Canada: Crisis brewing in the oil patch - Alberta workers under attack!

Camilo Cahis's last article before his tragic death proved to be his most popular, read by tens of thousands of people. It is even more remarkable in the light of the electoral earthquake which took place in Alberta yesterday reflecting the class contradictions which Camilo explained in his article.

The rapid crash in the global price of oil has thrown the Alberta economy into crisis mode. After years of record revenue, which partially allowed the Alberta ruling class to paper over the growing gulf between the oil bosses and the working class, the Alberta government has just brought in the most austere government budget in nearly 25 years, massively slashing public services and cutting wages of public-sector workers. And the worst is yet to come.

For years, the Alberta economy had been the darling of the Canadian ruling class. The so-called “Alberta Advantage” — made up of a flat income tax rate for the rich, some of the lowest corporate taxes in the whole of North America, low royalty rates for resource extraction, no “red tape” for inconveniences such as environmental regulations that would hinder development, and underspending in education, health, and infrastructure — was held up as a reason why the province continuously led the country in both employment and overall economic growth. The real advantage for Alberta was that by geological accident, the province sits on a massive reserve of oil (by some estimates, the second-largest in the world when the tar sands are factored in), and that it benefitted from the enormous economic boom in China that needed access to this oil.

Unfortunately for the Alberta bosses, the global crisis of capitalism is finally afflicting China, with the IMF estimating that Chinese economic growth will decrease to only 6.9% GDP growth this year, a far cry from the double-digit growth rates the country experienced at the beginning of the millennium. The slowdown in China is having a downward effect on commodity prices around the world, including oil. Now, the Alberta Advantage is turning into its opposite, and potentially raising the spectre of heightened class struggle in the province.

Prentice’s austerity budget

As soon as the price of oil began falling on world markets, Alberta premier Jim Prentice began making much noise about how people had to prepare themselves for a bad-news budget. Prentice condescendingly warned Albertans, “We have been living beyond our means in this province.” Of course, the warning was really meant at the province’s working class as the austerity budget does very little to constrain the lavish profits hoarded by the Alberta oil barons.

The Canadian Association of Petroleum Producers (CAPP) predicts that the oil industry, as a whole, will cut $23-billion in capital spending this year, with the bulk of those cuts to come in Alberta. It also expects to see a 30 per cent drop in the number of new wells drilled in the province. Not surprisingly, the budget that has just been brought down by Prentice and the Alberta Conservatives contains a massive $7-billion deficit, equal to nearly 16 per cent of the provincial budget — a far cry from the multibillion dollar surpluses the Tories were trumpeting just a few years ago. Furthermore, the Prentice government is calling for an additional $5-billion deficit for next year.

The frightening thing about the deficit is that this enormous number includes the government raiding the so-called Heritage Fund — the “rainy-day” fund that was created during the height of the oil boom. However, the Heritage Fund was more of a showpiece for the Conservatives who, instead of filling it, rewarded the oil companies with some of the lowest resource royalty rates on the planet. Now, the fund sits almost empty.

As well, the massive deficit also takes into account the deepest spending cuts witnessed in Alberta since Ralph Klein attacked social services in the province in the early 1990s. The province is finally abandoning the 10% flat tax scheme that rewarded the rich. The marginal tax rate will increase to 11.5 per cent for those earning $100,000 per year, and to 12 per cent for those with an annual income of $250,000. But the deepest chills will be felt by ordinary working class Albertans. The government is re-instating health care premiums on all workers earning over $50,000 per year. As well, it has jacked up consumption taxes on gasoline, alcohol, and tobacco overnight, prompting long line-ups at convenience stores and gas stations before the new taxes took effect. As well, the government is imposing new fees on a whole litany of services, including marriage licences, traffic tickets, and vehicle registrations. In all, there are 59 new taxes or hikes contained in the Alberta budget.

Most of all, it is government services and public-sector workers who are taking the austerity in the teeth. Overall government spending is being cut by $323-million, which is an even more significant cut given the fact that Alberta’s population has been growing by nearly three per cent per year. Over the next three years, the government will be looking to cut $4-billion in spending, according to Finance minister Robin Campbell. As the population ages, as in the rest of the country, health care spending is actually set to drop by $159-million in the upcoming fiscal year, despite the fact that the province has averaged a seven per cent increase in health spending per year over the last decade. (And even with those increases, Alberta still spends less on health care than most Canadian provinces.) Even with the lack of almost any environmental protection for the much maligned tar sands, the provincial government is cutting a further $200-million from the Ministry of Environment and Sustainable Resource Development. Post-secondary institutions will see a further $80-million reduction in their funding, with the National Post reporting that the eventual goal is to “wean” universities from public funding. At least 2,000 public-sector jobs will disappear, and remaining public-sector workers are set to see their wages slashed. The Alberta government went to war with teachers, doctors, and prison workers during the oil boom; we can only imagine what relations will be like between unionized workers and the austerity Alberta government.

Who isn’t paying for the government deficit? Alberta corporations, who have largely emerged unscathed from the austerity. 

Given the depth of the crisis, there are some conservative commentators that believe that Prentice’s budget did not go far enough. A National Post editorial reads, “This is a great missed opportunity: the oil crisis opened a rare window to engage in difficult but essential structural reforms — to rethink what government spends on, not just how much — the kind that are usually written off as too difficult politically.” According to some of them, Alberta still has the highest per-capita spending of any provincial government in Canada. However, this is a very misleading statistic. As shown in a report by the Alberta Federation of Labour (AFL), the provincial government’s spending is artificially inflated by the province’s labour shortage during the oil boom, which meant that the province was forced to spend much more on capital infrastructure projects as it competed with projects being built by the oil and gas sector. Actual government spending on social programs has remained below the federal average for over 25 years. For instance, real spending on health care (outside of pharmaceutical drugs and diagnostic testing, which has largely been privatized), has not appreciably increased since 1989. Similarly, based on stats from 2011, Alberta had the lowest per-capita spending on social assistance, programs for people with disabilities, and child welfare in the country. Overall, the Alberta government spends up to 33 per cent less on social services, per capita, than the average spent by the other Canadian provinces.

Prospects for the class struggle in Alberta

For decades, much of the left has dismissed the Alberta working class as being too conservative, too reactionary. These elements can only view the class struggle in the most vulgar, impressionistic terms.

The high price of oil, fed by the Chinese boom, meant that to a certain extent, the Alberta ruling class has been able to buy a certain degree of class peace — at least with the million-or-so workers that are employed by the oil and gas industry in the province. Median family income in the census area of Wood Buffalo, which encompasses Fort McMurray and the heart of the tar sands, stood at over $186,000 according to the 2011 census, the highest in the country. At one point in 2014, Alberta accounted for nearly 90 per cent of all net jobs created in Canada. This is a far cry from the manufacturing crisis that has plagued Ontario and Quebec, or the near-Depression conditions that afflict Atlantic Canada. But the Alberta boom has only masked the fact that Alberta’s public services are woefully underfunded given the province’s growing population. Between 2012 and 2013, Alberta’s population grew by just over 3.0 per cent, almost triple the population growth rate of the country as a whole. Meanwhile, the province had the inglorious notoriety of having the stingiest spending on social services of any province.

Already, there were signs of a growing discontent amongst Alberta workers, which resulted in the election of Ed Stelmach, and then Alison Redford, as the leaders of the PCs. Both Stelmach and Redford came from the wing of the Tories that recognized that a tiny portion of the oil wealth needed to be siphoned off for minor increases in infrastructure spending and public-sector wages — just enough to keep workers satisfied. But given the absolute parasitic nature of the ruling class during the capitalist crisis, this proved to be too much for the Alberta oil bosses. Redford came within a hair’s breadth of giving up the PCs’ 44-year dynasty to the upstart Wildrose Party (which received massive funding from the oil and gas industry) in the 2012 provincial election, and ultimately was forced out of the premier’s office by a vicious campaign orchestrated by Tory politicians, the oil and gas sector, and their allies in the mainstream media. In Prentice, the oil bosses have their man — someone who will not be afraid of putting their bottom line ahead of the interests of the rest of society.

This discontent is starting to become a roar as there is universal outrage over the Prentice budget. The Calgary Herald writes, “[The budget]’s not selling well at all. Many people are appalled by the shotgun hikes to taxes and fees. On all sides of the spectrum, it seems, people don’t like the fact that individuals pay it all, while corporations get off clean.” In that same article, a survey by Mainstreet Technologies puts the PCs in a tie with the Wildrose, even though the party’s leader and majority of the parliamentary caucus defected to the Tories back in December. In Edmonton, the NDP is now polling first, “far ahead of anybody else”.

In comparison with their counterparts in other provinces, the apparatus of the Alberta labour movement is relatively weaker. But, in the context of a labour leadership in the rest of the country that is looking for accommodation and deals with the bosses, this could allow for more militant explosions of anger to emerge from the province’s workers. In 2013, Alberta prison workers went on a province-wide wildcat strike which electrified the province’s labour movement and forced the government to cave in to the workers’ demands, once other unions began to mobilize in solidarity. The attacks raining down from Prentice & Co., combined with the hypocrisy of the government austerity, could very well provoke an angry reaction from rank-and-file workers, and which may not be held back by a relatively weak bureaucracy that has largely kept a lid on workers’ struggles in the rest of Canada. 

And, the precarious nature of work in the oil patch — which provides a high income when times are good, but offers virtually no protection when times are tough — may mean that unemployed workers may have no other choice but to fight back. In February, the province lost 14,000 jobs, the largest monthly drop since the beginning of the Great Recession. Buildforce, a construction industry association, is predicting more than a 15 per cent drop in the number of construction jobs in Alberta over the next three years. For the bourgeois, all of these numbers are particularly troubling considering that household debt-to-income is highest in Alberta, and climbing at a much higher rate than the national average. CIBC World Market’s Benjamin Tal says, “The main factor here is the fact that most of the newcomers to Alberta are young families — with a higher propensity to borrow. This also means that the damage due to the weakening economy will be felt disproportionately by debt holders.” (Globe and Mail, 9 Feb. 2015)

While oil was booming, there was very little reason for many workers to question the capitalist system that was “providing the goods”, so to speak. But, just as in the rest of the world, the capitalist crisis is giving the working class a very quick lesson of its true nature. The relative peace of the oil boom has been shattered, and Alberta’s workers will have little choice but to join the millions of other workers who are fighting to defend their jobs and families.

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