The recent shelving of the Joslyn mine oilsands project in Alberta is a reminder of the fragile economics of the oilsands. No economic formula could be found to make the $11 billion project work and it has been put on hold indefinitely.           

Oil major Total E&P, the biggest partner in the project, said the Joslyn mine project “cannot be (financially) sustainable in the long term.” Interestingly, Total did not blame lack of new pipelines for squeezing profit margins either.

“You run the risk in developing fossil fuels that one day will either become fully depleted or too expensive to extract,” Philip Gass, a policy analyst at the International Institute of Sustainable Development, said from Winnipeg.

It would be difficult to deny Canada has economically benefited from developing the oilsands, a particularly difficult and expensive fossil fuel to mine and refine into light fuels — but failing to diversify the Canadian economy beyond an oil and gas ‘energy superpower’ makes for a very uncertain economic future for Canada.

“Canada could find itself an energy superpower overspecialized in the ‘old economy’ (resource extraction) in a world rapidly trying to cut carbon emissions and avoid catastrophic climate change,” Andrew Jackson, a senior policy advisor with the Broadbent Institute, told DeSmog Canada.

“Putting all your eggs in one basket is never a good economic strategy,” Jackson said.

Benefits of Energy Development Remain Largely Locked in the Sector

The idea that all Canadians benefit from a surging oil and gas industry is slowly turning into a farce. An International Monetary Fund (IMF) report earlier this year finds every dollar invested in the energy sector in Alberta grows Canadian gross domestic product — an economic vitality indicator — by 90 cents. Of this growth, 82 cents remains in Alberta, mostly in the energy sector (67 cents).

IMF‘s breakdown of $1 investment in the energy sector scenario.

“There appears to be an important scope to increase inter-industry linkages across Canada that would lead to wider sharing of benefits from the energy sector,” concludes the IMF report released in January.

Increasing inter-industry linkages or value-added jobs does not appear to be priority of the federal government. New oil pipeline projects are almost all geared to shipping Canadian oil and oilsands bitumen to refineries in the U.S. or overseas, not in Canada. Most of the heavy equipment for oilsands extraction comes from the U.S.

“The spin-off effects of the energy boom are not being felt in Ontario and Quebec, where most Canadians are,” Jackson says.

The federal government’s low corporate tax rate and the exemption of provincial resource royalties from the Canadian system of wealth redistribution (which ensures all Canadians receive the same public services) further locks the economic benefits of the energy sector within the sector and resource-rich provinces.

Energy Sector Is Not A Big Jobs Creator

“The oil and gas sector is capital intensive, not labour intensive. Manufacturing could employ more people,” David Macdonald, a senior economist with the Canadian Centre for Policy Alternatives, says.

The same IMF report on the Canadian energy sector indicates that of the 752,000 jobs created in Canada between 2007 and 2012, the oil and gas sector can only take credit for less than 13,000, or 1.7 per cent, of them.

Job creation is not exactly Canada’s strong suit at the moment.

“The employment rate in Canada, that is the percentage of Canadians over fifteen years of age who are working, is sixty one per cent. This is the same level the employment rate was at during the worst of the recent financial crisis,” Macdonald told DeSmog Canada.

Employment rate (blue) and unemployment rate (black) from 2003 to 2013. SOURCE: Canadian Centre for Policy Alternatives 

The official unemployment rate (seven per cent) in Canada has returned to pre-recession levels, but Macdonald points out that Statistics Canada does not count Canadians who are not actively searching for employment as unemployed.

“Eighty per cent of the so-called ‘recovered jobs’ since the recession are Canadians who have simply given up looking for work,” Macdonald says from Ottawa.

Part-time/Temporary Job Creation On The Rise

Ninety-five percent of all net jobs created in Canada in 2013 were part-time according to the Canadian Chamber of Commerce. Part-time workers and the self-employed, who earn on average 20 per cent less than their employed counterparts according to CIBC, now make up 30 per cent of the Canadian work force.

Canada has created more full-time than part-time jobs since the recession but the rate of part-time job creation has grown faster than full-time. Fifty-three per cent of Canadians between the ages of 25 and 44 who found work since the recession could only find temporary jobs. The rate of Canadian part-time workers who want full-time work but cannot find it has grown 37 per cent during the same period.

“Since 2011 the number of underemployed workers has exceeded the number of unemployed workers — in 2013 there were 1.35 million unemployed workers and 1.43 million additional underemployed workers. And that is before we even begin to take into account skills-related underemployment. This is an issue that needs to be taken seriously,” a Canadian Labour Congress report concludes.

SOURCE: Canadian Labour Congress

Fourteen per cent of working Canadians are underemployed or unable to get enough work to meet their financial needs, a 28 per cent increase since 2008.

Canada Needs to Create Well-Paying, Long-Lasting Jobs

“Whether you are talking about green jobs or brown jobs (fossil fuels extraction) you want to create jobs that are fair, well-paying and long lasting,” Gass of the International Institute of Sustainable Development told DeSmog Canada.

“We would like to see federal policy facilitate the creation of more specialized manufacturing jobs and encourage unionization in the work place. Unions tend to create better paying full time jobs,” Macdonald says.

A report released last month by the Parkland Institute examining unions in Alberta (the province most hostile to unions) found in terms of economic performance, wage growth is lower in Alberta compared to other provinces with higher unionization rates, despite Alberta’s oilsands boom.

“There is $600 billion sitting on companies shelves in Canada that is not being reinvested in the economy. Companies only invest where there is an expectation for growth. At the moment it appears the expectations are low,” Jackson says from Ottawa.

Corporations operating in Canada are not the only ones with low expectations for growth. When polled earlier this year by the Broadbent Institute, Canadians between 20 and 30 believed they will face a future of precarious employment and the income gap will grow during their lifetimes despite Canada’s energy boom. Baby boomers (50 to 60 years of age) in the same poll stated they think their children are more likely to slip down an economic class than move up.

“With interest rates at all time lows I would like to see public investment into mass transit, passenger rail, etcetera ramped up. Public investment can pave the way for private investment,” Jackson said.

Unfortunately the current priorities of the federal government — tax cuts, tax breaks, battling unions and cuts to public spending — are taking Canada in just the opposite direction.

Image Credit: Cheryl via Flickr

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This post is Part 2 of the Canada Closed for Debate Series, a four-part exploration of argumentation in Canadian political discourse. For Part 1, click here. Read Part 3, Carrying a Concealed Motive or Part 4, What to do about Bad Arguments?

This is part two of a series on the types of bad arguments frequently found in the Canadian public sphere. The purpose of this series is to provide a taxonomy of demagoguery and to see how these arguments (as put forward by such polarizing campaigns as ‘Ethical Oil’) are harmful to our democracy. The first part concerned topic laundering.

The topic launderer puts a stop to open debate by refusing to answer questions and then changing topic to confuse everyone as to what the debate is really about. This part is about reductio-ad-villainum (reducing your opponent to a villain) in which a peculiar form of libel puts on the cloak of rational argument.

Reductio-ad-Villainum: This style of arguing consists in recasting an opponent’s position to make it look morally bankrupt. It is a curious species of character assassination. You do not have to dig up any dirt on your opponent (that after all requires some research). All you have to do is reframe their position to make the argument itself look dishonourable.

Take the reaction surrounding Thomas Mulcair’s ‘Dutch disease’ argument last May. The leader of the NDP claimed that the Federal government was not enforcing environmental legislation when it came to the Alberta tar sands so that the oil sells cheaper. This over-inflates the worth of the Canadian dollar, which then harms manufacturing exports in other parts of the country (as economists observed in the Netherlands after it found natural gas in the 1960’s). 

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It is a controversial argument that has economists divided, which is all the more reason that it should be debated in parliament, especially after the Organization for Economic Co-Operation and Development (OECD) released a report finding that the Harper government’s policies are creating an uneven economy across the provinces.

What response did Mulcair receive?

A chorus of conservative MPs claiming that he was trying to pit the West and the rest of the country against each other. What this response boils down to is that the ‘Dutch disease’ argument is not good because it makes Canadians dislike each other. This isn’t very likely to convince anyone once the veil is pierced.

The MPs no doubt wished to vilify Mulcair but what is especially sinister is that they vilified the argument itself. This fine specimen of the reductio-ad-villainum creates an easy talking point so that anyone who subscribes to the Dutch Disease hypothesis can be accused of hating Albertans. Anyone who rejects the hypothesis is a defender of the prairies.

We go from having a situation where we can debate the causes of manufacturing decline and natural resource development to a situation where anyone who makes the villainous claim is trying to divide the country against itself. Although, it's not likely that advocating strict enforcement of environmental regulations on tar sands development will lead to our nation's first civil war.

The reductio-ad-villainum consists in making an opponent’s argument sound as though it were mean-spirited and then rejecting it on moral grounds. By parodying a rational argument and providing a sound bite, this style of argument appeals to what is worst in us: we get to ignore an opposing argument while feeling a sense of moral superiority.

This bad argument does not foster debate; it shuts debate down.

It is bad for our democracy – it drags down the level of discourse and makes people afraid of holding an opinion after it has been slandered.  The reductio-ad-villainum is a way of silencing an argument rather than a person. It has been used time and again concerning the tar sands by the Conservative government and the Ethical Oil campaign so that, instead of discussing the environmental and economic impact of the oil industry openly and honestly in parliament, most MPs hold their tongues for fear of alienating voters in resource rich provinces.

We have lost sight of the goal of open debate: to get at the truth, not to win at all costs.

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Blame Canada is a four part series revealing how Canada has become a wealthy, fossil-fuelled energy superpower and an international climate pariah. For Part 1, The Country has become a Petrostate, click here. For Part 2, Canada's Plan to Get Rich by Trashing the Climate, click here. For Part 4, What is Happening to Canada?, click here.

Few are aware Canada's GDP shot up from an average of $600 billion per year in the 1990s to more than $1.7 trillion in 2012. This near tripling of the GDP is largely due to fossil fuel investments and exports. However not many Canadians are three times wealthier. For one thing GDP is only a measure economic activity. The other reason is that little of this new wealth stayed in Canada. And what did stay went to a small percentage of the population, worsening the gap between rich and poor.

One of the hallmarks of a “petro-state” is that while a country's energy industry generates fantastic amounts of money, the bulk of its citizens remain poor. Nigeria is a good example. Canada's poverty rates have skyrocketed in step with the growth of the energy sector. One Canadian child in seven now lives in poverty, according to the Conference Board of Canada, the country's foremost independent research organization.

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Income inequality increased faster than the US, with the rich getting richer and poor and middle class losing grounds over the past 15 to 20 years, the Conference Board also reported January 2013.

"Most of Canada's increase in wealth went to the big shareholders in the resource industries,” says Daniel Drache, a political scientist at Toronto's York University. “It mainly went to the elites."

Drache argues that Canada has moved into a type of “reckless resource capitalism,” sacrificing innovation and creativity. Resource extraction industries like logging, mining or fossil fuel production create relatively few jobs, and most of them are short-term positions. Almost all of the equipment used in Canada for resource extraction is made by other countries.

Drache says Canada's economy has completely reversed from its high-tech days of the 1980s and 1990s and has returned to its colonial roots as a "resource-based economy selling rocks [minerals] and logs" — and now oil and gas.

The Petro-state Path to Poverty

The extraordinary wealth in one sector has been a disaster for the overall Canadian economy, according to another recent study. Up to 45 percent of job losses in Canada's manufacturing sector can be attributed to what economists call "Dutch Disease," wrote authors from Canada and Europe in a peer-reviewed paper published November 2012 in the journal Resource and Energy Economics.

Dutch Disease refers to the many examples where an increase in exploitation of natural resources coincides with a decline in the manufacturing sector. It was first documented in the Netherlands during its North Sea oil boom in the 1960s.

Canada's energy wealth has also exacerbated income inequality by spurring the cost of goods and services and making Canadian exports more expensive. Ten years ago, the Canadian dollar was worth about 65 cents on the US dollar. In recent years, the Canadian dollar has been on par with the US dollar, or even exceeded it in value.

The study in Resource and Energy Economics found that the "Canadian currency has been driven up by the prices of commodities." As the Canadian currency gained strength, more than a half-million manufacturing jobs have been lost since 2000. In 2011 Canada lost industrial plants at twice the pace of the United States.

"This illustrates a negative side-effect of the oil-resource richness in Alberta," the study’s authors concluded.

That is a conclusion the Harper government does not want to hear even though the study was commissioned in 2008 by a government department. Applying the term "Dutch Disease" to Canada has Harper officials saying it is an insult to the hard-working employees in the resources sector.

There's not many to insult. Relatively few Canadians work in the resources sector. It's all big machines and big money. The Alberta tar sands are the world's largest industrial project with investments in the hundreds of billions of dollars and only 20,000 people worked there in 2011. For all its rapid growth Canada's oil and gas sector created only about 16,500 new jobs between 2000 to 2011, the same period in which 520,000 manufacturing jobs were lost.

Canada's GDP has nearly tripled, its energy and resources sectors have never been bigger and yet governments are running huge and growing deficits. Meanwhile the federal and Alberta governments spend millions of dollars facilitating faster growth of the energy industry so it can rip more publicly-owned, irreplaceable oil, gas and coal out the ground. For whose benefit, Canadians ought to be asking.

Image Credit: Kris Krug via flickr.

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