Don’t expect to hear much about “Dutch disease” in the coming weeks from our Alberta election candidates.
“Dutch disease” is a term coined back in 1977. It’s used to describe problems caused by sudden, and huge, inflows of money into an economy. In the Netherlands, everything went to hell in the 1960s when a huge natural gas field was discovered and developed.
As happened in the Netherlands, happens in Alberta. When the oilpatch is booming, youth drop out of school. Good paying jobs are everywhere. Many young people find their way to the energy industry. Regular businesses and offices find they can’t hire staff at the wages paid by oil companies.
Government taxes everybody so they, too, can hire at the higher rates. Banks slow down loans to “normal” businesses as they ramp up loans to energy companies. Real estate prices relentlessly march upwards. People have money to spend.
In-migration from workers seeking jobs puts huge pressure on roads, schools, hospitals. Companies start bringing people from other provinces at ever increasing wages. There just aren’t enough locals. The whole thing brings in more money. Politicians merrily spend, keeping voters happy.
In a perverse sort of way, in Alberta, many are happy with Dutch disease. To name only a few. Farmers can work the winter hours in the patch, or even in construction, earning enough to keep the farm back home afloat.
Businesses decry the costs of hiring, even while they are building new stores or shops, or buying new equipment to meet demand.
When energy prices are up, times seem good. Vehicles and homes are being sold. There are new projects starting everywhere. Complainers there are, but hey, who wants to listen to complainers? Let’s all make money while the sun is shining. Buy some sleds or a boat. Oh, maybe stick a few dollars in a rainy day fund.
Then times go bad. People from other provinces go home. Local businesses see sales drop. They struggle to keep banks happy and doors open. Now it’s easier to hire staff, but there isn’t enough work to need them, and no money to pay them anyway. It’s really quite the vicious circle.
Politicians like to tell us they have answers. Or at least, more answers than newspaper columnists, the next politician, or the folks in the coffee shops. Hardly!
The late Gordon Buchanan from Buchanan Lumber [now West Fraser] used to say, more or less, “Make sure you put money away when times are booming. Sure as night follows day, there will be bad times following good.”
That isn’t something leaders say often enough. When times are good, they say people don’t like being nagged to put money in the bank. When times are bad, they want to run around, telling people how government is going to look after them.
The real answer, as we were told so many times over the years, is “diversify” the economy.
It is now about 40 years later since that kind of chit-chat started. Alberta is still a resource economy. So really, how is it all that diversification working out for everybody?