1 Trillion invested in the world’s largest sovereign wealth fund from resources. This number would easily be eclipsed by the total current value of all transfer payments that have been paid by Alberta since the 1960’s. It is simply unfathomable that after all that Alberta has given to Canada that provinces like Quebec and BC seem happy to cutoff the economy of Alberta rather than curb their own populations and pollution contributions. This is the nature of power and control. 

The sure way to get it back is for all Albertans to send a clear message to Canada……. it is time for #albertaindependence.

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