Joel Kotkin: Danielle Smith's pro-growth rebellion a sign of things to come

An oil pumpjack is seen in a canola field north of Camrose, Alta.

Canada, even more than the United States, stands at the edge of a great historic opportunity. As worldwide demand for raw materials, including those needed for the much ballyhooed “ energy transition ,” expands, the country could profit massively from its remarkable array of resources.

Yet, as the recent conflict between Alberta Premier Danielle Smith and the current federal government shows, Canada, like the United States, is not of one mind about its economic future. Recently, Smith told Prime Minister Justin Trudeau that she will “fight” for the province’s oil industry , which accounts for upwards of 30 per cent of the province’s economy. Attempts to push back on Ottawa’s green agenda could also foster something of a constitutional crisis .

This is bigger than merely a battle between one province and the federal government; it’s a divide that could roil Canadian politics, much as is occurring in other resource-rich countries like Australia and the U.S. This reflects competing visions of the future: one that seeks to expand the national economy by tapping its extraordinary agricultural and mineral wealth, and another that seeks to curb any expansion of resource development.

In pure economic terms, the world needs what Canada has, including commodities that it could produce with far better environmental control than, say, Indonesia, the Congo or Bolivia. Eschewing the resource sector would pose a fundamental problem for a country that has long depended on resources for its economic prosperity.

True, Canada produces some high-quality media, but its output of filmed entertainment is dwarfed by the U.S., China, India and the United Kingdom, while in technology products, it is hardly a dominant player . Sorry, Justin, but good looks are not your country’s big export ; instead, it’s the great green devil — oil and gas — along with cars, another hated product, and other raw materials. Canada is also the world’s fifth-largest exporter of agricultural products .

Like fossil fuels, agriculture has also become a target of environmentalists, who worry about farming’s impact on climate change. Yet not everything about “net-zero” goals may be bad for Canada. Canada could see much growth in the minerals demanded by net-zero requirements, including rare earth metals, cobalt and, perhaps most importantly, uranium.

The biggest obstacle, ironically, may prove to be the environmentalists, who seem willing to restrict mining and production in developed countries, even though it leads to massive exploitation of land and people in the far less eco-friendly developing world.

Many western elites, citing climate change, actually see degrowth as the future, an approach likely to make most people poorer. In contrast, a growth strategy could make Canada a richer and more egalitarian country, while providing developing countries with the goods they need to grow.

Our ruling classes seem to be slow to realize that the future lies not in the long developed countries, but In booming places like the Gulf states and India . They represent ideal markets for Canada’s bounty of minerals, food, energy and lumber.

This division about the economic future threatens to drive a spike through Canadian politics. This has already happened in the United States, with startling results. Virtually all the “greenest” states — including my own state of California — have rushed headlong toward net zero. These policies have led to high energy prices, and tend to chase industry out while hurting the poor and working class the most.

California, like Canada, is rich in energy and agriculture, yet seems determined to squash these industries. In the current climate, this is causing something of a fiscal crisis, as over-dependence on tech stocks and falling property prices have reduced government revenues.

The state that boasted a US$100-billion (C$134 billion) surplus just one year ago is now contending with a US$32-billion shortfall , with more deficits likely in the years to come. Gov. Gavin Newsom, a perhaps brighter version of Justin Trudeau, must now either raise taxes, further losing businesses and wealthy individuals, or battle over budget cuts with his allies, powerful public-service unions and well-funded green activists.

These patterns can be seen in other states, which also suffer from high energy prices and growing business flight, as well as migration losses . For example, New York and Illinois lost more net migrants on a per capita basis than California in 2022. In personal income growth last year, however, California led the pack of losers, closely followed by blue states like Massachusetts, Hawaii and New York.

In contrast, the states gaining migrants are overwhelmingly red states like Florida, Texas and Tennessee, which have generally resisted net-zero mandates. These same states are gaining in terms of income growth, with Idaho in the lead, followed closely by Texas, Nevada, Florida, Arkansas, North Carolina and Tennessee. In the coming election, this divide between net-zero states and those choosing another path may prove a consequential political issue.

Canada may see a similar divide in future years, if not between provinces, as we can see with Alberta, but with resource-rich areas including the Atlantic provinces, which are now becoming, in the words of the New York Times , “the next-generation North Sea or Prudhoe Bay,” serving the American northeast.

As the debate over net zero intensifies, we can expect more conflict between states and provinces. The question, both for the U.S. and Canada, is how much latitude the federal structure allows each jurisdiction to operate in ways that are best suited to them.

Unfortunately, both the Trudeau government and the Biden administration seem determined to federalize virtually everything. This sets the stage for a sustained conflict between those embracing the centralist state’s direction and those who do not wish to bow to it. Unless some reasoned compromises are reached, it won’t end well.

National Post