FacebookTwitterGoogle+RedditEmail

Canada’s "Dutch Disease"

A clear diagnosis of the Oil Sands fever variant of Dutch Disease may be just what the doctor ordered to rally Canadian workers in the fight against global warming.

A rapid increase in natural resource investment and revenue usually drives up a nation’s currency. This generally makes other industries less competitive and can greatly weaken a country’s manufacturing base.

Widely known as “Dutch Disease” (named after a period of rapid expansion of the natural gas industry in the Netherlands), this well established economic paradox has become a taboo subject in this country. Canada’s highly class-conscious elite is worried that manufacturing workers might make common cause with environmental groups and even some business sectors to challenge the carbon/profit bomb known as the tar sands.

A recent Pembina Institute/Equiterre report titled Booms, Busts and Bitumen argues that Canada’s economy is facing “Oil Sands fever”. The study points out that the Bank of Canada believes one-third of the Canadian manufacturing sector’s decline has been caused by a more expensive dollar, which rose alongside the price of oil from $.61 US in 2002 to $1.10 US in 2007 (and has hovered near par since). The study concludes that 40% to 75% of the currency increase has been caused by rising commodity prices, principally oil.

The higher price has led to a boom in production and export. Between 2002 and 2012 energy grew from less than 13% of total Canadian exports to over 25%. And if plans to double tar sands production over the next decade are realized, this dependence will increase.

A February Canadian Centre for Policy Alternatives study gives a sense of the jobs impact of Oil Sands fever. The Bitumen Cliff notes: “The forestry sector lost close to 30,000 positions. And the manufacturing industry, of course, haemorrhaged nearly a half-million positions. For every new job created in the petroleum sector during the past decade, 30 have been lost in manufac­turing. Across all of the export-oriented goods industries… net employment declined by almost 520,000 jobs in the past decade.”

While the precise job toll is debatable, the rapid growth in tar sands exports has undoubtedly hurt manufacturers.

Despite the obvious link between tar sands expansion, a higher dollar and a decline in manufacturing, corporate sycophants denounce any politician or established organization that draws attention to the relationship.

Federal Leader of the Opposition Tom Mulcair was aggressively attacked for raising the issue as was former Ontario Premier Dalton McGuinty. In response to the Pembina/Equiterre report Financial Post editor Terence Corcoran called the mainstream Pembina Institute “off-kilter … fomenter of oil sands phobia … keen on triggering a nation-splitting debate over the oil sands.” For his part, Sun Media’s Lorne Gunter wrote: “Left-wing environmentalists should just come clean: they hate the oil industry, they hate profits and love big government.”

Both Corcoran and Gunter cited a recent Canadian Manufacturers and Exporters (CME) study lauding the tar sands. It notes: “In recent years, much of the discussion linking the oil sands with manufacturing has included so-called ‘Dutch disease,’ with any supposed relationship being characterized as inherently negative. While the effect of the rising dollar has impacted the competitiveness of the Canadian manufacturing sector, especially exports, the underlying problem was poor labour productivity, lack of diversity among customers, and lower rates of overall capital investment. While increased investment in the oil sands may have strengthened the Canadian dollar, it is by no means the root cause of the challenges faced by Canadian manufacturing. Rather than having a negative impact on Canadian industry, the oil sands are providing a customer base for manufacturers.”

While most sane people would argue it makes little sense for the lobbying arm of Canada’s export-oriented manufacturers to dismiss oil-fuelled currency increases that have added 5, 10 or 30 percent to their costs, the CME is a highly ideological institution. When environmental or labour regulations add a few percentage points to their costs it goes berserk. For instance, before Parliament ratified the Kyoto Protocol in 2002 the CME claimed that reducing greenhouse gas emissions 6% from 1990 levels by 2012 would cost the country 450,000 manufacturing jobs. (Perhaps CME researchers should check to see if they didn’t mistake a minus sign for a plus symbol since the trashing of Canada’s Kyoto commitments through tar sands expansion has contributed to significant job losses in manufacturing.)

The CME tends to represent the voice of its biggest members, many of whom have plants in other countries. They can shift operations to lower-cost jurisdictions or use the threat of moving jobs to force wage and benefit cuts.

But that’s only part of the explanation for the CME’s pro tar sands position. That organization is in fact a mouthpiece for capitalists who are more widely invested than ever before and thus less wedded to particular firms. Without too much difficulty they can move their capital from lower margin to higher profit industries. It’s all about chasing profits and damn the negative consequences for workers.

In recent years the tar sands have been a major source of profit making. The Parkland Institute estimates that oil sands operators realized pre-tax profits of $260 billion between 1986 and 2010 (the public owners of these resources received less than 10 per cent of that sum). Over the past decade Canadian resource companies’ profit margins have nearly doubled the service, manufacturing and “nonfinancial” sectors of the economy. According to a late 2011 calculation, the market capitalization of the 405 oil and gas companies listed companies on the Toronto Stock Exchange topped $379 billion.

The boom in tar sands profits and stock prices clearly benefits leading Canadian capitalists. A recentCanadian Business magazine profile of the “100 richest Canadians” explains: “Collectively, the individuals on the Rich 100 are worth $230 billion, more than the total gross domestic product of many countries in the world, including New Zealand, Ireland and Portugal. And this year has been one of their best ever. Their combined net worth surged by more than 15% … While the actual economies of Canada and the U.S. aren’t faring particularly well, so long as the U.S. Federal Reserve maintains its stimulus program, stock markets will tick higher.”

The “100 richest Canadians” – and the rest of the 0.01% of top shareholders who control most corporations – dominate corporate lobbying associations such as the CME and they also have significant influence with many think tanks, university departments and news outlets. Like their wealthy patrons, these institutions tend to back whatever generates the most profit (that’s the point of capitalism after all). As a result, there’s little interest in discussing the deleterious job impacts of Oil Sands fever.

But environmentalists and union activists should be making common cause by explaining how tar sands profits that go to the rich and powerful cost Canadian workers hundreds of thousands of jobs. Expansion of the tar sands and the resulting bouts of Oil Sands fever may be good for capitalists but it will further weaken the job market and do great harm to Canadian workers.

Yves Engler is co-author of the recently released New Commune-ist Manifesto — Workers of the World It Really is Time to Unite. For more information go to www.newcommuneist.com

More articles by:

Yves Engler’s latest book is ‪Canada in Africa: 300 years of Aid and Exploitation.

Weekend Edition
January 18, 2019
Friday - Sunday
Melvin Goodman
Star Wars Revisited: One More Nightmare From Trump
John Davis
“Weather Terrorism:” a National Emergency
Jeffrey St. Clair
Roaming Charges: Sometimes an Establishment Hack is Just What You Need
Joshua Frank
Montana Public Schools Block Pro-LGBTQ Websites
Louisa Willcox
Sky Bears, Earth Bears: Finding and Losing True North
Robert Fisk
Bernie Sanders, Israel and the Middle East
Robert Fantina
Pompeo, the U.S. and Iran
David Rosen
The Biden Band-Aid: Will Democrats Contain the Insurgency?
Nick Pemberton
Human Trafficking Should Be Illegal
Steve Early - Suzanne Gordon
Did Donald Get The Memo? Trump’s VA Secretary Denounces ‘Veteran as Victim’ Stereotyping
Andrew Levine
The Tulsi Gabbard Factor
John W. Whitehead
The Danger Within: Border Patrol is Turning America into a Constitution-Free Zone
Dana E. Abizaid
Kafka’s Grave: a Pilgrimage in Prague
Rebecca Lee
Punishment Through Humiliation: Justice For Sexual Assault Survivors
Dahr Jamail
A Planet in Crisis: The Heat’s On Us
John Feffer
Trump Punts on Syria: The Forever War is Far From Over
Dave Lindorff
Shut Down the War Machine!
Glenn Sacks
LA Teachers’ Strike: Student Voices of the Los Angeles Education Revolt  
Mark Ashwill
The Metamorphosis of International Students Into Honorary US Nationalists: a View from Viet Nam
Ramzy Baroud
The Moral Travesty of Israel Seeking Arab, Iranian Money for its Alleged Nakba
Ron Jacobs
Allen Ginsberg Takes a Trip
Jake Johnston
Haiti by the Numbers
Binoy Kampmark
No-Confidence Survivor: Theresa May and Brexit
Victor Grossman
Red Flowers for Rosa and Karl
Cesar Chelala
President Donald Trump’s “Magical Realism”
Christopher Brauchli
An Education in Fraud
Paul Bentley
The Death Penalty for Canada’s Foreign Policy?
David Swanson
Top 10 Reasons Not to Love NATO
Louis Proyect
Breaking the Left’s Gay Taboo
Kani Xulam
A Saudi Teen and Freedom’s Shining Moment
Ralph Nader
Bar Barr or Regret this Dictatorial Attorney General
Jessicah Pierre
A Dream Deferred: MLK’s Dream of Economic Justice is Far From Reality
Edward J. Martin
Glossip v. Gross, the Eighth Amendment and the Torture Court of the United States
Chuck Collins
Shutdown Expands the Ranks of the “Underwater Nation”
Paul Edwards
War Whores
Peter Crowley
Outsourcing Still Affects Us: This and AI Worker Displacement Need Not be Inevitable
Alycee Lane
Trump’s Federal Government Shutdown and Unpaid Dishwashers
Martha Rosenberg
New Questions About Ritual Slaughter as Belgium Bans the Practice
Nicky Reid
Panarchy as Full Spectrum Intersectionality
Jill Richardson
Hollywood’s Fat Shaming is Getting Old
Nyla Ali Khan
A Woman’s Wide Sphere of Influence Within Folklore and Social Practices
Richard Klin
Dial Israel: Amos Oz, 1939-2018
David Rovics
Of Triggers and Bullets
David Yearsley
Bass on Top: the Genius of Paul Chambers
Elliot Sperber
Eddie Spaghetti’s Alphabet
FacebookTwitterGoogle+RedditEmail