Category: Economics

Matters of money

Innis on the Northwest Company as a forerunner to Confederation

By 1821 the Northwest Company had built up an organization which extended from the Atlantic to the Pacific. The foundations of the present Dominion of Canada had been securely laid. The boundaries of the trade were changed slightly in later periods but primarily the territory over which the Northwest Company had organized its trade was the territory which later became the Dominion. The work of the French traders and explorers and of the English who built upon foundations laid down by them was complete. The fur trade had pushed beyond the St. Lawrence drainage basin to the north and the northwest along the edge of the Pre-Cambrian shield and the forest regions, and had organized the bases of provisions in the more fertile territory to the south at Detroit, the Assiniboine, the Saskatchewan, the Peace, and lastly, the Columbia. The Northwest Company was the forerunner of confederation and it was built on the work of the French voyageur, the contributions of the Indian, especially the canoe, Indian corn, and pemmican, and the organizing ability of Anglo-American merchants. (p. 262 hardcover)

Innis, Harold. The Fur Trade in Canada. 1930.

Advertising on this site

I am mindful of the fact that the advertising on this site is ugly, and often runs counter to the main lines of argument here. For instance, there are often ads for oil companies.

All told, the ads yield roughly $100 per year, which is enough to cover the costs of hosting the site.

Would people strongly prefer a site without ads? If so, would they be willing to donate to make that happen?

To be fair, I have always encouraged people to use advertising blocking plugins. Adblock Plus, for Chrome and Firefox, is excellent.

Harrison on federalism and environmental policy

While not denying the existence of either constitutional limitations or resistance from at least some of the provinces, I argue that the explanation for federal and provincial roles in environmental protection is not complete without considering governments’ electoral incentives to extend or defend their jurisdiction over the environment in the first place. Environmental protection typically involves diffuse benefits and concentrated costs, and thus offers few political benefits but significant political costs. One can expect the opponents of environmental regulation to be better organized, informed, and funded than the beneficiaries. Moreover, since environmental protection typically involves the imposition of costs on business, strengthening environmental standards can run counter to voters’ concerns about the economy and unemployment. Thus, the absence of electoral incentives, rather than constitutional constraints or provincial opposition per se, may explain why the federal government did not pursue a larger role in environmental protection throughout the 1970s and early 1980s. The reality may be closer to a federal surrender than the provincial victory implied by many authors. (p. 5 hardcover)

Harrison, Kathryn. Passing the Buck: Federalism and Canadian Environmental Policy. 1996.

Strangers Devour the Land

Boyce Richardson’s Strangers Devour the Land is not an academic text, but rather a series of personal narratives interspersed with selections of courtroom testimony. The book describes the traditional lifestyle of the Cree of northern Quebec, and the influence the James Bay hydroelectric developments had upon their lives between the inception of the project in the 1970s and the author’s return visits during the 1990s. Richardson is clear in his advocacy of the Cree perspective and is open about his willingness to edit his work to meet with the approval of his Cree subjects and rebut the arguments made by their opponents at Hydro-Quebec and within the Quebecois government. (p. 204, 289, 290 paperback) Nonetheless, the account comes across as a sensitive, sympathetic, and honest one for all parties concerned – a text that both furnishes detailed observations of what has transpired and which engages in a nuanced way with the political and moral complexities that accompany them.

The dynamic at the heart of the book – between First Nations people trying to maintain their most important traditions and an encroaching world hungry for natural resources – continues to play out in Canada. While the parallels between the James Bay hydroelectric projects of the 1970s and today’s oil, gas, and mining projects are numerous, it is not fully clear what the experience with the former can help us improve about the latter. If anything, the contemporary parallels show how the tension between peoples seeking to perpetuate traditional lifestyles on territory they have held for centuries and others who wish to disrupt those lifestyles for economic or nationalistic purposes persists and how Canada has a poor record of reaching equitable outcomes through fair means.

Quebecois nationalism and the northern Cree

Robert Bourassa – Premier of Quebec from 1970 to 1976 and 1985 to 1994 – did more than anyone to advance the James Bay hydroelectric projects. Now, his name is attached to a 7,722 megawatt generating station and a reservoir with a surface area of 2,835 square kilometres. For Bourassa, the construction of hydroelectric capacity in the James Bay region was a vital measure for promoting Quebecois economic growth and thus the national integrity of Quebec. (p. 22, 303, 329) The scale of work envisioned was indeed vast: the entire La Grande river would cease to flow below the blockage for an entire year as the reservoir filled. (p. 191)

Richardson’s intimate account of the hunting lifestyle of the Cree contrasts sharply with the perception of the province that they had essentially abandoned their traditional practices and that the lands they inhabited were effectively empty. (p.33-4, 72, 76, 195, 280) Richardson convincingly documents the inadequacy of the environmental and social impact studies conducted by the government of Quebec, as well as their quickness to discount the importance of the land and the people reliant upon it. (p.112, 132, 163, 173, 246, 298, 344) Similarly, the Quebecois government was biased toward the over-estimation of future electrical needs, and quick to use unrealistic projections as justification for the scale of the massive James Bay projects. (p. 255-259) It is logically possible to separate procedural questions from questions about outcomes; the construction of the dams may have been much less objectionable with the full prior and informed consent of the First Nations in the region and with suitable compensation. At the same time, such an approach may still have clashed with the perceived relationship between the Cree and the land described by Richardson, and in particular with the notion of the people as perpetual stewards of the bounty of nature. (p. 89) Arguably, it would be inappropriate for any one generation or small set of generations to break that stewardship, even if compensated financially. Indeed, this perspective is highlighted in the book’s epilogue, in which the Cree who have benefitted from the 1975 James Bay And Northern Quebec Agreement were nonetheless resisting Quebecois proposals for additional dams on the La Grande River, the Great Whale and surrounding rivers, and the Nottaway, Broadback, and Rupert Rivers. (p. 347)

Court proceedings and settlement

In addition to quoting at length from the testimony given by members of the Cree community and expert witnesses, Richardson comments extensively on the legal process through which the Cree community sought to respond to the work initiated without consultation by Hydro-Quebec. He discusses the strategies employed by lawyers arguing both sides of the case, and describes Quebec Superior Court Justice Albert Malouf’s 1973 judgment in favour of the Cree, ordering the James Bay Development Corporation to “immediately cease, desist, and refrain” from construction and from interfering with the rights and territories of the Cree petitioners (orders which Richardson alleges were not followed, even during the short span before the first appeal was heard). (p. 296, 299) The book goes on to describe the subsequent Quebec Court of Appeal decisions that stripped the Malouf ruling of effectiveness and eventually compelled the acceptance of the James Bay and Northern Quebec Agreement in 1975. (p. 296-309)

The most notable feature of the initial legal proceedings may be the way in which they demonstrated the inadequacy of the social and environmental impact studies conducted by Hydro-Quebec and the government of the province. Most startlingly, Richardson describes how construction on the first phase of the James Bay project began with no prior consultation and that even when the Cree first sought remedy through the courts, lawyers from the James Bay Development Corporation continued to argue that they had no rights which could be infringed. Later, the corporation’s own staff anthropologist Paul Betrand testified that the project would create a “crisis… in the Cree culture”, that there would be an “immense impact”, and that “the shock [was] going to be brutal”. (p. 247-248) Such testimony was effectively rejected by the various courts of appeal that assessed Malouf’s initial conclusions, preferring to see the Cree as having transitioned to a white-style life and lacking the legal right to object to Hydro-Quebec’s plans. It is therefore convincing that the subsequent settlement – though it did involve considerable financial compensation – was effectively made under duress, with the prospect of the complete dismissal of the Cree claims driving them to accept an arrangement that would not have been tolerated without coercion. Under the terms of the settlement, the hunting territory of the Mistassini (who feature prominently in Richardson’s account) is reduced from 100,000 square miles to 7,000 and their exclusive right to hunt is granted provided with the provision that it not “conflict with other physical activity or public safety”. (p. 324)

Reading Richardson in a climate change context

In one passage, Richardson neatly summarizes many of the key ethical claims of the book:

Since eighty-eight square miles of the island of Montreal support 2 million, most people cannot see how such huge territories can in equity be left to so few people. If these lands are needed in the public interest, it is argued, then unfortunately the Indians will have to adjust. The question is, however, how are the lands to be handled and how will the Indians be allowed to adjust? The manner of doing the deed reveals our quality as a civilization. For the Indians have always been there: it is not their fault that other people have arrived, making claim to the lands on which their whole culture and way of life has been built. In decency and justice, they cannot simply be trampled over: our own society would be infinitely richer if we could find the means to give Indians a genuine choice, some real control over the pace of change, as they face the inevitable arrival in force of this alien civilization. (p. 225)

To these challenges must now be added the additional challenge of adapting all of Canadian society to the needs of the global climate. Failure to do so risks imposing as large a change in circumstances as has been experienced by the Cree of northern Quebec upon people everywhere, indigenous and non-indigenous alike.

There are many parallels between the James Bay development that began in the 1970s and the expanding oil sands today. Indeed, much of the language about the economic potential of resource exploitation is nearly identical. In the context of the James Bay project, Richardson describes how politicians and engineers defending the project “rave[d] on about how hospitals, factories and schools will have to close down if the project is not built” (p. 255); in 2011, Minister of the Environment Peter Kent asserted that for Canada to meet its Kyoto target it would be necessary to “clos[e] down the entire farming and agricultural sector and cut… heat to every home, office, hospital, factory and building in Canada”. As Quebec aspired to achieve influence and prosperity on the basis of exporting hydro-electricity, Alberta and Saskatchewan now hope to do likewise with synthetic crude exports processed from the vast Athabasca oil sands reserves. In both cases, the prospect of wealth could only be achieved by appropriating vast amounts of traditional territory used by First Nations for centuries, and by severely disrupting the lifestyles of these inhabitants. In both cases, aboriginal people are presented with the question of how to respond to resource development, with a difficult choice to be made between resistance through legal or political means and accommodation, which carried the possibility of financial reward.

Richardson’s epilogue complicates the story told by the book. He describes how Cree society has evolved into the 1990s, with new deals between the First Nation and Hydro-Quebec, further expansion of white Canadians into resource industries in the region, and the development of extensive commercial holdings and civil service bureaucracy by the Cree. He highlights the persistence of a hunting culture, while also commenting extensively on the economic and social transformation that has taken place since the James Bay project was first proposed. While the physical impact of the dams is certainly on a vast scale, he concentrates more on the impact of development on the Cree way of life, which has been ambiguous.

Environmentalists and policy-makers today can no longer ignore the dangers associated with the accumulation of greenhouse gasses in the atmosphere. This adds fresh complexity to the utilitarian calculations described in Richardson’s book, such as how the interests of relatively small numbers of hunters with lifestyles dependent on vast amounts of land integrate with the interests of southern urbanites desirous of electricity and a nationalist Quebecois society desirous of wealth and influence, both in and of themselves and as the tangible means of protecting a distinctive culture. All else being equal, the risks associated with climate change must make us more open to dams compared with fossil-fuel sources of electricity, though that rebalancing certainly doesn’t make dams appropriate in all circumstances or nullify the arguments raised against them.

Richardson himself discusses the possibility of moral dilemma “so dearly beloved of moral philosophers, in which both sides were right”. (p.289) Even that categorization may over-simplify the ethical situation presented to the Cree in the 1970s and to Canada’s First Nations today. How are the values and practices of a traditional lifestyle to be maintained or altered as resource nationalism and encroaching globalization inevitably affect Canada’s wildernesses and their traditional inhabitants? How are the possibilities of enrichment through natural resources to be balanced against the reality of degraded land, air, and water – and the increasing reality of a degraded and threatened global climate? Thinking about energy supply in the context of a changing climate also encourages perplexing counterfactual questions: had Quebec not built so much hydroelectric capacity, would people have turned to more climatically-damaging alternatives to produce the same quantity, or would demand simply have been more moderate in the face of higher prices?

The injustices so articulately described by Richardson cannot be denied. They include the influx of thousands of outsiders into their traditional territories, the flooding of trapping land, the diminishment of animal population, and the contamination of fish and drinking water from methyl mercury. (p.344) Without question, Cree families that had subsisted by fishing, hunting, and trapping for centuries had strong grounds to object to construction projects dreamed up for the benefit of outsiders that caused enormous damage to their way of life and culture. Unfortunately, the imposition of undeserved suffering on one group by another is a deeply engrained feature of globalized, capitalist, industrialized society. Indeed, the choices humanity is making now about fossil fuel use threaten to permanently damage the entire planet and the lives of all of its inhabitants for thousands of years, as well as totally destroy the lifestyles and cultures of those living in especially vulnerable areas like the arctic. Quite possibly, the human race has reached a point in which we can no longer avoid inflicting undeserved suffering on one group or another. The question has become how much suffering, imposed through what means, and with what (if any) compensation.

‘Shut down the oil sands’ is not an extreme position

Rather, it is the endpoint of joined-up thinking about climate science and energy policy.

On Twitter the other day, Suzy Waldman said: “Trying to envision middle ground between idea coalsands ought 2b shuttered and idea Canada’s economic fate depends on them”.

I think this perspective risks perpetuating one of the big problems in Canadian climate and energy politics – namely, the assumption that the oil sands have a legitimate future part to play in Canada’s economy and that any position that questions that is ‘extreme’ and outside the political middle ground. This may be true in terms of opinion polls and the positions of politicians, but this is because people haven’t really accepted that our current trajectory ends with planetary catastrophe.

We now have very clear and credible evidence that warming the planet by more than 2°C virtually guarantees big trouble for humanity. Crossing that threshold can be achieved by burning a fraction of the conventional oil, gas, and coal available on the planet. In short, then, we have a dangerous amount of fossil fuel available without even tapping unconventional sources like the oil sands.

Stabilizing the climate at any level of temperature increase means cutting greenhouse gas pollution to the point where the amount produced each year is absorbed by natural systems and so there is no net change in the concentration. Achieving that requires very deep cuts – essentially, the global phaseout of fossil fuel use. Stabilizing below the 2°C limit requires that all this happen extremely quickly. In such a world, it simply makes no sense to be building bitumen mining and in situ extraction facilities intended to operate for decades. Nor does it make sense to keep building pipelines to export fuels that we cannot afford to burn, if we wish to maintain a livable planet capable of sustaining human prosperity indefinitely.

This connects to the biggest problem with the oil sands: the way in which they contribute to a vicious cycle. We build more fossil fuel production capacity, so naturally we need to have transport and export capacity to serve it. The availability of fossil fuels then encourages people to keep investing in vehicles, power plants, and other facilities and equipment that require them. And so fossil fuel dependence is perpetuated.

If we are to avoid catastrophic climate change, we need to rapidly reverse that cycle. We need to be shutting down production capacity, and transport capacity, and facilities and equipment that depend on fossil fuels. That will probably make some things a lot more expensive and change the ways in which people live, but the alternative of a planet with a permanently hostile climate is clearly much worse.

Shutting down the oil sands is an extreme idea politically in Canada, but that is simply evidence of how poor the scientific basis for Canada’s energy politics is.

Tim DeChristopher’s expectations about the future

Orion Magazine has posted the transcript of a highly interesting conversation between Tim DeChristopher and Terry Tempest Williams:

[T]here’s no hope in avoiding collapse. If you look at the worst-case consequences of climate change, those pretty much mean the collapse of our industrial civilization. But that doesn’t mean the end of everything. It means that we’re going to be living through the most rapid and intense period of change that humanity has ever faced. And that’s certainly not hopeless. It means we’re going to have to build another world in the ashes of this one. And it could very easily be a better world. I have a lot of hope in my generation’s ability to build a better world in the ashes of this one. And I have very little doubt that we’ll have to. The nice thing about that is that this culture hasn’t led to happiness anyway, it hasn’t satisfied our human needs. So there’s a lot of room for improvement.

We are in the process of committing the world to a terrifying amount of climate change. It seems plausible that as it gets worse, people will eventually become less willing to work together to deal with it. Hopefully the next few years will see the emergence of a movement strong enough to close off the worst possibilities of extreme warming, and capable of adapting to keep humanity on a comparatively sane and cooperative path in the future.

Toronto350 letter on Line 9

Toronto350.org has submitted a letter of comment on the proposed reversal of the Enbridge Line 9 pipeline.

Given the unwillingness of the Alberta and federal governments to take climate change seriously, the best strategy open to us at this stage seems to be doing what we can to reduce the scale of fossil fuel exports, particularly by stopping oil pipelines and coal export infrastructure.

Federalism and the French Canadians

As part of my preparation for my August comprehensive exam, I read Pierre Trudeau’s 1968 collection of essays: Federalism and the French Canadians. Compared to the other texts on the list, it is short, clear, and accessible. While some of the controversies addressed are too obscure to be intelligible to someone who has never closely studied the politics of Quebec at the time, the book does set out the general thrust of Trudeau’s thinking in areas ranging from the shortcomings of ethnic nationalism to the importance of bilingualism and federalism in Canada.

Written during the middle of what has subsequently been called Quebec’s ‘Quiet Revolution‘, Trudeau’s book argues that the constitutional structure of Canada’s federation, encompassing Quebec, arose appropriately from the historical circumstances of Canada’s founding. (197) Regarding the future of that province, he describes two alternatives: one in which isolation and ethnic nationalism lead to stagnation and an economy and society falling ever-farther below the world standard, and another in which federalism is renewed, particularly through the universal application of bilingualism across Canada. (32, 48)

Trudeau does an acute job of identifying the shortcomings in an ‘asymmetric’ approach to federalism, in which some provinces are granted special privileges or substantially more power than others. For one, how can provinces granted such rights be appropriately accorded equal influence within the federal government to provinces with lesser powers? Trudeau also discusses the contradictions involved in asserting national self-determination for Quebec. If it is a ‘people’ that holds the right to declare political independence, how can they bring with them an Anglophone minority that doesn’t want to come, or indigenous groups that would choose to remain part of the rest of Canada. Similarly, how can they leave behind Francophones in other provinces? (153) He concludes that a modern state must be polyethnic and that such a character actually empowers and enriches a society through openness, diversity, and tolerance. (156-8, 165)

Trudeau stresses the importance of the division of powers to democratic legitimacy – describing the importance of the electorate being able to identify which level of government bears responsibility for a particular policy. The book also describes Trudeau’s perspective on equalization payments as an essential part of a federation in Canada, justified on the basis that they will allow all provinces – regardless of economic circumstances – to provide the same basic standard of social support. (27, 72)

In one long chapter, Trudeau describes what he perceives as the obstacles to democracy in Quebec. These are chiefly the things which the Quiet Revolution arose against: an overmighty Catholic church, restrictions in speech and education, a parochial elite dominating society, and lingering feelings of historical inferiority and exploitation. (106) He highlights, for instance, the enduring alliance that emerged between the English Canadian elite that played a large role in the Quebecois economy and the Catholic Church which was permitted to operate largely unchanged after the Seven Years’ War and 1774 Quebec Act.

Trudeau frequently expounds on the importance of reason and the allure and inadequacy of emotion for making political arguments or justifying political institutions. He is largely dismissive of nationalism as a force for unity in Canada. He also refers frequently to the importance of expanding individual liberty, using this as the criteria for distinguishing between ‘genuine’ revolutionaries and counter-revolutionaries. Trudeau’s view of constitutional politics is remarkably Burkean, with an emphasis on the idea that Canada’s constitution doesn’t merely reside in one or more constitutional documents, but also in precedents and traditions, and that the fact of standing the test of time is an endorsement of their merit. (20)

In places, the book seems to fall into some of the traps of which the author is wary. In particular, there are segments where close logical argument is abandoned in favour of something more like emotional or rhetorical hand-waving. Nonetheless this is an unusually interesting book. Indeed, it is probably a unique one in Canadian history insofar as it shows the thinking of a politically-minded academic who actually went on to make singular changes to how Canada is governed, via the patriation of the constitution and the Charter.

The difficulty of assessing the cost of nuclear power

This post includes some interesting information:

In the EIA’s analysis, which leaves out all incentives, the average cost of “advanced nuclear” or “next-generation nuclear” plants entering service in 2018—long lead times associated with these technologies will make it difficult to open any early—would be $108.40 per megawatt-hour (MWh), equivalent to $0.1084 per kilowatt-hour (kWh), in 2011 dollars. This seems in the right ballpark, as the estimated cost of power from the new nuclear plant under construction in the Kaliningrad region of Russia is around $0.10/kWh, a German lawmaker said in April.

For reference, the 2012 average retail price of electricity in the US was $0.1153/kWh. So the cost of new advanced nuclear power would be just barely below the retail price of electricity—power sold to you and me at home. (Commercial, industrial, and transportation customers all buy power for less than the LCOE cost for advanced nuclear power.)

In other words, it would be very difficult for a utility to make money selling power generated by advanced nuclear plants, if they had to shoulder the entire cost themselves. But they don’t.

Not included in the LCOE analysis is the cost of decommissioning nuclear plants, which is often externalized and pushed onto ratepayers through surcharges on their utility bills, or the cost of managing nuclear waste for decades, which is generally pushed onto taxpayers through the Department of Energy budget. And these are not trivial costs: Edison International estimates that decommissioning its San Onofre Nuclear Generating Station near San Diego, which it permanently retired last week, will cost around $3 billion. So the LCOE analysis actually understates the true, all-in cost of nuclear power.

Related: