ALBERTANS' CAN-DO ADVANTAGE.

Many observers mistakenly assume Alberta's greatest resource is oil and gas. In fact, its most important resource is its people. Its entrepreneurial and skilled population, whether in the private or public sector, underpins the province's prosperity.

Before 1900, it was not easy for newcomers to Alberta. Winters were cold and majestic, infrastructure scant. At Calgary's Heritage Park, with its model “soddies” (houses made of sod with dirt floors and primitive heating), you get a good sense of how tough settlers had to be.

At the turn of the 20th century, however, large-scale immigration and railway expansion brought robust export growth, especially for wheat and cattle. A natural gas industry began to develop in 1909, thanks to two entrepreneurs, Archibald Dingman and Eugene Coste, who sold the product to Ontario and the U.S.

With economic growth, Alberta's population grew from 75,000 in 1905 to 470,000 by 1914. Even before the Leduc oil discovery of 1947, Alberta had already become Canada's fourth-largest province, with close to 900,000 inhabitants. Oil and gas discoveries led to further population growth. By 1975, after OPEC had pushed up world oil prices, Alberta's population doubled to 1.8 million, making it the fastest growing province along with British Columbia. Today, there are more than four million Albertans.

Boosting demand for well-paid skilled workers, the high value-added resource sector played a critical role in Alberta's development, especially after 1947. Per capita income grew from 95 per cent of the Canadian average in 1950 to 123 per cent by 2016, the highest among the provinces.

But the resource industry contributed to Alberta's economic prosperity in another way that has been far less understood. The boom-bust nature of commodity markets and the economies that depend on them created a much more risk-oriented, entrepreneurial workforce. As the saying goes, “when the going gets tough, the tough get going.” Over the last few decades, Alberta's business entry and exit rates have typically been the highest among all provinces. This dynamism has forced Albertans to be innovative, as evidence in the current recovery from a lock-downed economy.

This year is looking much brighter than last, with a recovery in oil prices and production getting back to pre-pandemic levels. Agriculture, mining and forestry prices have reached new highs and service industries are beginning to recover. Despite difficult economic times since 2014, Alberta is starting to see light at the end of tunnel with an expected growth rate of six per cent this year, which is highest, with B.C., among the provinces.

That's just the short run, however. Many Albertans are worried about the longer term, as the world shifts towards low-carbon sources of energy. But that shift will not doom the Alberta economy. Its people will again be its main strength, as Albertans discover and take up new opportunities.

Adapting to change requires that labour and capital markets be flexible. Alberta has attracted hundreds of thousands of immigrants from other provinces and abroad. It has created first-class colleges and universities and a personal and corporate tax system that helps attract both investors and immigrants.

With rapid oil sands development after 2000, Alberta's non-energy-related businesses have had to struggle to be cost-competitive. Labour compensation and land prices were bid up, making it more difficult for the economy to diversify. That won't be the case in future, however. As energy demands shift from oil and gas, other sectors have an opportunity to pick up the slack, including agriculture, forestry, minerals, logistics and transportation, advanced manufacturing, financial intermediation, tourism and high-tech.

In typical Alberta fashion, diversification is continuing even as the pandemic proceeds. Alberta has not been viewed as having a strong innovative ecosystem but that is already changing. New tech investment is coming to the province, including global IT player, Infosys, and Vancouver-based mCloud Technologies. Calgary startup Benevity is now officially a unicorn, with a $1.1 billion valuation after a private equity deal. Overall, venture capital investments doubled between 2019 and 2020.

More good news: CP Rail, headquartered in Calgary, announced its blockbuster $25 billion merger with Kansas City Southern, making it the first railroad to span Canada, the U.S. and Mexico (if regulators approve). Last June, Alberta powerhouse ATCO announced it has been selected to upgrade and operate Puerto Rico's electric system. Several service and financial companies have been lured by Alberta's low corporate income tax rate, soon to be lowest in North America if Joe Biden has his way.

Given Alberta's energy competence, it's not surprising that profitable opportunities are flourishing. Greengate will be building the largest solar farm in Canada. New investments are taking place in hydrogen, likely a critical energy source in the low-carbon future. Petrochemical producers and mining companies are also eyeing Alberta for investments.

In all this, Alberta's government role is to support this risk-taking and innovative economy, not obstruct it. Politicians and bureaucracies contribute to this entrepreneurial climate by promoting effective public services at minimal tax costs. Whether the federal government will be as supportive is an open question.

Alberta's success is due to its open-for-business public policies, a well-educated population, good infrastructure and a high standard of living. The economy will continue to evolve but, as the past 150 years have shown, Albertans are up to any challenge.