It’s James Keller in Calgary.
It’s been almost impossible to keep up with the news of the past few days, from the oil-price crash of last weekend to the COVID-19 pandemic that is escalating at breakneck pace.
And it’s been equally impossible to assess, precisely, what any of this means for Alberta’s already fragile economy. The province has been on an economic roller coaster over the past decade, with each of its ups and downs defined by oil prices, but this latest plunge feels like something altogether different.
First, there was the 2008 financial crisis that battered the global economy. As the province was shaking off the effects of that, oil prices took another steep dive in 2014, setting off a two-year recession that caused unemployment to spike and provincial revenues to dry up.
And now, as Alberta continues to crawl out of that downturn, the province has been hit by a double-whammy of COVID-19 and a Russia-Saudi price war that caused oil prices to crash.
I teamed up with my colleagues in Calgary, Jeff Jones and Emma Graney, to take stock of where Alberta was at before the events of the past few weeks. It’s a grim starting point that has left many Albertans exhausted and wondering if things will ever turn around, And more important, we look at happens now as we enter a period of enormous uncertainty (and, as Premier Jason Kenney warns, a potential global recession).
The novel coronavirus outbreak has depressed oil demand, as international travel grinds to a halt. The dispute between Russia and Saudi Arabia has meant that prices are now well below what many producers in Alberta need to break even. Further downsizing will put more pressure on real estate, tourism and overall economic growth.
And all of that will place significant strain on the province’s budget, which is already projecting multibillion-dollar deficits.
As Martin Pelletier, portfolio manager at Trivest Wealth Counsel in Calgary, put it: “This is the worst I’ve seen in energy in my 20-year career. And it’s getting worse, so buckle up.”
Across Western Canada, the public-health situation has been changing rapidly. As of Friday afternoon, Alberta had 29 confirmed cases (all added in a little over a week) and B.C. had 64, including one death. Saskatchewan had two confirmed cases and Manitoba had four.
Only B.C. has had a confirmed case of community transmission.
At the same time, governments in this region and across the country are imposing restrictions to curb the spread of COVID-19, such as banning mass gatherings. The federal government is banning large cruise ships from docking at Canadian ports.
Manitoba plans to cancel public schools on March 23, joining Ontario and New Brunswick. So far officials in B.C., Alberta and Saskatchewan haven’t gone that far.
Health officials are now recommending Canadians don’t travel outside the country and, if they do, to isolate themselves for 14 days upon their return.
For more on the outbreak, sign up for our new Coronavirus Update newsletter with the day’s most essential coronavirus news, features and explainers written by Globe reporters. In addition, we’ve has dropped the paywall on our coronavirus news stories. We have a large team of journalists working to bring readers the most up-to-date information and applying high standards to make sure each story is factual and does not feed in to panic.
This is the weekly Western Canada newsletter written by B.C. Editor Wendy Cox and Alberta Bureau Chief James Keller. If you’re reading this on the web, or it was forwarded to you from someone else, you can sign up for it and all Globe newsletters here. This is a new project and we’ll be experimenting as we go, so let us know what you think.
Around the West:
SURREY POLICE: This week, the province released a heavily redacted report on issues around replacing the RCMP in Surrey with a new municipal police force by April, 2021. It flagged financial risks and whether officers could be trained quickly enough. The report, prepared by a municipal-provincial committee chaired by former B.C. attorney-general Wally Oppal, says the police board for the new force will also have to reach agreements with other agencies, including the province and an expected police union.
GRETA STICKER: Amnesty International says it’s not enough for political leaders to condemn a sexually suggestive decal appearing to show teenage climate campaigner Greta Thunberg and they should do more to protect human-rights activists. ”While there have been many expressions of dismay and disgust about this particular sticker … it is imperative to recognize and acknowledge that this is not a unique or singular incident,” Alex Neve wrote in the letter dated March 5. “It is reflective of a wider concern for which much more serious and concerted action is urgently needed.”
CONSTRUCTION COSTS: Construction costs rose more in Vancouver than in any other city in Canada during the past two years and were predicted to go up about 4 per cent this year, says a national tracking study. The costs are increasing at a time when the province is on a massive drive to deliver big infrastructure projects, including two SkyTrain lines and a new Pattullo Bridge, along with thousands of units of low-cost housing. Vancouver’s costs increased by 5.19 per cent in 2018 and 6.39 per cent in 2019, with slightly more than 4 per cent anticipated for 2020.
ALBERTA PUBLIC-SECTOR COURT CASE: The Supreme Court won’t hear a case involving the rights of public-sector workers in Alberta in a labour dispute with that province’s government. The union was challenging legislation passed last summer by Premier Jason Kenney’s government to delay binding arbitration in collective agreements affecting thousands of workers. The province passed the law in June, saying it needed the delay to gain a better understanding of the province’s finances.
CALGARY’S PLUS-15: Calgary wants to expand the system of elevated walkways that links many of its downtown buildings and make it easier to navigate the much-loved network, despite a continuing economic downturn that has stalled most new construction in the city. Calgary’s officials are nearing the end of a study that is looking at making the system larger, with a proposal to broaden it north toward the Bow River and an expected station on a new light-rail line being planned. Officials are also looking at changing the rules for the Plus-15s for the first time in 36 years, with a focus on improving navigation and increasing the hours the network is open to pedestrians.
Annalise Klingbeil on cuts to Alberta parks: “Whether it’s a family vacation, a junior high school field trip or a first date, we have fond and formative memories in our parks – and so these cuts hit at the heart of who we are as Albertans and Canadians. We are deeply proud and protective of our world-renowned natural spaces, these threads that tie us together.”
Thomas Kerr on blood-borne infections in Canadian prisons: “A critical step to eliminating HCV and HIV as public health threats is to prioritize the health of prisoners. Most people in prison do not stay there forever; they return to their communities after serving their sentence. And all too often, they return carrying the burden of HCV, HIV or another needless infections acquired behind bars.”
Kelly Cryderman on hoarding during the coronavirus pandemic: “Hoarding is despicable, and especially so in the midst of a global pandemic that threatens lives, social stability and the economy. News reports of stores being sold out of basic cold and flu medications are worrying. Stores will need to implement more limits on certain key products to keep some online hustlers-cum-vultures from swooping in. “Don’t be a jerk” needs to be a guiding mantra.”
Alexandra Gill on Richmond’s Dolar Shop: “More importantly, the Dolar Shop broths are amazing. Don’t bother with the standard pork leg, tomato-oxtail or spicy Sichuan. Go straight for the “exquisite” golden or silver soups. The golden is dark yellow and thickly gelatinous from slow-simmered rooster comb, chicken feet and pork-neck bone. The silver, although less of an edible emollient, is more balanced with the subtle burn of white pepper, sweetness of Chinese dates and umami depth of Jinhua ham. Seriously, these two milky broths rank above and beyond any other hot-pot soup in Metro Vancouver.”
We're at war and need wartime institutions to keep our economy producing what's necessary | TheHill – The Hill
There can be no question about the nation’s current predicament. We are at war. We are faced with a public health crisis, yes, but the virus now ravaging our communities is a lethal invader taking American lives, threatening our way of life and destroying our productive capacity and economic health.
We’re waging battle on the public health front with thousands of the most heroic and able health professionals on the planet, yet at the same time, it appears that despite Congress’ record $2 trillion relief bill we have no wartime strategy to get needed equipment where it is needed or to save our economy. We have no coordinated plan to mobilize workers, produce needed medical supplies, and distribute these to the facilities that need them.
We’ve faced down war on our people on our own shores before, so why not look to those occasions for clues as to how it is done? Many of the answers we’re looking for to respond to our current crisis and associated production shortfalls can be found in the measures taken by wartime presidents Franklin Roosevelt and, before him, Woodrow Wilson.
The key to keeping wartime production humming has always been public collaboration, with the public firmly in the driver’s seat, with private producers.
The U.S. took such measures when Pearl Harbor was bombed. President Roosevelt established a War Production Board (WPB) to coordinate the repurposing and expansion of factories; the re-routing of existing and opening of new distribution channels, and countless other tasks entailed by the productive and distributive ramp-up necessitated by the war. Before that, President Wilson established a War Industries Board (WIB) to achieve the same ends during the First World War mobilization.
Roosevelt’s WPB worked in tandem with Herbert Hoover’s and his Reconstruction Finance Corporation (RFC), the already-existent financing arm of the New Deal. The RFC had been patterned after Wilson’s War Finance Corporation (WFC) of the preceding era, established to work with the WIB in overseeing and funding U.S. mobilization for the First World War.
The WFC and the RFC directly financed mobilization, using a broad array of financing tools. They made direct grants, provided inexpensive credit or loan guarantees, and in many cases took equity stakes in individual businesses, thereby both recapitalizing them and taking internal governance rights to help guide production flexibly from the inside.
Given the success of this model in our most “existentially” threatening earlier wars, why not update it now as we grapple with another lethal invader?
I have been advocating, in some cases on my own and in some cases with others, a number of possible models for a contemporary RFC for some years now. The idea must be not just to address crises ad hoc after they have emerged, but to treat healthy and ongoing ‘reconstruction’ and national development proactively as an always-necessary, continuous process in need of an effective and democratically accountable coordinator. Think of it as a smart industrial policy tool for managing a permanent policy need in any world, such as ours, in which technical needs and technologies themselves constantly evolving.
A National Investment Authority (NIA), for example, which I first floated with my colleague Professor Omarova early in 2015, would develop, coordinate, and oversee the financing and execution of a coherent strategy of perpetual, across-the-board national development, in collaboration with private sector agents whose industries are implicated by particular projects.
My National Investment Council (NIC), introduced more recently, would collaborate more with already-existing federal agencies whose mandates are implicated by specific industrial and infrastructural projects, bringing them together as the Financial Stability Oversight Council (FSOC) does our multiple financial regulators. It would accordingly resemble not only the RFC but also the Board for National Investments (BNI) advocated by J.M. Keynes in the 1920s.
Either model would include a direct investment arm, which would act both in primary and in secondary to ensure both public and private sector provision of critical public goods. What makes these models especially relevant today is that they are designed to be platforms of precisely the kind that we need to survive our pandemic.
Right now, they would mobilize a coherent productive response to the COVID crisis. They would inject capital into businesses that need it, take direct equity stakes in them as necessary, and direct resources coherently toward the production of what must be produced both to keep our people healthy and our economy humming.
In recent weeks, my friends James Galbraith and Michael Lind have proposed an ad hoc Health Finance Corporation (HFC) to address the COVID crisis. Like the NIA and NIC, it is inspired by and patterned in part after the RFC. I find much to admire in this proposal, as does presidential candidate Bernie SandersBernie SandersOvernight Energy: Oil giants meet with Trump at White House | Interior extends tenure of controversial land management chief | Oil prices tick up on hopes of Russia-Saudi deal Oil giants meet at White House amid talk of buying strategic reserves The Hill’s Campaign Report: Biden struggles to stay in the spotlight MORE (I-Vt.), who has proposed his own variant of it. I think we’ll do even better, however, to institute something more permanent.
Unless we’re all killed by the present pandemic, there will be others. And just as importantly, reconstruction and development — national self-renewal — are forever.
Robert Hockett is the Edward Cornell professor of law at Cornell University, Visiting Professor of finance at Georgetown’s McDonough School of Business, and consulting counsel at Westwood Capital in New York City. Formerly with the Federal Reserve Bank of New York and the International Monetary Fund, he is a frequent advisor to legislators and regulators in Washington and New York.
Opinion: Reality check: The economic crash is significant but it's not the apocalypse – Calgary Herald
Stock markets have entered bear market territory meaning that they have lost 20 per cent of their value and in short order. Is the stock market’s reaction overstated? From an economic perspective, coronavirus is big. It started with an interruption in China’s output and if that wasn’t mainstream enough, now global travel is being interrupted, events are being cancelled and large social events are being prohibited. Meetings are being moved to virtual ones and extended breaks are being imposed on schools. This is disrupting our lives.
When the sub-prime mortgage fiasco resulted in the global financial crisis, the U.S. stock market collapsed as the Dow Jones Industrial Average index fell from a high of over 14,000 to a low of around 7,000 over a period of 18 months. There was a fear that the globe was entering a period of a global depression much like what had happened in the 1930s. That fear proved unwarranted as the global economy rebounded and the stock market resumed its upward trend. There are many reasons that the global economy was more resilient this century versus in the 1930s and the banking rules have been largely pointed to. I would posit that the degree of globalization, trade, availability of food, preservatives and energy, along with the portion of the population that is not living in abject poverty are all in the mix as to why the 2008 recession did not become a depression.
"Sledgehammer" policies will destroy us; we need open economy says Johns Hopkins professor | – Kitco NEWS
Government-mandated policies of self-isolation will cripple the American economy, and the draconian measures taken to contain the pandemic are not necessary, this according to Steve Hanke, professor of applied economics at Johns Hopkins University.
“With the economy shutting down, the cost is going to be absolutely phenomenal,” Hanke told Kitco News.
Hanke likened the response to the virus from the U.S. and many Western European nations to a “sledgehammer.”
“The sledgehammer approach being used in most European countries and the United States is turning out into a very costly mistake. And what I mean by sledgehammer is they haven’t planned anything, they just have a blanket program where we’re all locked in our condos or houses and can’t move, and the economy shuts down,” he said.
Instead, governments should take the model that Sweden has set, Hanke said.
“If you look at some place like Sweden, Sweden has a very laissez-faire, very targeted approach, and they’re doing very well. The kindergartens are still open, the grade schools are still open, most factories are still open in Sweden. They are not imposing this sledgehammer and essentially wiping out the economy,” he said.
“The places that have done well in controlling and counting properly the victims of this pandemic are countries that have small, efficient governments, and free market economies. You look at Singapore, Hong Kong, they’re right up there,” he said.
Additionally, these nations have all practiced the “five P’s”: prior preparation prevents poor performance, Hanke said.
The U.S. is now the country with the highest number of COVID-19 cases in the world, and the majority of the country has not yet been tested.
“Wherever the five P’s have not been applied, you have a disaster,” he said.
Greatest Moments of NHL Season … So Far: first round, matchup 5 – NHL.com
Skype rolls out 'Meet Now' for hosting video calls without downloading an app – MobileSyrup
How Revelstoke handled the Spanish flu – Lake Country Calendar
Iran anticipates renewed protests amid social media shutdown
Popular Richmond BBQ spot speaks out about coronavirus rumours after man collapses outside restaurant – Vancouver Is Awesome
Real Estate Board of Greater Vancouver reports January housing sales up 42.4 percent
- News20 hours ago
Coronavirus cases in Canada up by over 450, total nears 12,000 – Global News
- Economy20 hours ago
Pandemic debt: Countries are spending trillions to save the economy from the coronavirus crisis. Can the world afford it? – The Globe and Mail
- Tech23 hours ago
Zoom is a dumpster fire. Try these two alternatives for video meetings – Chrome Unboxed
- Tech20 hours ago
Everything known about the 2020 'iPhone SE' – AppleInsider
- Politics21 hours ago
How Chinese Americans Are Living Through a Second Pandemic: Politics Daily – The Atlantic
- Science15 hours ago
Third SpaceX Starship Prototype Crumples Under Testing – The Motley Fool
- Health24 hours ago
Coronavirus: Phone data shows Canadians avoiding restaurants, transit, stores, offices – Global News
- Art19 hours ago
Pandemic shutdowns create a ‘triple whammy’ for Western Canada’s arts community – The Globe and Mail