I recognize that over the past few months, Greece has been my primary focus on this blog. Now, as the deals have been signed on the dotted line and unrest no longer runs through the streets of Athens, I feel regret that this country - homeland of my father and mother, and many beloved friends and extended family - is on the path to giving away its future at fire sale prices in what is sure do be a prolonged tax fuelled depression. Set to raise a mere billion dollars over the next three years, Greece is selling large pieces of everything from the railway and postal system to water treatment plants and the state-owned natural gas company. Seeing Greece give so much away for so little in return and for no apparent reason (what will $1 billion accomplish in the face of a $400 billion debt?), it reminded me that here in Canada, we’ve been doing just that for years - from Petro Canada to the 407 highway.
By any measure, Canada is a supremely wealthy country, filled with the world’s most in-demand resources; oil, lumber, grain, natural gas, coal, gold...the list goes on. Just over 33 million people are scattered over this vast, rich space. You’d think that given Canada’s geographical luck (and plenty of talent to take advantage of it), this country would be heaven on earth for its citizens. Not so. Canada has a poor social safety net compared to most European nations, few incentives for small business owners, and has always limited its access to credit for companies below the top tier.
Much like in the USA, our employment growth is primarily in the service sector, and as mentioned in the last post, education costs are cripplingly high. Our natural wealth is drained away into the hands of multi-national corporations, exported cheaply as raw materials rather than turned into good manufacturing jobs here. In Alberta, for example, a ‘revolutionary’ attempt by the Provincial government to raise royalty rates on oil and gas concerns starting in 2010 (called, of course, a “cash grab” by the corporations and right-wing rags) resulted in the usual corporate outcry. The government stuck to their guns initially. But just before these changes were to take effect, they were repealed in favour of multi-national profits. In my first post, ‘Suffering Canadian Patriot’ I touched on these issues, and invite you to look back.
Does it have to be this way?
A few years ago, I was in Abu Dhabi on business – a place that has its own problems, but a lot of lessons for Canada. I did not know what to expect and I tried to go without any preconceived notions. All I knew of the place was what I had heard from a dear friend who was a notorious exaggerator. We had met while he was studying here in Canada from wherest he left promptly after graduating to go get a ‘real’ job. From the minute I arrived, I was floored by the profligate luxury everywhere. Landing in Dubai, I took a car from the airport to Abu Dhabi, a two hour drive similar to that from Toronto to London; a drive I had done on many an occasion, winding through corn fields, much of it in darkness. As we left, I was struck by the endless rows of luxury waterfront condos that seemed to go on forever...the products of a bubble, to be sure, one I tried to warn them about, but spectacular nonetheless.
The road was brightly illuminated, making night feel like day, and was straight as an arrow and smooth as marble. A median separated eastbound from westbound for the entire drive. I thought that I must be in the richest place on the planet. I was wrong! As we entered Abu Dhabi the median was now filled with palm trees and lush greenery - remembering that we were in the middle of the desert - I noted that it wasn’t an oasis, but spurned by a 50km long irrigation system, running straight into a desalination plant needed to supply these people with drinking water of which they had none! Surely a planned luxury to impress guests? But upon arriving at the foot of Abu Dhabi, the oasis grew into a 10 km waterfront park, dominated by plush green grass sitting atop what was essentially a barren sand dune.
Our visit to the Emirates Palace, a declared seven star hotel, yielded more wonders where it seemed like all the walls were made of gold and the crystal chandeliers hung majestically from the cathedral ceiling. An auction was taking place where locals were bidding on license plates....While the number ‘5’ license plate fetched a cool US $8 million, it was the ‘911’ plate that provided me with the biggest catalyst for this post. It was bolted on a brand new Porche that was sitting on stage, worth a mere US $80,000 dollars (as there are no taxes on such goods there). The license plate went for $400,000 dollars at auction. Someone had just paid 5 times what one of the finest pieces of automotive engineering on the planet was worth, for the piece of tin that you bolt on the front of it! Were they mad? I scoffed at people at home for wasting 300 dollars on a vanity plate...this was insanity!! But not really; the citizenry had been allowed to keep all of their wealth.
I did not tell this story to make people jealous, to create filler or to digress; I told it because of the parallels between Canada and this oasis in the desert. Abu Dhabi is a place with a very small population and a single large resource. Canada is a place blessed with MANY resources in abundance and also a relatively small population – We ‘even’ have drinking water and plenty of it! Why are we not doing better than they are? This tiny Emirate has a massive sovereign wealth fund of 1 trillion dollars, which amounts to $17 million dollars for every citizen in the emirate - and not only that, it was a completely tax free haven! Even with our excessive and ever-growing taxes, and our far fewer luxuries, we could only muster a 1 trillion dollar debt (app. Federal, Provincial and Municipal). Not to mention the skyrocketing personal debts we have – 1.3 trillion dollars in 2009 – of which Abu Dhabi had none, as debt was illegal when I visited. (It was since legalized as Sharia compliant, in a form, and of course they had their first real estate crash 2 years later!)
No matter what their level of ambition and skill, citizens are also virtually guaranteed lucrative careers. A “poor” citizen of Abu Dhabi is a contradiction in terms. And this is the profound difference between this Emirate and Canada – our resources go straight into private hands, and we are given a minority of the profits in royalties. On the other hand, their wells and infrastructure had been built by foreign companies, who had been paid handsomely to do so – but they kept their oil!
When it comes to keeping a country’s wealth in the hands of its people, there is another motivator – safety. The BP oil spill in the Gulf of Mexico is a prime example. The so-called Big 5 oil companies in the world spent US $33.8 billion dollars on exploration over the last three years and their profits were upwards of $160 billion– their combined yearly spending on disaster prevention was $20 million, as such an event was deemed ‘a zero probability event’. Is it any wonder that safety violations are rampant? Numbers on how much damage the oil spill will cause are unknown right now, but can hardly be overstated. When you lose control of your resources, you put your safety in the hands of corporations to whom it's a cold cost-benefit equation – and almost always, the massive profits to be had more than outweigh potential risks. There is simply no moral hazard.
These views may sound like left-wing ranting to many, although I would hardly call Abu Dhabi an anti-capitalist commie paradise, but rather the complete antithesis. They just keep their wealth and generously take care of their citizens, unlike us. Tack on a quarter of a billion dollars for bank profits and a similar amount for insurers over the past decade, not to mention big oil, and you start to see where all of Canada's sovereign wealth goes. So what do we do? It’s not as though Canada could get away with telling the multinationals we’re keeping a bigger piece of what belongs to us and they can just deal with it, right? They need to make a return on investment or won’t they simply take their money and expertise and flee the country?
Well, a country did just that with success. Under Chavez, Venezuela tossed out old unfair agreements with international oil companies in favour of forceful renegotiation to increase royalties, give the government a minimum 51% stake in projects, and, as 90% of the multinationals engaged in tax and royalty evasion, ensure that the country was no longer cheated out of the money they were owed. Sure, there was a massive outcry and probably a few assasination attempts on Chavez, but even then, it was still worth it for the companies to do business there and only Exxon threatened to leave, but stayed in the end. I am not advocating a military seizure of all our resources and that our leaders wear fatigues - nor do I agree with all of the man’s politics - but I admire his balls. We need to grow a pair here.
One big difference between Abu Dhabi and Canada is that their citizenry is a closed club, not open to new members, except to those born to members. Zero immigration. If that were the case in Canada, neither you nor I would be citizens.
ReplyDeleteAs for the balls, yes, Canada could use a pair. Please and thank-you.