The worst premier in Alberta's history

Ed Stelmach is far and away the worst premier in Alberta's 104-year history. I don't even think his own partisans would deny that. They'd simply point out that even the worst premier in Alberta's history can still beat the Liberal Party in the polls, and they're right. That's hardly a feat. I wonder if that winning streak will continue in the face of the awkwardly-named Wild Rose Alliance, undergoing a renewal right now.

I predict Stelmach will be known in history as the undertaker of the Alberta PCs. He is already known as the underminer of the province's oil and gas industry, a remarkable feat. He has changed the province's oil royalty regime five times in three years; is it any wonder that a survey of nearly 600 oil and gas executives, Alberta is now ranked as the least favourable province in which to invest? Perhaps that's a reason why the province is headed for a $7-billion deficit, an amazing achievement given that oil is hovering in the $70/bbl range. By contrast, Ralph Klein balanced the budget on $20/bbl oil.

Here an article I recently found on the Internet that I wrote two years ago, before Stelmach pulled a Hugo Chavez on the oil patch, and before the province swung from massive surpluses to massive deficits. Even then it was obvious that Stelmach and his numb caucus were economically illiterate, with a touch of populist bullying thrown in for good measure. I wrote this in Canadian Lawyer two years ago:

During the 1990s, Alberta was the policy laboratory for the rest of the country, testing out ideas like balanced budgets and tax cuts adopted in other provinces. But today, Alberta’s government has lost its leadership role.

It is a follower now, toying with importing socialist ideas that were once anathema in Canada’s most entrepreneurial province.

The price of housing is on the minds of lots of Albertans, as a flood of job seekers pour in from other provinces, driving up the price of the average home by 13 per cent over the past year, and much more than that in Edmonton and Calgary. But the free market has responded as it should; nearly 50,000 homes were built in the province last year, more than in Quebec, a province with more than double the population. Alberta’s construction permits routinely exceed a billion dollars a month, most of it residential, a number exceeded only by Ontario.

That’s Adam Smith’s “invisible hand” theory at work. No central authority instructed workers from high unemployment areas to migrate to Alberta’s booming oil patch; and no one directed Canada’s developers to build more homes where needed. Both of these opportunistic trends happen to be a natural check on themselves in the long run: higher housing prices attract investment that will eventually lead to lower housing prices. In the meantime, those higher housing prices offset the economic benefits to job seekers moving to Alberta from more affordable provinces, naturally cooling off Alberta’s migration.

But Alberta’s allegedly Conservative government isn’t leaving it alone. The government recently struck a committee to look into the housing “crisis” — if 50,000 new homes a year can be called a crisis. Among its recommendations was a plan to limit annual rent increases to inflation plus two per cent — rent control.

In the end, that recommendation wasn’t adopted by the government — to the dismpay of many MLAs. “The free market is not working very well right now,” explained Neil Brown, a Calgary Tory MLA. But tens of thousands of Canadians think otherwise. They’re not choosing Saskatchewan, a province with nearly as much oil and gas, more wheat, more potash, and more uranium. Alberta’s wealth is not because of its natural resources but precisely because its free market is working so well.

It’s not the construction industry that dodged the rent-control bullet: it’s any newcomer to Alberta hoping that more apartments will be built. In disastrous rent control experiments from Toronto to New York, apartment-seekers are always the first casualty because no-one wants to become a landlord and those who already own apartments have no reason to do more than bare minimum maintenance. Rent control is usually an early domino in urban decay; when the private sector abandons rental apartments, the government moves in, building housing projects that become magnets for crime.

Economics deal with the eternal question of scarcity: man’s desires exceed the amount of resources available. His reach exceeds his grasp. In the free market, scarce apartments are allocated based on who wants them the most — roughly measured by who is willing to pay the most for them. Rent control rations scarce apartments another way: whoever got there first gets to keep them, even if newcomers would pay more. It doesn’t just transfer wealth from landlords to renters; it transfers wealth from people who don’t have apartments to people who already do.

Alberta is still riding out its economic “miracle.” But it actually isn’t a miracle at all; Alberta’s success is the predictable outcome of a low-tax, low-regulation, entrepreneurial economy. Its government should remember that most of its newcomers came to get away from job-killing government regulations, not to have those regulations follow them.

It's a little bit sad to read that now; Alberta's economy has tipped into a recession, there is a glut of unsold condos and homes on the market and prices have fallen back by several years. Saskatchewan, by contrast, is booming -- rolling in surpluses, tax cuts and debt pay-downs. The difference is that they've elected their best premier in history, the Sask Party's Brad Wall. It's hard for an Alberta chauvinist like me to watch, for the first time in 75 years, a net migration from Alberta to Saskatchewan, both of money and people. But I don't begrude those fleeing Alberta, and I certainly don't begrudge Saskatchewan and Wall for earning their trust, where Ed Stelmach has earned their contempt.