Alberta separatism could deliver “devastating economic blow” – economist

Economic studies examining Alberta separatism are converging on a common conclusion: leaving Canada would impose large costs on the province, economist Jim Stanford told Energi Media.

Stanford, director of the Centre for Future Work and co-author of an Alberta Federation of Labour report on separation, said economists “of all stripes” are nearly unanimous that independence would be “a devastating economic blow.”

The studies reviewed in his report estimate Alberta GDP could fall between 4 and 10 per cent in the first years after separation. Stanford said an independent Alberta would also have to finance institutions and services now provided federally, including defence, taxation, banking and central banking.

“So enormous fiscal cost, the tax requirements to pay for that fiscal cost will go up, not down,” he said.

Stanford said uncertainty would hit investment quickly. Businesses would have to assess unanswered questions about currency, inflation, institutional stability, property rights, interest rates and trade relationships. Investors, he argued, would begin cutting spending if separation became a credible possibility — potentially before any vote to leave Canada.

Alberta’s Economic Integration

Stanford also challenged the separatist portrayal of Alberta as primarily an oil and gas economy whose wealth is transferred to the rest of Canada.

About 20 per cent of Alberta GDP is embodied in exports of goods and services to other provinces, he said, while fewer than 5 per cent of Alberta workers are directly employed in petroleum. Healthcare employs more people, and Alberta also has manufacturing, technology and other industries connected to Canadian supply chains and markets.

Those relationships would face significant uncertainty after separation because Alberta could not assume existing Canadian trade arrangements would simply continue.

Stanford also rejected the claim that Alberta pays into equalization or directly subsidizes Quebec. Federal taxes are paid by individuals and businesses into general federal revenues, while equalization represents only a small share of federal spending, he said.

The Currency Question

The largest unresolved economic problem may be money.

“I think the currency issue, Markham, is probably the biggest single economic hurdle facing this separatist argument,” Stanford said.

An independent Alberta could attempt to keep using the Canadian dollar, adopt the U.S. dollar or create its own currency. But using the Canadian dollar would not give Alberta control over Bank of Canada policy, leaving difficult questions about banking stability, money supply, interest rates and capital flight.

Stanford said the separatist economic vision also depends heavily on the assumption that global markets will absorb increasing volumes of Alberta oil and gas indefinitely. He argues Alberta instead needs to continue diversifying as global energy technology changes.

“The world is going to find other ways — better ways, cheaper ways, more reliable ways — to generate the energy that it needs,” he said.

For Stanford, that makes separation especially risky: Alberta would be attempting to dismantle its economic relationship with Canada at the same time its traditional petroleum economy faces growing long-term uncertainty.