We cannot progress into the 21st century and prosper in an ever-evolving economy while stuck in a 20th century mindset, says ATB Financial’s chief economist.
As technologies advance and continue to push new boundaries, people and industries must adapt or face the reality of becoming obsolete, Todd Hirsch told several dozen people who attended the ATB Speaker Series, held Friday, March 29 at the Sundre Elks Hall.
Hirsch, who was also among last year’s guest speakers, discussed several issues that he identified as presenting challenges for Alberta’s future.
Economic growth and GDP
His prediction is that Alberta’s economy will continue to grow and recover, albeit at a much slower rate than in more prosperous periods in the past, which will undoubtedly leave some people feeling frustrated.
When it comes to our economy, there is “one thing that matters a little, and five things that matter a lot,” he said during his presentation.
While an increasing GDP is certainly an indicator of economic health, it does not take into account other crucial factors that play an even more important role in generating economic growth, he said.
“Economists, we like to talk about one thing an awful lot as if it’s the only thing that matters…the rate of growth of the GDP. It’s always the big punchline at the end of the presentation,” he said.
“Yeah, we like to see the economy grow taller. But it doesn’t give much information about the health of our economy,” he said.
“It matters a little bit, but it actually doesn’t matter very much.”
Although Alberta is poised to see its economy grow modestly by a bit more than one per cent over the coming year, he said that increase pales in comparison to "the good ole days" of three to four per cent jumps experienced more than a decade ago.
However, slow growth is better than convulsions caused by contractions that result in recessions like 2015-16, he said, recognizing the reduced pace of recovery and the level of joblessness has left many people feeling impatient and anxious.
Hirsch dove into the five themes he believes will impact how Alberta adapts and grows moving forward.
Pipelines
Probably the most contentious issue facing the province, pipelines have consumed the public and political discourse for the obvious reason that the infrastructure represents a great importance to Alberta. But the process to develop new projects is no longer as straightforward as it once was, he said.
However, new pipelines or not, there are alternatives to move Alberta’s natural resource, including a new method being tried by CN to essentially put bitumen in small containers that are then shipped off to markets such as China.
“I’m not here tonight to sell stock in CN. I don’t know if the project is viable or not. What I love about the idea is it represents a creative, innovative solution to a difficult problem, which is how to move this resource that we have when the old rules no longer really apply.”
While Alberta needs pipelines, the province also needs innovative minds moving the industry in new directions. The issue of moving Alberta oil to market will remain a key issue this year, he said.
Diversity
Greater economic diversity in this province has remained an elusive holy grail. Every time there was a boom in the oilpatch, the discussion just evaporated, but then the inevitable bust always came back knocking. Since graduating from high school, Hirsch said he has seen five recessions.
“So how do we create more diversity?” he asked.
Defining who “we” are in that statement is the tricky part. That responsibility does not fall solely upon the shoulders of just the government, chambers of commerce, banks, or industry associations, he said.
“We all play a part.”
The coming year will offer the greatest opportunity to diversify that Hirsch said he has ever seen in his years as an economist. The energy sector, which since 2015 has stabilized and remains Alberta’s backbone, has not bounced back like before and cannot be depended on to single-handedly drive the province’s economic engine, he said.
Economic growth has to happen organically, and Hirsch anticipates that four sectors will see improved diversity this year: agriculture, tourism, technology and logistics. But the mindset that only oil and gas will bring prosperity must be left in the last century, he added.
Technology
As artificial intelligence and automation continue to take leaps and bounds forward, no country or industry anywhere on earth will remain immune to the ramifications, he said.
“It’s affecting us, both positively and negatively.”
There are two typical human responses to automation. One should be to feel excited about the possibility of solving problems with the help of vast computing power now at our disposal. But the other is abject horror and panic at being replaced and made irrelevant by robots, he said.
However, in the long run, he said resistance is futile, and industries and people who refuse to embrace change will be left behind. The challenge, he says, will be learning how to work alongside artificial intelligence and robotics.
“The worker who can only do one thing is in trouble. It’s just a matter of time before a robot can replace them. Flexibility and adaptability is our edge over the robots. That’ll be the most important skillset in 21st century.”
Technology has always shaped industry, and there are jobs today that merely decades ago, never mind early last century, would have been unimaginable, he said.
Wealth inequality
The growing income gap, which Hirsch expects will keep widening, and disparity of opportunities among Canadians, which are also affecting all wealthy industrialized nations, has resulted in a resurgence of reactionary populist movements like Brexit. As more workers are displaced by technology, those unable to adapt could end up in a vulnerable situation and perhaps without income at all, fuelling further growth in income inequality, he said.
This has led to conversations about universal basic income (UBI) that would ensure low- and no-income citizens receive the bare minimum necessities of life. Once people transition to new gainful jobs, they would be whittled off UBI, he said.
Such a system would unquestionably cost a lot, but in its purest form would replace all of the other layers of bureaucracy involved in delivering the myriad of welfare anti-poverty programs that are already in place, he said, adding existing programs are decades old and might be in desperate need of modernization.
“It’s time we start having that conversation.”
While admittedly on the fence about the issue, Hirsch said he would like to see more data on such options before the wealth divide grows too wide.
Global economy
Summarizing his presentation, Hirsch said Alberta and Canada have, compared with the rest of the world, modest, even smallish, economies.
“We’re not insignificant, but also not that large.”
"Our province, with a population of about 4.4 million, is tiny juxtaposed to a planetary population well over seven billion.
“Yet we are a global player,” he said. “But we are price takers in that global economy.”
Alberta does not control the prices of the natural resources extracted and sold on the international market, he said.
“That leaves us vulnerable.”
When heavyweights like the U.S. and China — Canada's largest trading partners — clash on trade policy, he said the nation ends up trapped in the middle with few options available other than trying to deal with the fallout as best as possible.
With ongoing uncertainty around U.K.’s Brexit, Hirsch said there’s no way to predict how it all will play out. But if there’s one thing that businesses and investors do not like, he said it’s not knowing what the lay of the land will look like tomorrow. And in an uncertain global economy that could potentially endure some bumps and bruises this year, Canada is not likely to get through unscathed, he said.
Q & A
When asked by a member of the audience whether his prediction would change depending on the provincial election’s outcomes, Hirsch said, “My forecast won’t change depending on the election.”
“It never does change. I think we give our governments both too much credit and too much blame for things that go on. That is not to say that good policy doesn’t matter, because it does matter. But I think sometimes we think it matters more than it really does,” he said, pointing to Conservative-ruled Saskatchewan.
“Economically, they are underperforming Alberta in every measure you want to name.”
While the government there, he said, is undoubtedly doing everything it can, Hirsch added that in the grand scheme of things, we are cogs in a global economy that cannot control nor avoid international factors.
