On Alberta, and Canada, after the end of the oil advantage

The collapse of oil prices worldwide has hit many oil-exporting economies hard. Here in Canada, Alberta has been hit particularly hard. A recent CBC post illustrating a Facebook post
which went viral underlines the issue.

An oilpatch worker's widely shared social media post accuses Justin Trudeau of ignoring Alberta's economic pain and pleads for help during the economic slump.

Since Lloydminster's Ken Cundliffe posted the letter on Jan. 10, it has been shared thousands of times.

"Since you will not acknowledge what the low oil prices have done to our own people, I will," wrote Cundliffe, an operator with Husky Oil. "It's hard to say in words how scared and desperate people are becoming."

The letter paints a dire picture of layoffs and unemployment insurance running out for many, alongside a jump in theft and suicide rates.

"Alberta has not taken an equalization payment for over 50 years and has done more than its fair share in supporting the East in that time. Now that the Alberta economy is struggling due to low oil prices, why do you refuse to acknowledge the problem?" he wrote, questioning why the Liberal government has given away "BILLIONS of Canadian taxpayer dollars to other countries."

"Please start helping our own people through these tough times," the letter urged.

Some might disagree with the angst, but the scale of the collapse is real. Jason Markusoff's article in MacLean's, "The death of the Alberta dream", outlines the scale of Alberta's issues.

the great oil rout of 2014-15 seemed, at least at first, to be following a similar pattern to other busts. Some big oil sands projects get delayed, rig and well activity shrivels and Employment Insurance rolls spike, leading to knock-on effects: Calgary towers thin out, the real estate market softens, and cuts spread to everything from shops to restaurants. Yet past plunges were reliably followed by a bungee-like snap back in growth, as oil prices regained their upward momentum. It’s a pattern a generation of Albertans has come to expect, after the 1998 Asian financial crisis, the 9/11 terrorism shock and the 2008 financial crisis.

But the broad optimism of early 2015 has gradually given way to dread. This feels more like the awful 1980s, with no swift recovery to come—not in a world glutted by oil, as Saudi Arabia battles to squeeze out higher-cost producers like Russia and the United States. Before Christmas 2014, as prices thudded from above US$100 per barrel to below US$60 for the first time since the Great Recession, oilpatch observers wondered how soon US$80 oil would return. Instead, the OPEC cartel’s decision to keep pumping, and the surprising resilience of U.S. producers, have pushed oil down to below US$40.

Energy companies are preparing for a grim 2016. Analysts predict budgets will get slashed further, and that more energy firms may have to cut staff, having already laid off thousands. Ongoing oil sands construction projects will continue to wind down with little to replace them, hitting both the residential and commercial real estate sectors hard. For instance, in nearly one-sixth of all the office space in downtown Calgary, the fluorescent lights now shine on empty cubicles, and it’s forecast to get worse. Reports of the symptoms pop up almost daily: more insolvencies, more business for moving trucks and repo crews, even a noticeable uptick in suicides. The Calgary Stampede itself has been forced to lay off staff, as its offseason event bookings dried up. In November, the Alberta unemployment rate came within one-tenth of a percentage point of the national average, the closest it’s been since 1989. Those trend lines are expected to cross over next year, making it more clear to Canadian job-seekers that the Alberta dream is in decline.

The rest of the country isn’t immune from those ominous grinding sounds coming from Canada’s longtime economic engine. Canadian GDP dipped into recession territory in the first half of 2015 on the oil shock, and though the country managed a rebound in the third quarter, Alberta’s troubles—as well as slumps in other oil-rich provinces like Saskatchewan and Newfoundland—have left a gaping wound. The energy sector had long driven Canada’s trade surplus, papering over weakness elsewhere while soaking up large numbers of unemployed and underemployed people from regions like the Maritimes and hard-hit southwestern Ontario. Many economists predict a gradual rebound, but nothing head and shoulders above national growth rates, as had been typical for Alberta. “Average growth” is an unfamiliar term in Alberta, and will take some getting used to.

But even average growth seems a ways off, as troubles keep filtering through the province. In Alberta’s southeast, Medicine Hat drew international acclaim in the spring of 2015 after it became the first city in Canada to eliminate homelessness, having pursued an ambitious five-year agenda to put people into subsidized housing within 10 days of them landing in emergency shelters. After so much progress, Medicine Hat’s Salvation Army shelter is back to averaging 17 clients a night, up about one-third since 2014—too many to promptly find them all affordable housing. Local demand for donated clothing and household items also rose by more than a quarter over the last year, says manager Murray Jaster. But donations slumped too, and he had to reduce staff. When he’s out along the Trans-Canada Highway that dissects Medicine Hat, Jaster has noticed more hitchhikers than he’s seen in years—people looking to take the long road home, or perhaps to wherever in Canada the jobs may be. “Man, we’re a have-not province all of a sudden,” Jaster says. “Who can believe it? I can’t.”

As Toronto Star writer Antonia Zerbiasias noted in her "Ottawa’s focus on Alberta oilsands is killing manufacturing jobs in Eastern Canada, economists say", many of these returning migrants won't find jobs at home. The high Canadian dollar of previous years, sustained by high oil prices, may have inflicted Dutch disease on the Canadian industrial sector.

In his report, Coulombe and his co-researchers determined that our petro-currency was responsible for 42 per cent of job losses between 2002 and 2007. That translates to at least 140,000 manufacturing jobs gone as a direct result of the oilsands development.

It didn’t get any better after that. Our manufactured exports dropped another 12.6 per cent between the second quarter of 2007 and the first quarter of 2011.

If Dutch Disease is allowed to spread, Coulombe and other economists warn, Canada’s ailing manufacturing sector will face still more job losses, while consumers, farmers and non-oil producing industries will feel increasing pain through inflation and gas prices at the pump.

The long-unprofitable oilsands, which require the expensive and water-intense extraction of tarry bitumen, suddenly became economically feasible.

That increased oilsands development boosted crude exports. By 2006, oil became our biggest export, displacing autos and auto parts. The loonie surged against the weakening U.S. dollar. That made our manufactured exports — long dependent on a low Canadian dollar — more expensive. And that cost factory workers jobs.

Over the past year, alarm bells have been sounding.

As noted by the CBC in relation to the Atlantic Canadian province of Nova Scotia, the returned workers have nothing to look forward to but lower incomes and higher levels of unemployment. Some local companies have taken advantage of the returnees to alleviate worker shortages, but this cannot be a general solution.

What next? I, personally, am not sure I want to know.

Changing world population balances, 1800 to 2100

The Russian Demographics Blog was the most recent source to link to Max Galka's remarkable map showing changing populations in the recent past and the projected future.

For thousands of years, Asia has been the population center of the world. But that’s about to change.

Asia contains 7 of the 10 most populous countries in the world, the two largest of which, China and India, each individually have larger populations than Africa, Europe, or the Americas. And as I’ve demonstrated previously, the eye-popping population density in regions such as Tokyo and Bangladesh is an order of magnitude greater than anywhere in the western world.

Two hundred years ago, the figures were even more extreme. In 1800, nearly two thirds of the world lived in Asia. And at that time China had a larger population than Africa, Europe, and the Americas combined.

Asia dominates the world population landscape, and it has for at least the last two and a half thousand years. [. . . T]he relative population sizes of Asia, Africa, and Europe have remained surprisingly constant for thousands of years. Since at least 400 BC, 60% or more of the world has lived in Asia.

According to the U.N. Population Division, the population of Africa is poised to explode during the next 85 years, quadrupling in size by 2100.

The U.N. attributes this change to two factors: Africa’s high fertility rates (African women have on average 4.7 children vs. a global average of 2.5) and its young population, many of whom will be reaching adulthood in the coming years and having children of their own.

A note on public health, or, how you get what you pay for

Late last month, I blogged about PrEP, an acronym for "pre-exposure prophylaxis", as Wikipedia puts it "the use of prescription drugs by people who do not have HIV/AIDS as a strategy for the prevention of HIV/AIDS". When taken with sufficient frequency, the drug in question--in most studies, either tenofovir or the tenofovir/emtricitabine combination TruvadaSouth Africa and Thailand suggest that PrEP can be an effective anti-HIV strategy in middle-income countries as well.

PrEP is not the only transformative event in the treatment of the pandemic The latest anti-retroviral treatments are not only keeping the HIV-positive in good health, they are radically reducing the chances of further infection, via the strategy of TaSP (treatment as prevention). One thing widely reported in the media with varying levels of incredulity after Charlie Sheen's self-outing as HIV-positive, in Vox and Gawker and MacLean's and New York Magazine, is that Sheen has undetectable levels of the virus in his system and cannot infect people. This was not just Sheen talking: This is the actual science. Multiple research projects, including the ongoing PARTNER study, have so far concluded that the chances someone HIV-undetectable could transmit HIV on to someone HIV-negative are trivial. The PARTNER study has not yet found a single instance of such a transmission happening, not with tens of thousands of sex acts in hundreds of couples in two years. TaSP, treatment as prevention, also works. The approach of systematic testing and universal treatment of HIV, pioneered in Canada in British Columbia by Dr. Julio Montaner, can break the back of the epidemic. Saving people's lives also slows down the spread of HIV radically.

These successes raise an important question. Between PrEP and TaSP, not only is it possible for people infected with HIV to lead normal lifespans--indeed, some recent studies suggest that the sustained engagement with medical systems can give HIV-positive people longer life expectancies tan their HIV-negative peers, their HIV becoming a manageable
Journalist Laurie Garrett's 1995 The Coming Plague remains as relevant a book now as it was when it was published two decades ago. In that book, she made the point that the world was woefully unprepared for pandemics, that sustained underinvestment in public health and medical systems made it very difficult for increasingly fragile states to control infectious diseases within their frontiers. Governments, as she observed caustically in country after country, with disease after disease, simply seemed to have other priorities. The result was the risk of catastrophe. PrEP and TaSP may be effective strategies, but what does it matter if governments opt not to make the investments necessary? The United States is the country that developed PrEP and TaSP, and happily these strategies are becoming increasingly widely adopted in different at-risk communities which have access to them. PrEP and TaSP, though, require significant investments, in medication and in ongoing medical surveillance. Those communities which cannot access these investments are suffering horrifically: a recent Al Jazeera item suggests that HIV is spreading among black men who have sex with men in Atlanta at rates rarely seen in the United States since the 1980s. Similar stories can be told elsewhere in the world, only the details varying.

People elect governments, governments make choices, and too often these governments don't bother trying to deal with significant public health problems. The results, when crises erupt, can be catastrophic. I remain thankful that the West African Ebola epidemic has been fought back, though I wonder how many lives, how much wealth, how much potential could have been saved had the concerned governments and organizations behaved prudently. False economies are, by definition, false.

"Edward Hugh, Economist Who Foresaw Eurozone’s Struggles, Dies at 67"

The last Demography Matters post of 2015 noted the sad death of co-blogger Edward Hugh, and the first post of this year shall note Landon Thomas Jr.'s obituary for Edward in The New York Times. A sampling:

“For those of us pessimists who believed that the eurozone structure was leading to an unsustainable bubble in the periphery countries, Edward Hugh was a must-read,” said Albert Edwards, a strategist based in London for the French bank Société Générale. “His prescience in explaining the mechanics of the crisis went almost unnoticed until it actually hit.”

As the eurozone’s economic problems grew, so did Mr. Hugh’s popularity, and by 2011 he had moved the base of his operations to Facebook. There he attracted many thousands of additional followers from all over the world.

If Santa Claus and John Maynard Keynes could combine as one, he might well be Edward Hugh. He was roly-poly and merry, and he always had a twinkle in his eye, not least when he came across a data point or the hint of an economic or social trend that would support one of his many theories.

His intellect was too restless to be pigeonholed, but when pressed he would say that he saw himself as a Keynesian in spirit, but not letter. And in tune with his view that economists in general had become too wedded to static economic models and failed their obligation to predict and explain, he frequently cited this quotation from Keynes:

“Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past, the ocean is flat again.”