Opinion

Petro State per Usual: Reading Alberta's Election

Why it's so hard to kick out or reform an oil-fueled government.

By Andrew Nikiforuk 25 Apr 2012 | TheTyee.ca

Award-winning journalist Andrew Nikiforuk writes about energy for The Tyee and others. Find his previous Tyee articles here.

Just about every pundit and pollster alive predicted that the libertarian Wildrose party would surely end the Tories' 41- year long reign in Alberta.

But they got that dead wrong and history, once again, did not unfold as predicted.

The chatterati not only underestimated the enduring mechanisms of social control in a petro state, but failed to grasp its tortured nature.

In fact most of Canada's political scientists, a fraternity of the deaf and dumb, still don't have the courage to recognize Alberta as a highly dysfunctional petro state. Yet half its electorate (the equivalent of petroleum welfare bums) can't even bother to vote.

And no wonder: petro states are largely oblivious to elections and other changes because they rise and fall according to the price of oil.

They are strongest during oil booms and most fragile and vulnerable during oil busts.

The single greatest advantage Alberta's inept and corrupt Tories held this election was not their ability to capitalize on the political gaffes of the Wildrose party, but to ride the promise of province’s temporary bitumen boom.

One party petro-states

Now petro states are peculiar creatures.

They mine a finite resource whose price volatility encourages spending busts and booms. Oil generates such extreme amounts of cash for both government and oil firms alike, that good statecraft (the product of scarcity and the taxation of ordinary people) atrophies. (Just like oil companies, Alberta's Tories cover up mistakes, folly and stupidity by writing cheques.)

The U.S. political scientist Terry Lynn Karl, who wrote the book on the subject, explains that petro states and their citizens get so blinded by petro dollars that they develop a high tolerance for waste, corruption and inefficiency.

Both the ease (and sleaze) of oil money explains such carelessness: "Since oil states do not have to extract the majority of their resources from their own populations, they do not have to build the institutional capacities that have historically been required by such extraction. This means that they are denied the information that is generated by a robust tax bureaucracy, and they are also denied the incentives for innovation within a civil service that stems from scarcity."

Over time, the curse of oil revenue either strengthens authoritarian regimes or erodes democratic ones. Armed with petro dollars, few oil states can resist the temptation to buy consensus, marginalize dissidents or bury critics. Just watch Stephen Harper, a classic petro politician.

The money explains why oil-exporting nations tend to be ruled by demagogues or a single governing party for extraordinary lengths of time. The Democrats, for example, ruled oil-rich Texas for more than 90 years until the Republicans took advantage of Karl Rove's rhetoric and an oil price slump in the 1990s to put their noses in the trough.

The extremely autocratic and corrupt Institutional Revolutionary Party (PRI) governed Mexico for nearly 70 years thanks to its now depleted oil fields. Oil dollars also cemented the long reigns of Suharto in Indonesia, Saddam Hussein in Iraq and Hugo Chavez in Venezuela. Oil, too, kept Col. Moammar Gadhafi in power for 42 years.

A petro state that runs on oil revenue instead of taxes also tends to create a certain kind of disengaged citizen. As long as revenue from the likes of ExxonMobil, Cenovus and Petro China runs Alberta's mismanaged hospitals and schools, Albertans will remain the compromised clients of oil companies. Why bother voting when the link between taxation and representation has been so crudely severed?

Welcome to the petro-casino

But there is also another problem. Petro states tend to attract people more interested in making a killing than a living. You'll never hear any member of the Alberta government request that newcomers give back to the province as much as they plan to take because the Tories view Alberta as one great petroleum casino for the looting.

Karl defines the bizarre disengagement of citizens in a petro state with frightful honesty: "With basic needs met by an often generous welfare state, with the absence of taxation, and with little more than demands for quiescence and loyalty in return, populations tend to be politically inactive, relatively obedient and loyal and levels of protest remain low -- at least as long as the oil state can deliver. Thus for long periods an unusual combination of dependence, passivity, and entitlement marks the political culture of petroleum exporters."

As a consequence the window for real change in a petro state opens briefly when oil prices fall, explains Karl. That's when the ineptitude of oil-addled elites becomes most glaring in the form of massive deficits, crazy spending schemes, government spying scandals, or public prayers for redemption. (The Arab Spring was very much a product of the 2008 oil price collapse.)

Almost on cue, two new political movements emerged in Alberta after the oil shock crash of 2008 -- the right wing Wildrose Alliance and the left of centre Alberta Party.

But one should never underestimate the ability of petro states to pave over their cumulative policy errors while waiting for the next boom to erase the public's memory. In fact high oil prices quietly gave Alberta's Tories another win they neither earned nor deserved.

Can petro-states be reformed?

Given these startling realities, reforming a petro state is not for the faint of heart. A government flush with bitumen dollars simply has the financial wherewithal to fight reform, robocall the dead and manipulate voters on an unprecedented scale.

Karl says that there are only three reforms that can really change a petro state. They include transparency such as regular reporting on royalties and savings and freedom of information; participation in government by direct taxation; and an accountable civil service funded by direct taxes as opposed to oil loot. Alberta's twelfth consecutive Tory government promises none of the above.

Several years ago former premier Peter Lougheed offered a coherent and elegant reform package.

These changes, which only the province's New Democratic Party championed during the election, could have saved Alberta from its looming bitumen disaster with volatile global oil prices: Slow down. Behave like an owner. Collect our fair share. Save for the future. Add value to the resource. Clean up the mess. Approve only one bitumen project at a time.

In contrast Alison Redford's Tories have vowed to give away $3-billion to the world's wealthiest companies for bogus bitumen research and another $16 billion for carbon capture and storage over the next two decades. The bad royalty and tax system that has driven rapid bitumen development will not be fixed.

But charging higher royalties and taxes alone won't transform the moral character of Alberta's petro state until the majority of its oil revenue ends up in a Norwegian-like pension fund.

Norway, the poster boy of transparent petro states, tellingly and responsibly runs on carbon or income taxes. Unlike Alberta it has saved its wealth ($500 billion) for the day the oil runs out or global demand peaks.

Until Albertans start to think like Norwegians and reawaken their democratic impulses, the province will reap inequality, corruption and more dispiriting elections.

But that is what petro states do best: guarantee business as usual for the master resource.  [Tyee]

Read more: Energy, Politics

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