Politicians like Brad Wall must take the fall for boom and bust: Don Pittis
It seems only months ago that Brad Wall was one of the most popular politicians in Canada.
In 2016 his conservative Saskatchewan Party swept to its third consecutive election victory, taking all but 10 seats in the 61-seat provincial legislature.
But starting this spring, the mood in the province changed.
Grumbling at cuts
While last week’s resignation came as a surprise to many of us, my own recent family visit to the province exhibited a new level of grumbling about the premier and his government.
After years of riding high on a wave of resource wealth, suddenly Saskatchewan was scratching for cash, and people didn’t like it.
Only a year after Wall’s re-election, many Saskatchewan people were surprised to discover two of the province’s crown jewels, the publicly owned corporations Saskatchewan Government Insurance and SaskTel, were on the block as part of an effort to raise money.
Government workers deemed unnecessary lost their jobs. Those who remained employed faced cuts to pay, pension and benefits — overall compensation — of 3.5 per cent, a chop big enough to hurt. The cuts prompted outrage from the province’s large public service.
The premier and his MLAs shared in the wage cut. But there was anger that the private sector earned profits from government contracts and the premier’s allies continued to benefit.
A political sacrifice
It’s not how the premier put it in last week’s Facebook message, and maybe, as the CBC’s Chris Hall has said, 10 years is the best-before date for most politicians. But by his resignation, Wall gave himself up as a political sacrifice to the province’s abrupt transition from boom to bust.
Saskatchewan is still an enormously rich place with untapped potential. Besides its fossil fuel resources, the province remains an agricultural cornucopia in a hungry world. It has potash and uranium.
As one of Canada’s sunniest and windiest provinces it is an ideal prospect for green energy. It has a wealth of educated talent and a knack for business.
But like so many places before it, Saskatchewan just wasn’t able to save enough from the good times to tide it over in the downturn that history tells us inevitably happens. Similar to what one expert recently told me about Venezuela, its current financial crisis is not due to a lack of wealth, it’s a cash-flow problem.
Every time it happens, voters blame their politicians. Why didn’t they tuck something away? But the fact that the same thing happens repeatedly in electoral democracies — especially those blessed with enormous resource wealth — shows that the people who did the voting must share the blame.
Forward-thinking leaders have tried to even out the spikes, notably former Alberta premier Peter Lougheed with his Heritage Fund founded during the 1976 oil boom. But facing public pressure to spend, subsequent Alberta conservative governments did what so many others do and took a long holiday from contributing to the fund.
The Norway exception
Norway was a rare exception to the trend, setting up a sovereign wealth fund, most of it invested abroad, to hold its national oil income ring-fenced from public spending. The fund is now worth about $1 trillion U.S.
The country made its first withdrawal from the fund last year following a sharp decline in oil income, but until then one of the reasons politicians did not touch the fund was the danger of inflation if all that cash was spent in a country with a population of five million.
Besides other dangers from what’s known as the resources curse, governments that spend their resource windfalls doubly inflate their economies when resource prices are high.
During a boom, energy companies expand and small entrepreneurs are welcomed as the industry does everything it can to increase production quickly, pushing wages up. At the same time, at the behest of taxpayers and voters, governments take their resource windfall and spend it, investing in roads and hospitals and hiring government workers.
When the resource boom ends the private money dries up. Government revenue is not far behind, and soon politicians realize they must borrow or cut spending.
The cycle seems to have a certain inevitability. Individually, at least some of us know it is good to tuck away a little of today’s good fortune, but in groups we seem to vote as the worst spendthrifts, our collective credit cards maxed out.
Compounding our aggregate extravagance is the first-past-the-post system of government. A party in power feels there is so much at stake they are willing to appeal to our worst natures, bribing us with our own borrowed money, with fingers crossed that they will be bailed out by a rebound before their term in office ends.
That was another of Norway’s benefits, a system that creates coalition governments where no party can buy its way to power with a minority of the popular vote.
Of course Saskatchewan voters cannot use that excuse. Last spring Wall and his spending plans won the support of 63 per cent of those who voted.
Follow Don on Twitter @don_pittis
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