Posts tagged financial crisis

Alberta’s royalties, conventional wisdom and conflicts of interest.

By admin on February 25, 2010
This entry is filed under Media, Politics and tagged , , , , , , .View Comments

Are Albertans getting a fair royalty rate for the resources we own?

It’s a reasonable question and one that has dogged Ed Stelmach since 2007 when he “initiated a public review of the province’s royalty and tax regime to ensure Albertans are receiving a fair share from energy development through royalties, taxes and fees.”

An important reason why Ed seems to be hated by much of Calgary’s oil and gas sector is the conventional wisdom (a.k.a. convenient myth, for some opportunists) that this royalty review drove away investment from the province and is primarily responsible for our continued economic woes.  The real blow to Alberta’s “one sector economy” occurred not long after the review when the global market for oil became extremely volatile and the price fell from $142 to $34 abarrel as the global finance industry melted down in the fall of 2008. The price eventually stabilized around $65-75 after the stock market began to recover last March.

It was unlucky political timing for a new Premier having difficulty articulating a vision for Alberta’s future, but even worse for the thousands of Albertans that lost their jobs as a result.

File:Brent Spot monthly.svg

Brent barrel petroleum spot prices, May 1987 – March 2009

Last year’s tough economic times affected Alberta’s entire economy and this year’s $4.7 billion deficit is strong evidence that these circumstances endure. But even with the price volatility ushered in by the greatest financial collapse in 70 years, the question of whether Albertans are getting their fair share for the resources we own remains a reasonable, albeit limiting, one. I would prefer to see us asking how our government can act as more responsible and effective steward of our natural resources, our climate and Alberta’s environment. We also need to look at how to reduce the province’s ridiculous over-reliance on variable resource revenues and make large strategic investments to our post-secondary education system to help diversify our economy, (the exact opposite approach of the 2.7 per cent cut we saw in budget 2010).

Bearing all this in mind, yesterday the Edmonton Journal reported that:

Alberta least competitive in oil and gas: U of C report

EDMONTON — Alberta is dead last in terms of competitiveness for oil and gas development and should drop its current royalty regime, says a University of Calgary professor.

Jack Mintz, director of the School for Public Policy, ranked five provinces plus Texas for the ability of their tax and royalty structures to attract investment, and found Alberta’s current royalty regime “creates a burden on investment that is twice as high on oil and gas” compared with other sectors in the economy.

Interesting findings. Here’s the PDF.

Although the comment is now removed from edmontonjournal.com website, the following was pasted from a Forbes.com database of board of directors’ compensation disclosed by publicly traded companies:

Director Imperial Oil

57 Years Old
Jack M. Mintz, Palmer Chair in Public Policy for the University of Calgary. President and chief executive officer, The C.D. Howe Institute (public policy institute) and professor, Joseph L. Rotman School of Management, University of Toronto.

Director Compensation (Imperial Oil) for 2008
Fees earned or paid in cash $69,000.00
Stock awards $138,200.00
Option awards (in $) $0.00
Non-equity incentive plan compensation $0.00
Change in pension value and nondisqualified compensation earnings $0.00
All other compensation $0.00
Total Compensation $207,200.00

Serving on Imperial Oil’s board of directors, Mr. Mintz has a direct financial stake in the success of a subsidiary of the largest oil company in the world that just happens to have billions invested in projects in Alberta.

The introduction to Jack Mintz’s research states that:

it is crucial to know just how much government tax and royalty policies affect the investment decisions the oil and gas industry makes relative to those of other sectors of the economy.”

If the conflict of interest couldn’t be more glaringly obvious, look no further than imperialoil.ca where you find them crowing: Imperial Oil Foundation gives $1 million to the University of Calgary’s School of Public Policy.

Ridicule is the only appropriate response to this mockery of “public policy research. ”

For the record, I agree it is important to ask how much do “government tax and royalty policies affect the investment decisions the oil and gas industry?”

Without independently funded studies, free of direct financial conflicts of interest on the part of the researcher and the university department undertaking the study, I have little faith in our ability to get a straight answer to this important question… which is another compelling reason for the government to properly fund our post-secondary researchers.

The Journal took some flack on this in the comments for churning out a preliminary story on this naked and seemingly effective, attempt to grab headlines. There are 70 (AHHH!!!) related articles and it looks like most are  churnalism.

Ok. Deep breath.

Can we please all work together and put in a little more effort to ensure that we aren’t being spoon fed bullshit?

K thx.

Where to cut?

By admin on November 11, 2009
This entry is filed under Politics and tagged , , , .View Comments

I laughed out loud while reading Chris Labossiere’s post, “The Fiscal Four Fraud.” He addresses the political opportunism of four Tory MLAs who began to publicly express doubts about the Government of Alberta’s financial management last week.

I made this comment on the post and decided to share it here (with a couple links added):

The real question for these alleged “Fiscal Four” is this: “name the specific areas of the budget you would cut (with the exact numbers, including layoffs) to balance the budget and why?”

Fiscal conservatism is a great claim to make. But judging by recent actions, I’m not certain these four – or much of the rest of the government – are prepared to answer this question.

Where is the honest conversation with Albertans about our provincial finances and where our true priorities lie? If anything, I hope the Fiscal Four’s political opportunism inadvertently leads us to having this conversation.

But before we get that far, let’s first not forget that Alberta’s finances are in better shape than most other jurisdictions in the world. We have no debt and billions in the bank, but we also have a projected $7 billion deficit this year because of short-term thinking.

It’s clear we need to make some changes, but it’s also clear that we have much more leeway than just about everywhere else in the world to address this budgetary problem with a long-term sustainable solution.

Here’s the rub: I don’t think regular Albertans are going to stand for big cuts to health care, education or any of the other big ticket portfolios. And given Ed’s recent promises about taxes, this leaves our government in an impossible place: stuck between those demanding no tax increases & massive cuts and the awakening public, who doesn’t think highly of our government and politicians in general, and who will not tolerate cuts resulting in poor quality health care services or in a sub-par education for their children.

I hope we see some real leadership on these important issues soon. Frankly, I’m surprised more politicians don’t see the real opportunity in this situation.

Apparently they think our biggest problem is how the media reports on our government.  I don’t think Albertans would agree.

Ehrenreich on positive thinking as a system of social control

By admin on November 9, 2009
This entry is filed under Politics and tagged , , , , , .View Comments

Barbara Ehrenreich has a PhD in cell biology, a 40 year career as an activist and an incredibly impressive curriculum vitae as an academic, journalist and writer. Listening to several interviews promoting her new book, including this appearance on The Daily Show, we hear the incredibly griping story of how her battle with breast cancer illuminated the immense problems with the ‘power of positive thinking’-fueled self help industry and the effects of an ideology Jon Stewart calls a “secular religion” on our society.

On one such interview on CBC’s The Current, Ehrenreich explained how the positive thinking ideology infiltrated corporate culture and contributed to the 2008 financial collapse:

Anna Maria Tremonti:

So what are the consequences for a world full of people who believe that everything you decide is true, is true ?

Barbara Ehrenreich:

I think we saw the consequence in 2008 when the huge financial meltdown happened. Because what I got very interested in tracing in this book is how is positive thinking became the corporate culture; how it infiltrated the corporate culture through the motivational speakers who were brought in, through the many many books, motivational books …

It really grew: in the middle of this decade you could be fired for being a negative person.

That meant if if you said, “hey, I’m worried our bank has too much sub-prime [mortgage market] exposure,” [they would say] “hey, that’s negative that’s a downer. Let’s get rid of this person.”

…we created  – around this positive thinking – a workplace culture  where the idea is not to get a job done, so much as it is to flatter and reassure the boss. Just say good things. Never be the bearer of bad news. Never raise a question or a doubt.

Sound familiar?

AMT:

What’s so bad about feeling bad?

BE:

Well, this is an ideology, what can I say? It is an ideology that says everyone should be cheerful and smiley at all times. And if you want to, you can think of it as a brilliant form of social control. If you tell people who are suffering from one thing or another, illness or layoffs or whatever, that they’re really supposed to be happy about it, and that the solution is in their minds anyway, you don’t get a lot of social protest.

Listen to the whole interview: [MP3]

Barbara also blogs at ehrenreich.blogs.com

I leave you with her answer to Jon Stewart’s question about ends vs. means: “I never think delusion is OK.”

What’s the worst that could happen?

By admin on October 23, 2009
This entry is filed under General and tagged , , , , .View Comments

[Start the video at the 16th minute for the story]

There’s a marvelous story in this hour long FRONTLINE documentary called “The Warning” about the woman who warned of the coming financial collapse.

It was the the late 90′s and while media manipulators of internet stocks proclaimed that “Santa Claus arrives early on Wall Street,” the tech bubble continued to inflate.  Alan Greenspan, then chairman of the immensely powerful Federal Reserve, told Brooksley Born, the head of an obscure small federal regulatory agency – the Commodity Futures Trading Commission – that he didn’t think the government should regulate fraud.

As Born challenged Greenspan’s orthodoxy on financial derivatives – the complex toxic financial products now blamed for the sub-prime mortgage meltdown and the resulting  financial collapse of 2008 – the story quotes Greenspan as saying “We’re never going to agree on fraud … you probably think there should be rules against it.”

“He thought the market would figure it out.”

In hindsight it seems as though the faith the public held in their illustrious financial wizard and the wizard held himself in the efficacy of his own magic potions, isn’t much different than that of religious fundamentalists. But to what god were they praying?

B.A.D. 2009: Teetering on the brink of climate bankruptcy

By admin on October 15, 2009
This entry is filed under General and tagged , , , , , .View Comments

I was inspired to sign up and write a post on climate change for Blog Action Day 2009 after reading Alex Abboud‘s excellent post entitled “Embracing Post-Modernism.”

My first consideration of the risks of resource depletion, overpopulation and the need for long term thinking and sustainable practices was over a decade ago in grade 10 high school science class. The problem seemed almost as intuitive, even obvious, as it is today.  But for a middle-class 16 year-old eager to begin driving a car, while living in a resource laden country, the problems never seemed as tangible as they are today.

Looking back, it was as clear then as it is now that exponential  population growth in conjunction with an increasing,  resource gobbling,  standard living were leading us down a dangerous road. Advances in technology, medicine and even in social system systems -  the ascendancy of globalized capitalism and its recent failure, for example – are leading us ever closer to a precipice where tough decisions are necessary.

Some are even likening the willful blindness towards living within our means, or more accurately the lack of action taken to rectify our recent collective awakening to accelerating climate degradation, to a massive global ponzi scheme.

I worry most about the cost of inaction, of maintaining the status quo, given the huge uncertainties and potentially destabilizing global security risks we’re all facing as a result of anthropogenic climate change, which is only one of the environmental threats to our continued security and prosperity.

Last night I heard the latest news in what seems to be a perpetual parade of disconcerting stories about the rapid changes in our climate. CBC is reporting that climate researchers now believe we will have ice free summers at the North Pole in only 10 years.  This will have enormous consequences.

So what can we do?

For starters, myopic sloganeering about “local food” as the panacea for addressing climate change is not the magic cure all some make it out to be – though I wish it were.

I recognize that the growing chasm being awareness and action is the real issue here. Most people now accept that climate change is happening and that it is a major problem but few people seem to have changed their behaviour and lifestyles to minimize their impact. As a human being, I am not without fault here either, but I am trying.

So I agree that lifestyle changes are important. When aggregated they can really make an enormous difference. However,  much of the massive change needed to address our climate bankruptcy can only come from new rules, laws and policies on a systemic level.  To put it another way: this is a problem that governments at all levels, from around the world, must immediately work together to address.

A new age of cooperation is required. Right now. Will the COP15 United Nations climate change conference this December be the turning point?

For the sake future generations, let’s all hope so.

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