Mulcair needs a good lesson on income distribution

It’s time for a reality check

There’s an interesting debate going on within Canadian energy circles these days, centred on whether it’s better to ignore federal NDP Leader Thomas Mulcair’s divisive and ill-informed remarks regarding the oilpatch or to continue to point out the gaps in his thinking.

The logic behind ignoring Mulcair is that his commentary is so “out there” it doesn’t merit attention.

On the other hand, for an industry accused of not being very forthcoming on the communication front, those on the side of hanging him out and exposing his knowledge gaps is necessary.

This columnist believes the latter approach is the right one.

Mulcair is a great pretender. His comments show him as neither an economist nor a federalist.

And it’s from an economic perspective that the importance of strong energy sector needs to be explained.

Most students of economics — early on in their studies — examine the theory of income distribution. It’s this concept that Mulcair seems to need explained.

In simple terms, Mulcair is choosing to ignore the fact the energy sector is not just an economic engine of the country, but that the way it functions is that it facilitates the distribution of income across the country — to the benefit of all.

Economic studies and papers have shown there is a relationship between income distribution and aggregate economic activity.

In simple terms, the greater the economic activity in a jurisdiction, the better distributed the income is throughout that jurisdiction.

In other words, what happens in the energy sector is good for the country because it creates jobs, income and more importantly for someone with NDP stripes, tax revenue.

Late last month, Mulcair made it to the Suncor mining site for two hours — presumably so he could say he checked off that box on the to-do list.

Had he spent more time in northeastern Alberta — as did TV Tokyo, which was touring the oilsands at the same time — he would have seen examples of how the energy sector benefits his home province.

He might have travelled on a bus made by Diversified, a Quebec company that supplies the hundreds of buses that shuttle oilsands workers to and from job sites on a daily basis.

Had he walked through Devon Canada’s Jackfish site, he would have learned the steel weaving through the company’s in situ operations came from Quebec. He would have seen steel tanks stamped with blue ink saying they were made in Toronto and he would have seen massive lodgings in the process of being built by British Columbia’s Britco, with the modules coming from the interior of that province.

And that’s only one project.

Nor does it take into account the number of flights that criss-cross the country, bringing workers in from coast to coast, with more flights being added on a monthly basis.

Let’s look at it another way.

Last month, the unemployment rate in Alberta was 4.5 per cent. At 7.8 per cent, it was largely unchanged in the past 12 months in both Quebec and Ontario, while Newfoundland posted a 12 per cent level of unemployment.

Imagine what it would be like without the energyrelated manufacturing activity in both Quebec and Ontario — and the lack of energy-related work in Newfoundland and other Maritime provinces.

As Premier Alison Redford said at a news conference Wednesday, Alberta is the economic engine of the country.

“We are leading growth in the country and attracting investment at a tremendous rate and seeing tremendous opportunity across this country with respect to manufacturing and jobs. For us to be able to grow the economy matters a lot. One of the things often overlooked in that discussion (regarding a high dollar) is that we are also an exporting province and a high dollar isn’t necessarily advantageous to us, either,” she said.

Redford also noted the large size of the contingent from Ontario’s Department of Economic Development attending the Global Petroleum Show, with companies and small businesses looking for business and reinforcing the contacts they already have.

Isn’t that where Mulcair is fishing for votes? Would he rather be held responsible for killing economic activity — and causing Ontario more problems than it already has? I doubt it.

Were it not for a strong energy sector, those unemployment numbers would be higher, accompanied by a corresponding drop in income tax revenue, not to mention the effect that would be felt in everything from retail spending to housing prices.

Mulcair should also understand, as pointed out by a recent report released by CIBC Economics, Ontario and Quebec are most vulnerable to interest rate fluctuations by virtue of the fact their economies are more dependent on interest-sensitive industries than is Alberta’s.

By extension, then, it means Alberta’s economic strength and resource weighting is helping to keep interest rates low.

Were the Bank of Canada to decide to boost interest rates, it would have the added impact of increasing the value of the loonie, which would hit those provinces harder.

It’s time for Mulcair to have an economic reality check. Or better yet, a tutorial. Any volunteers?