Alberta and Quebec can learn from each other

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Even Alberta economists need to get out of their home province and stomp around the rest of the country now and then. And thanks to a bit of work/vacation, I had the chance to do this very thing. Three fantastic days in Montreal last week were a great way to wrap up summer of 2012. Through the people I met and talked to, along with simply keeping my eyes open, I learned a thing or two about our sister province.

While some people are swift to highlight the differences between Quebec and Alberta, the two actually have plenty in common.

Each province’s economy is very different but comparisons can be found in the economic aspirations of each. Both are trying to figure out how to compete and succeed in a shifting global economy.

Walking around Montreal last week, one thing jumped out: Quebec is in the middle of a very fiercely fought provincial election. And it’s getting a bit nasty. Plenty of campaign signs punctuate the otherwise beautiful streetscapes in Montreal – and a lot of them have been viciously defaced. Three political parties are vying to lead the province, and it appears the fight will be a close one. In this province, it’s all politics all the time.

Economically, Quebec is facing big challenges. You don’t notice it much in downtown Montreal where throngs of tourists and laid-back Montrealers stroll the main shopping districts, jockeying for tables on the patios and soaking up the sunshine. But the province’s manufacturing sector continues to struggle, particularly traditional manufacturing. (There are plenty of examples of niche and smaller manufacturers that are actually doing very well). The high Canadian dollar, soft export markets to the U.S., stiff competition from Asia, and high labour costs are weighing things down for Central Canada.

This stands in sharp contrast with Alberta, where energy prices – volatility aside – continue to supercharge the economy. Alberta’s unemployment rate is 4.6 per cent; in Quebec it’s 7.6 per cent.

But the two provinces have much in common along another front: Each is attempting to get its public finances in order. Governments in both provinces are facing deficits, and rising health-care and education costs are always nipping at their heels. This has been especially poignant for Quebec this year. University student protests against rising tuition fees have led to a spring and summer full of marching and banging on pots. (Although the latest strike on Aug. 22 was a whimper. It seems that even angry students decided that a beverage on the patio was preferable to waving a placard in the heat.)

In Alberta, we desperately hope energy prices will stay high and resource royalties will paper over the enormous gap between what we spend on government programs and what we pay in taxes. Most years this game works in our favour. But not always.

In Quebec, even a 9.5-per-cent provincial sales tax (on top of the 5-per-cent GST) and much higher income taxes are not enough to cover the gap. They haven’t been for a long time and the rising debt level of the provincial government is a very serious problem.

Saddest of all, La Belle Province does not have resource revenues like we do in Wild Rose Country to bridge the deficit gap. So debt levels continue their unceasing climb higher. Something eventually has to give.

As a born-and-raised Albertan – Edmonton my home town, Calgary my current address – I love nothing more than the energy, optimism and enthusiasm of the province. Its cities are growing and maturing, and it has the potential to lead the country in a variety of policy issues. We have lessons for Quebec and the rest of the country.

But I have to admit: Montreal is a real city. It doesn’t have to try to impress anyone – it’s comfortable in its own skin. Residents understand the importance of great public spaces and attractive design. Whatever economic challenges Montreal is facing at the moment, it will come through them (if not a bit battered and bruised). It will continue to be a great global city, and Alberta can learn from that.

Merci beaucoup, Montreal!

Troy Media Columnist Todd Hirsch is senior economist with ATB Financial. His writing can be found at www.troymedia.com.

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