Is the Dutch Disease Theory Really a Wedge Issue?

Alberta Oil Refinery

This past Spring, newly-minted NDP leader Thomas Mulcair introduced the notion of "Dutch Disease" in relation to the Canadian economy. Simply put, he meant that the booming oil economy in Alberta is inflating the Canadian dollar which in turn, is negatively impacting the manufacturing sector in the rest of the country, particularly Ontario which, once upon a time, was the economic engine of the country. 


Almost on cue, the western-centric Reform/Conservatives,sensing an attack on their economic and political base, lashed out at Mulcair saying his comments were not only faulty, but divisive (talk about the pot calling the kettle black). They even released their first attack add aimed at the NDP leader, claiming his theories were "risky" and that he is promoting "dangerous economic experiments". 


In June, the Organization for Economic Cooperation and Development  released a report that in essence, lent credence to Mulcair's assertion, saying that the Government needs to do more to promote the "non-resource" sector of the economy in order to maintain a higher employment rate and a more even distribution of wealth across the country. 

Gotta build us a FIREWALL around Alberta

Since then, there has been nary a word from the Reformists about "dangerous economic experiments" but they have certainly kept up their stinging mantra about Mulcair's comments being divisive and "anti-west". As with their misleading  commentary about the legitimacy of coalition governments, usual CPC operating procedure is to repeat the same erroneous statement over and over again until it becomes believable - believable at least, to the uninformed and the CPC's Reformist base. 


But were Mulcair's comments divisive? Were they an attack on the west? It was certainly easy for many Canadians to jump on that band wagon, claiming that the "Bearded Wonder" was no better than Harper in his use of the politics of division, pitting Alberta against Eastern Canada which in itself, is a festering rivalry reminiscent of the Hadfields and the McCoys. The Reformists of course, were only too happy to fan those flames. But why is applying the Dutch Disease theory to Canada divisive? 


No where in Mulcair's comments was he using an accusatory tone with regard to Alberta and why should he? Is it Alberta's fault that someone discovered oil in their back yard? Is it Alberta's fault that this find is causing their economy to boom? Of course not. Nor is it their fault that their good fortune, just happens to be having a negative impact on the manufacturing sector. It's a side effect of the oil boom, but certainly not one that was foreseen or was intentional. And I can find no where in Mulcair's theories where it says that Alberta should stop being prosperous. No, his is merely a statement of possible fact in relation to a theory that may actually have some merit. It has no blame what so ever attached to it.

In simple terms, this situation is not unlike two neighbours living side by side. For years, one has been cultivating and nurturing an Oak tree in his back yard. Finally, after much patience, the Oak matures into a beautiful shade tree, one that would certainly add to the value of the owners property. The problem is, the branches spread out over the property line and deposits leaves and other debris in the other neighbour's yard. It is certainly not the tree owner's fault that his Oak is creating a problem for the guy next door. But it is a problem none the less. Will hurling insults over the fence line at each other solve the issue? Certainly not. So how do good neighbours collaborate to resolve the issue in a way that's acceptable to both property owners? 


It is not a bad thing then, that Mr. Mulcair had the courage to raise this Dutch Disease issue. It was a simple statement of the facts as he see's them, with no actual blame attached to them. So how then, does Western and Eastern Canada work together as good neighbours to resolve this potential problem in a way that is mutually beneficial?   Certainly not by being defensive and assigning guilt, but through understanding and negotiation. The way Canadians usually solve their problems.