Thoughts on the Fort MacMurray Fire and a Basic Income

I have something to add to the public discourse over the Fort MacMurray fire. It is often best to add something after the frenzy of the initial event has died down a bit, but this is getting a bit old. I have been very busy since the Basic Income Canada Network (BICN) congress in Winnipeg in May.

I attended it and have been writing up my notes and impressions about it and delivered a couple of talks on it. I have helped organize the frenzy of activities which have developed from the latest wave of interest in a Basic Income, also called Guaranteed Annual Income, Guaranteed Livable Income, and so on.

There may be more connection between the two topics than it first seems. There is not much reason for a large urban area like ‘Fort Mac’ to exist way out in the north Alberta Taiga. It is, or was, there to service the massive industrial complex built to extract a so called “synthetic crude” from the great tar sands deposits of the Athabasca country.

a colossal waste

The whole thing never made the slightest economic sense, for reasons I will get into in more detail. The stuff produced did not even yield gasoline; it was much better for refining into heavy fuel oil. For that a huge area had to be ripped up, which may not have been some of the most valuable land around, but which provided a living for some mostly aboriginal hunters, trappers, fishers, and loggers.

The huge forest fire which engulfed the area last month was predictable. It had nothing to do with the global warming nonsense, of course. Every kind of natural disaster is blamed on that now, and the connection made to the extra ‘carbon’ the synthetic crude is putting into the air and supposedly altering whatever it is exactly that is supposed to be being altered by “burning fossil fuels”.

You do not need to create a panic about ‘climate’ whatever or other in order to make a case for stopping foolish projects like the tar sands. Resources should be used as lightly as possible. Every effort should be made to “leave it in the ground”, and to leave the ground alone.

Even the Basic Income people have pretty much got that clear. There is no magic mountain of ‘resources’ which can be monetized in order to fund a Basic Income, so we do not have to grab the billionaires by the horns and make them start paying taxes. The flexible BI/GLI concept is now a way to convince people to consume less and thus place less demand on mother earth.

This lead to an lively debate with some other BICN 2016 congress participants in a university dorm in Winnipeg as we were watching TV news about the Fort Mac fire. If I could not entirely convince them that “climate change” was a load of hooey, at least they would agree that it was something which could be legitimately disputed and so should not be used as an argument for a BI.

The argument for minimizing the use of resources can be made without the climate crap, and BI really would be useful in achieving that. If everyone’s needs are assured, and the hold of capitalism over people’s lives weakened, people can be content to work less, consume less, create less waste, thus less “throughput” in the economy, and we will all be happier. Limited resources can be saved for the future.

As well, the justification for nonsense like the ‘tar sands’ will disappear. The new and nominally socialist government of the province of Alberta has no choice but to keep it going even after the fall in world oil prices rendered it even more economically nonviable that it was with high oil prices.

The Alberta government sells oil, which belongs to the people of Alberta, to the rest of the world for a small fraction of the world price. For decades, the oil has been practically given away because otherwise all that revenue will make government too self sufficient and apt to act in the public interest. That is just awful according to neo-liberal dogma. Yet Edmonton has still taken in enough money during times of good oil prices to buy off serious dissent and dissatisfaction.

In Oilberta, all sorts of unjustified projects are built to create jobs, but the old, disabled, and other ‘welfarians’ are treated with exceptional contempt, even by Canadian standards. We cannot put all this revenue into a sovereign wealth fund for when all this oil runs out; that would be socialism. Instead, we must use it to subsidize totally nonviable industries which ‘create jobs’, especially the tar sands plants.

Political scientists will talk about the ‘resource curse’. An economy based on extracting resources makes people stupid. It is too easy. It creates currency exchange and labor market problems which ruin more valuable industries. This explains a lot of Canada’s problem, especially in the age of ‘neo-liberalism’.

But if resource based economies make people stupid, the oil economy has made Albertans absolutely retarded. They have a one industry economy, an industry which totally dominates their society, and they have thought of themselves as a bastion of ‘free enterprise’. They bought into ‘neoliberalism’ well before it became fashionable everywhere else.

undeserving of pity

I grew up in Alberta. I have not lived there for awhile. Now that this hallucination has partly receded, to a point they have voted in the NDP, I plan to go back for a visit soon.

But imagine how I feel when I see people in Toronto out collecting money for disaster relief in Fort MacMurray. Next to the usual bin for food bank donations at the supermarket, is one collecting donations for the stricken residents of Fort Mac, Alberta. This in Toronto, which the Alberta ideology demonizes as Sodom by lake Ontario; as the cause of almost everything that goes wrong in Alberta.

I lived in Fort Mac for a few months forty years ago now. Then and now, the city as a whole is worthy of no special consideration. The old economy of river transport and traditional livelihoods was vanishing then, when the city had a quarter of the population. I am sure it is now utterly extinguished by the resource complex economy and all that goes with it.

I could tell some tales of the summer of 1976 that I spend in Fort Mac, experiencing 23 hour days in a city where the woods came right up to the edge of carburbs just like those of Calgary or the ‘905’ belt around Toronto. Unlike most people who wandered in and out of Fort Mac, I was not there looking for high paid work which was actually in short supply there. I ended up there purely by chance.

I was living in Edmonton. I was frustrated with getting the social services system and Manpower Canada to understand my problem with finding employment; what is now called a ‘hidden disability’. This was back when government actually tried to find you a job. Someone had the bright idea that I should go up to Fort Mac and take a course in heavy equipment operation.

So I spent a few weeks rolling massive bulldozers around on a patch of shattered forest. The instructors admitted I was very good at controlling the machines and using them to move huge amounts of dirt around. It was lots of fun. However, I had a lot of trouble understanding just where they wanted me to move the dirt to. Eventually I got dropped from the course but they had to let me stay in the dormitory for a little while.

After a stretch of washing dishes in a Chinese restaurant, I fell back into my old standby, driving cabs. This was something I was physically and mentally able to do. I pushed a hack in several cities when I was young, but Fort Mac was a unique experience.

They did not even use meters, just a zone system. The run up Muffler alley to the Great Canadian Oil Sands (GCOS) Plant was $30 even in those days. I was told right off never to take a fare out to the nearby town of Anzac, which at the time had the highest murder rate in the country, and only a few hundred people.

I became involved in a kind of war between two Metis clans who were fighting for control of the taxi business in Fort Mac at the time. But there was a deeper conflict between the old timers and the new comers. My sympathies were with the old town. I soon came to detest the camp laborers who came up there for the booze and whores, and the skilled operators, there for the money and contemptuous of anyone not just like them.

I took the guided tour of the GCOS plant, the pilot for all the other oil sands plants which were being built then. A huge amount of energy went into getting one barrel of rather low quality “synthetic crude” out of several tons of this gooey sand. The guide was so proud of the cleverness of the process.

But he admitted there was no way the process could be profitable any time in the near future. It depended on constant government subsidy. So what was the point? Did someone expect the supply of regular oil to run out anytime soon? He assumed that someone thought it would become profitable in the future.

This was the time when the ‘oil shock’ was still being felt, when the Petroleum pumping countries decided to jack up the price. But also, though it did not get into the media much, students of energy economics knew that the oil supply had peaked and was in permanent decline, and new energy sources would eventually be required.

Even then, there were more efficient ways of producing motor fuels than the oil sands. I talked to the guide briefly about coal gasification, which had been around for awhile and was quite cheap where used. He knew nothing about that, or biofuels, or hydrogen fuel, all of which were under development at the time. He was just a pitch man for tar sands.

I grew tired of Fort Mac and returned to Calgary. I occasionally read news clips about it, usually about another forest fire threatening the town. This is Fort Mac’s perpetual problem, as it is located in the bush with no farming belt around it. I think the town has been partially evacuated a couple of times before. When I was there a brush fire was put out quickly before it could spread.

This latest fire was a disaster waiting to happen and has nothing to do with ‘climate warming ‘ or whatever they are calling it now. It seems to have been caused by a badly maintained power line shorting out. The city was again saved from being burned down. But what if it hadn’t?

the resource curse

The town and the industrial complex around it are symbols of the distortions and misallocations brought about by high capitalism. I cannot even pity someone who thinks capitalism is a logical or efficient system. It is about generating profits by creating capital flows, even if the flows produce nothing except waste and harm.

Megacorporations have long known how to maneuver governments at all levels into blackmail deals in which public money subsidizes industries which are not otherwise viable, in order to create ‘jobs’. The tar sands, oh, pardon me, PR department, the OIL sands, create a lot of jobs and profits for ancillary businesses.

The problem with this is the classic case of ‘Dutch Disease’, in which these activities create inflation and other market distortions which pushes out other industries which would be more socially beneficial in the long run. Even other resource industries like coal and logging get second call on available high quality labor and services, in deference to the petroleum complex.

The truth about Alberta’s economy is that it is overdeveloped due to unstable resource businesses. It has always had the problem of being isolated from any potential markets. Its real strong points are ranching and farming, and to an extent tourism and logging, but governments in Alberta seem obsessed with driving these down.

So the Alberta economy has been made totally dependent on the oil industry. There is not much the Alberta NDP can do about it. It is trapped, or thinks it is trapped. They accept without question, as does almost everyone in Alberta, the neoliberal economic dogma that if they raised taxes on the wealth being pumped out of the province for peanuts, the oil companies will simply shut in production and the economy will collapse.

This is actually not likely because the oil companies need that gas. And it is mostly gas; there is not really that much oil in Alberta. The oil and gas cartels especially need it since the collapse of the fracking boom in the United States, another boondoggle which was never viable in the long term. Much of the United States remains totally dependent on Alberta gas.

Logically, Alberta could charge a fair price for its gas, but ideologically that is impossible. It will be a big enough fight to establish a progressive income tax system which could actually raise the revenues needed to run public services. But it is alright to subsidize industries in order to create ‘jobs’.

A problem with the oil and gas industry is that it really does not need many people. So the great wealth created by it has to go into creating make-work to keep enough people busy and able to spend to keep the retail economy going. The tar sands need more people to run it, and build all the infrastructure, and it is partly a make work-project. The province cannot just shut it down without dire economic consequences.

Now, some nimbusses on the rightward side of the Basic Income movement might see the solution as using oil and gas revenues to provide a Basic Income to all Albertans. This would stabilize the situation in the short term, but does not solve the underlying problem of an economy totally dependent on an unstable and depreciating asset.

The oil and gas is not going to run out. It is said that the stone age did not end because they ran out of stone. The petroleum age will not end because we will run out of petroleum. There is still plenty of it around and long before it starts to become really hard to get, we will have all switched to something else. The process is already underway, if not fast enough to suit the ‘carbon emissions’ dingbats.

Basic Income as a solution

A Basic Income, better called a Guaranteed Livable Income, could make it much less complicated to switch away from the tar sands to something more viable. There is not going to be any economy in Alberta without some government planning and incubation of new industries. This will arouse intense opposition from neoliberal screwheads, funded and egged on by the oil and gas biz who like things as they are.

It would be interesting to see how the kind of ‘work, make money, buy house’ krunks so common in Alberta, and especially obdurate in Fort Mac when I was there, will react to an income guarantee. Some discussions at the Winnipeg conference noted how Basic Income programs are much less stigmatizing than ‘welfare ‘ programs, and people are much more willing to avail themselves of them.

So an income guarantee could give Alberta a way out. The gooey grit steaming business could be shut down and the whole city of Fort MacMurray boarded up, with home owners compensated so they can find housing elsewhere.

The proud homeowners of the north side of Fort Mac will be sitting on worthless real estate in twenty years anyway, just like residents of dozens of ‘boom towns’ in Alberta once the oil and gas industry moves on. Ask an Albertan about boom towns, and boom bust cycles.

Alberta still has a low production cost for conventional oil and gas, and if it started to manage its economy sensibly this industry could carry it over until it can get something else going. I do not think it is possible under the trade rules Canada has locked itself into, for them to make the industry public; the most sensible solution.

It is a bit late in the game to start a Norway style sovereign wealth fund with the oil and gas revenue. That was what the Heritage trust fund was supposed to be about back in Lougheed’s time, but that got shut down. Alberta has completely wasted every opportunity to use the present easy wealth to secure the future. But countries who find themselves with resource windfalls rarely do so.

This is why the idea of many income guarantee advocates, of funding such a program with resource revenues, is so stupid. Resources makes stupid. It really would be better, in most cases, to just leave it in the ground and focus on creating a stable economy with a base of import replacing manufacturing.

That is hard to do under the global system of capitalism. It requires intelligent planning. It requires an intelligent population, the antithesis of a resource exploiting society and economy. I do like to think that Albertans will be motivated to begin to regrow some brain wrinkles by the pain to be experienced when the petroleum age finally ends for them.

City without a future

Meanwhile, I do not think Fort MacMurrayans are worthy recipients of the charity of downtown Torontonians, or anyone else. For one thing, there has been a remarkable lack of emergency planning and other foresight. Why was an adequate fire barrier never built around the town, and proper construction mandated out of fire resistant materials. They seem to have never heard of brick.

Alberta should be well enough able to look after its own. Yet most of “The Fort’s” population has not returned. It cannot seem to get local services and a local economy going again. All the “transients”, in Fort Mac’s lovely expression for people who come there for work, went back to places like Newfoundland and Hamilton, Ontario. They are no longer there to work, spend money, and pay rent.

The local economy had been winding down along with the goo steaming business before the fire. If it had been in full roar when the fire happened, the economy would have come back quickly. The fire just disguised the underlying downturn, which may have been the purpose of all he hysterical coverage. Fort Mac is unlikely to come back, unless there is a major world upheaval that drives up the price of oil again.

It is interesting to think of how the Alberta government will unwind the whole mess over the next few years. The tar sands have been totally a make work, and make empty profits off useless economic activity, kind of deal. The opposition to just shutting it all down will be huge. But there is no longer the money to keep it pumped up.

Many rugged individualists will suddenly be whining for government support to keep themselves afloat until they can transition to something else. The money for such transitions will be very scarce as well. The government will finally have to scrap this “Alberta advantage” nonsense and start taxing surplus wealth.

Alberta Disadvantage

Becoming a tax haven never gave Alberta the slightest advantage. Like other tax haven countries, the money just passed through on its way elsewhere. Local businesses did not use the extra money and freedom given by a lack of taxes to expand or innovate or create anything. They never do.

Alberta would be a good place to have a start at what has been shown to really create initiative and innovation; good systems of economic and social support. Government has always been the big source of innovation start up capital, and support for initiating new industries. Capitalism never has been; it just moves in when something becomes worth grabbing up.

People become innovators when the basic support is there; when they know that if they fail they will not lose everything, they can start again. A stable economy and stable consumer demand is created when everybody has a basic security which can only be provided by government wealth redistribution.

So there is a good argument to start a Guaranteed Livable Income in Alberta, not funded by oil revenues, or a sales tax, or any other regressive tax, but on wealth. That is, income taxes, property taxes, financial transaction taxes, and so on. You might now see why it is wise for the Alberta NDP to not increase oil royalties right away.

It might be a good idea to not jack up wealth taxes right away, but give legitimate, real jobs and service providing businesses, a chance to adjust first. This would mean deficit financial, Keynesian countercyclical budgeting. Things that are downright socialist!

Starting a Guaranteed Livable Income at this time would be a very good move. But the province would have a very hard time doing that on its own. The federal government would have to be convinced to assist, or shamed into it. There are those in the Basic Income advocates universe who think a BI may be started in one province and then the others would be forced to go along. That is possible, but there are huge problems with it that are too much to discuss here.

Alberta will have to break from its traditional “get out of here” treatment of economically surplus people. The idea that anything “social” is treasonous must be challenged. Enough wealth redistribution has to occur to prevent the near collapse of the local economy that occurred a the bottom end of previous bust cycles.

a future for Alberta

Alberta will have a long road to travel to repair the mistakes of the previous three generations. Resource industries have made them stupid and mean minded. But there has always been a substrate of people with a more progressive mindset. They are throwbacks from an earlier era in Alberta, the age of the progressive and cooperative movements.

And an advantage of drawing in so many well educated people from elsewhere is that they often bring more progressive attitudes with them. This is what put the NDP into office this time. In previous bust cycles the support for more progressive alternatives has grown, but has met with strong suppression. There is an elite in Alberta like anywhere else and the Alberta elite is especially noted for its determination not to let any opposition get a chance to get started. But opposition usually fades when a new boom cycle starts.

But this time the ruling elite of Alberta has become so stupid and extreme as to be totally incapable of governing. Some of them even think Preston Manning is a socialist. Thus, Ms. Notley’s government will likely be around for awhile. She will have the opportunity to put Alberta on a new path, after about eighty years of the Social Credit/hard “C” conservative regime. They were around longer than the Bolshevists were in command of Russia. They fell for similar reasons.

The Russians spent about a decade in confusion before finding a new path after the fall of an old regime and Alberta likely will too. Alberta should be able to rebuild itself on a more solid footing. However, I do not think Fort Mac is ever going to recover. At present it is not possible to start dismantling that whole complex way up in the bush, but in about another decade it will be.

The world is full of monuments standing in a wilderness, to the grandiosity of a previous age, and a commitment to a social model that had no future. Fort MacMurray and the oil sands complex will be another one.