William Watson: Land-locking Alberta’s resources will reduce the wealth of our nation
It’s early February so in my McGill University course in the history of economic doctrines we’ve finally reached Adam Smith’s Wealth of Nations. (What have we been waiting for? Aristotle, Aquinas, Mun, Cantillon, Quesnay, and Hume, to be precise.)
Every time I teach the Wealth of Nations I re-read the passages I’ve assigned, both to refresh my memory but also for the great pleasure of it. The sentences are stately, majestic, powerful. (I imagine Smith developed their rhythm gazing out at the North Sea from his home on the main street of Kirkcaldy, Scotland, watching the waves roll in.) The observations are finely wrought. And Smith’s intelligence and wit shine through in almost every sentence. How much of what we read these days will still be worth reading 240 years from now?
The book starts off, of course, by asserting that what makes a country rich is not silver or gold, but high productivity, which Smith terms “skill, dexterity and judgment.” In some societies, he writes on the great book’s very first page, productivity is so high that some citizens “do not labour at all, many of whom consume the produce of ten times, frequently of a hundred times more labour than the greater part of those who work.” Shades of Bernie Sanders, I suggested to my class this week. Who do you suppose those non-working high consumers are? The 18th century’s “one per cent.”
In fact, on this pass through the first three chapters of Smith, I spent more time thinking about land-locked Alberta and its current energy pickle than about the Vermont senator running for president on a platform of “revolution.” The key to high productivity, Smith says, is specialization, which he calls the “division of labour.” But (another famous phrase, actually the title of his third chapter) “the division of labour is limited by the extent of the market.”
What determines the extent of the market?
People’s ability to pay for your product but also your ability to get your product to them. The larger the number of people you can reach, the more profitable can be any given investment in production.
In Smith’s day, the 1770s, there were basically two transport choices for getting goods to market: water or animal (whether human, horse, ox, mule or other). To get four tons of goods from London to Edinburgh would take: one wagon (or “waggon”), two drivers, eight horses and six weeks. In the same time, a ship attended by six or eight men could move 200 tons. Little wonder most cities and towns were situated by the sea or on big, easily navigable rivers. But the quality of the river wasn’t the only consideration. How many jurisdictions bordered it was also crucial “because it is always in the power of the nations who possess that other territory to obstruct the communication between the upper country and the sea. The navigation of the Danube is of very little use to the different states of Bavaria, Austria and Hungary, in comparison of what it would be if any of them possessed the whole of its course till it falls into the Black Sea.” That’s what made me think of Alberta.
The word “pipeline” naturally does not appear in the Wealth of Nations. Pipelines weren’t invented until the following century. But what the Danube is to ordinary shipping, pipelines now are to the delivery of oil and gas. Albertans reading this passage in Smith might well react that life would be a lot easier if their province, as Smith might have put it, “possessed the whole of any pipeline’s course till it falls into salt water.” That way they wouldn’t have to deal with hostile or indifferent populations apparently willing to hold up—in both the delay and the highwayman senses of that word—delivery of Alberta’s energy wealth to willing buyers outside Canada.
It seems inconceivable that a country sitting on one of the world’s largest reserves of energy could be incapable of getting it to market in the safest and most efficient way available. Yet that appears to be where we are right now.
I wish people who view that situation with equanimity would give Smith a read and then spend a few moments reflecting on how land-locking Alberta’s resources will diminish the wealth of our nation.