Budget Tips From Mobutu

June 8th, 2009
Email This Post  Print This Post  

My “Open Range” column from the June 2009 issue of Alberta Venture magazine:

The Alberta government doesn’t have a “revenue problem.” It has a spending problem

For some reason my middle-aged memory banks retain vivid images of a long magazine article round about the time the former Zaire was crumbling at roughly the same velocity as its leader, Mobutu Sese Seko. Mobutu was succumbing to cancer, and the writer sought to explain what had befallen him and his country. Mobutu – whose much longer full name translates as “The Cock Who Leaves No Hen Intact” (or “Untouched” or “Unruffled”) – was a deeply flawed man. But unlike certain African coup leaders, he at least didn’t dine on the ears (and other soft parts) of his deposed opponents, nor even rule principally through violence. Mobutu’s favoured technique of statecraft was gathering and dividing spoils.

He would fly hither and yon, buying off cronies, tribes, regional leaders, potential rivals – any squeaky wheel or problem area. A new bridge here, some crisp army uniforms or squadron of Mercedes-Benz limousines there. This worked as long as Zaire’s huge copper mines, hardwood timber and gemstones gushed torrents of revenue into Mobutu’s treasury in Kinshasa – which he reapportioned with careful discrimination (including a large cut for himself). But when resource prices collapsed, out went the Mobutu fiscal model. Public spending and government debt exploded and annual inflation hit 24,000%. Towards the end, Mobutu jetted pathetically back and forth among European banks and clinics, seeking personal and fiscal cures. He and his governance model were equally doomed.

Does this sound even vaguely familiar to an Albertan? Isn’t this essentially how the provincial Conservatives have run Alberta’s finances since they balanced the budget in the mid-1990s? Instead of corrupt fat cats in decrepit jungle towns, think teachers, nurses, public-sector employees, seniors, paramedics, farmers, municipalities. Scarcely a stakeholder too obscure or undeserving. For the past dozen years, spending has risen faster than economic growth, population growth or inflation – sometimes faster than all three combined. One report by the University of Calgary’s School of Public Policy warns that health care spending alone could consume 86% of provincial revenue by 2030.

Alberta’s fiscal model was, however, even more ineptly executed than Mobutu’s. The randy rooster at least had the wiles to focus on those who might support him, however insincerely and temporarily. In Alberta, the desperate-to-be-liked-because-we-feel-guilty-about-being-Conservatives hurled the billions indiscriminately. The largest disbursements went to interest groups that openly despise them, will never vote for them and have kept right on scheming against them. The nadir was paying off the teachers’ unfunded pension liability, accumulated through mismanagement and selfishness. For the government, this act was worse than merely futile; it was slow-motion political suicide.

Thanks to the previous era of sound management and sheer blind luck, for years the Conservatives nearly drowned under the deluge of incoming dollars. There was plenty to go around, however misspent. But it was a fragile model. This year, it cracked. The tiniest nudge of fiscal instability has sent us back into deficit – a projected $4.7 billion, maybe much worse in the end. Most noteworthy is the governing party’s absolute ill-preparedness. With scant ideas and even less will, Premier Ed Stelmach and his ministers are staggering like Mobutu in his final befuddled months.

We’re into some weird times when the Left provides political cover. Former Edmonton Journal editorialist, now consultant, Satya Das opened a recent newsletter item with the words, “The Alberta budget shows we have a revenue problem.” Shockingly, our finance minister agrees! But Alberta has a revenue problem the same way a drunk, drug addict or gambler does. The same way Mobutu’s divisions of spoils never quite mollified his recipients. No amount of revenue cures these diseases. A political analyst or minister who uses revenue shortfalls to describe a government that has increased already-record spending – Canada’s highest per capita – by a further 38% in four years is someone who will never admit to a spending problem. To such a person, revenues are always too low, because there is no theoretical upper limit to spending.

I hope you’re finding this all a little droll. But like Mobutu in Zaire, the Alberta Tories are doing serious damage. And unless they’re luckier than they deserve, it will last for what will seem a very long time. The last time Alberta went deep into deficit, it took 10 years to dig ourselves out. A lost fiscal decade. Long enough for a young person to emerge from high school, earn a university degree, graduate with no job prospects, become embittered and leave. Long enough for someone in their prime earning years to hit the wall, lose their job and descend into financial ruin. There’s a revenue problem, all right: a generation of Albertans could be denied the chance to generate revenue through their own honest efforts by a government too clueless to realize that the more it spends, the more harm it does.

All analogies ultimately break down, of course. Alberta isn’t exactly Zaire. Right off the top, there’s little chance anyone will give Stelmach a nickname like Mobutu’s. And the almost unimaginably appalling series of political calamities, military atrocities and human suffering that befell Zaire (now Democratic Republic of the Congo) won’t be repeated in Alberta. The differences are large enough that we can continue to smugly dismiss African countries and their incompetent, lazy, morally corrupt ruling classes as fundamentally unlike our own. Still, it’s instructive to remember that Zaire’s real per capita GDP was higher in the mid-1980s than when Mobutu died in 1997 – and far higher than it is today. And that could happen here.

Blogmarks BlogLines del.icio.us Digg Facebook Google Google Reader Magnolia Yahoo! MyWeb Newsgator reddit SlashDot StumbleUpon Technorati
By George Koch