The true dimensions of the economic crisis of the last year is becoming clear as we see western countries set out their budgets for the coming year. Yesterday both Ireland and Britain set out what the future means given the events of the past 12 months. Ireland was once the economic miracle known as the Green Tiger. For years it pursued an aggressive economic agenda that included deep tax cuts, virgorous monetarism, radical deregulation of banks and other large economic players, and the pursuit of a knowledge based, high tech economy. It cut its university tuition fees to zero and invested heavily in technological industries. For over a decade it was credited with having achieved an economic miracle. Alas it all came apart as a result of its deep policy flaws. Many neo-conservative economists, now cowering in academic and university think tanks in shock as their deeply ideological agenda lies in ruins, once held Ireland up as a model. Yesterday, the Finance Minister in Ireland admitted that things are bad. The media report ’savage cuts to save the ailing Tiger’. Economic growth will fall 7.5% this year, compared to 4.5% for the UK. The budget deficit will run to 14%, an unheard of level anywhere a few short months ago. There will be huge cuts in public sector pay and benefit entitlements. The public debt is exploding and the currency is hovering on the brink of collapse. The banking sector is in crisis and with it this once proud nation. While the Finance Minister promises better for the future in typical political double talk, there is genuine fear that the country may be headed to become a second Iceland, which is wallowing in economic disaster. Both countries remind us of the havoc economic and financial advisors created with their aggressive rush over the years to push small countries to become laboratories for untested and dangerous economic ideas. Anyone familiar with the role of these people can see the horrific damage that results when ideology rather than knowledge and facts drive the agenda. It is hard to believe that a single group could wreck so much havoc with so little sense of responsibility or intelligence. Ireland and Iceland are two examples of the dangers of getting caught up in the unsubstantiated claims and beliefs of unaccountable experts taken over by beliefs rather than science. It is doubtful whether the economic profession’s credibility can ever be restored. Just as in eastern Europe and Russia where Marxists economist did the same thing years ago, few who pushed the disastrously mistaken ideas that became the mainstream of prevailing economic beliefs have expressed any remorse or acknowledged how wrong they were. Perhaps a life-long banishment to Iceland and Ireland would be in order in the absence of some contrition for the bill of good the poor citizens of those countries were sold.

Britain experienced some of the same ill affects of bad advice from a ill educated economics profession. However Britain will be experiencing only a 4.5% drop in GDP this year, which is much more manageable. Britain has also under more robust and informed political control and thus averted some of the most disastrous of the affects of economic mismanagement. And the British government has announced that its budget measures will be more in keeping with the traditions of sensible economics. Revenue measures will see increases in income, payroll and sales taxes, a punishing claw back of bank bonuses over $40,000 (thank goodness some government has stepped up to plate and put a stop to these economy wrecking practices that contributed so much to the mismanagement of bank finances and the necessity of huge bail outs of backs), and cuts in spending while at the same time increasing pensions, child and disability benefits, and free school lunches. Government borrowing will increase a modest 3 billion pounds. This will be a budget of sensible ideas and sound management. As proof, the currency markets have responded positively, and the stock market has provided a vote of approval.

With an election coming in the next few months the right wing press has nevertheless but as expected gone ballistic. Not for it any learning form the past mistakes. Fortunately Prime Minister Gordon Brown has responded with a calm determination to avoid the excesses of the past. Indeed Brown has been the key sane voice at the top of governments in the west. He was the world leader in calling for a coordinated economic rescue package that has prevented world wide disaster. He was the one who insisted the bank crisis had to be aggressively dealt with. And he is perhaps the only leader who is prepared to risk telling the truth on taxes – namely that countries must pay their way over the longer hall, and that the promise of free lunches through big tax cuts for the well off is just more of the ideologically extreme pandering to the special interest making up the wealthy, largely business class (such as we have and continue to practice in BC and Canada, and which is still promoted by many economists including some of my own colleagues. Oh my, how hard it is to see the truth when taken with blind ideologies).

The sad thing about Britain is that the Prime Ministers’ honesty and economic competence will likely go unrewarded in the soon to be held election. The large right wing press is going ballistic about the higher taxes and increase in basic benefits. A perfectly manageable public debt is being painted as the height of mismanagement. It is mostly politics. But there is still a yearning to return to the bad old days when economists and much of the media largely shilled for disastrous policies that led to certain destruction. It is discouraging to see. Perhaps the Prime Minister will prevail in getting this basic message across about responsible economic management, but it is hard to be optimistic. Ideologically driven ideas and interests die slowly if ever, perhaps because there is still a hope that that will serve the interests of those who got rich under the old discredited policy regimes. Special interests never give up. Time will tell whether they will prevail in the face of all that is so obvious about past failings. The British election will be a good test.

The MacKenzie Gas Pipeline Project has been part of the lore of generations of Canadians, particularly in Northern Canada, since the 1970’s. It was then that the dream of building a huge natural gas pipeline from the delta of the MacKenzie River to southern Canada first took shape. At that time it was spurred on by energy shortage fears and a nationalistic desire to mount another great Canadian dream of the magnitude of the first transcontinental raiway. The Liberal Government of the day granted huge exploration subsidies to find and secure gas fields in the Beaufort Sea and surrounding areas, with great success. The government had been latecomers to the realization that the aboriginal owned lands of the MacKenzie Valley would have to be acquired before the line went through, but was soon convinced of this, largely thanks to the pathbreaking inquiry and report on the impact of the pipeline by Mr. Justice Thomas Berger. Berger traveled up and down the valley to community meetings, consulted with aboriginal leaders, listened to oil and gas company executives and studied the environmental, economic and social implications of the pipeline. In his report in 1977, he agreed that the pipeline could proceed under strict environmental controls and operational regulations, provided the consent of the aboriginal residents, who own much of the land, was obtained, just as it had been obtained before the railroad went through the prairies.

By the time he reported, energy markets had cooled and the industry lost immediate interest in the pipeline. However everyone knew it would be coming some day when the gas would inevitably be needed. As a result treaty negotiations continued between the federal government, the territorial government and the aboriginal groups to settle the land issue. At the same time the aboriginal groups began to see land ownership and governance as inseparable, and thus most demanded treaties that included recognized self government powers. Negotiations went on for a long time, but settlements were reached with the Inuvialiat on the north slope and the other aboriginal people down the MacKenzie to Yellowknife, some coming as late as the mid part of this decade. Today only the Deh Cho Dene in the south west corner of the NWT and a group of Metis in the Yellowknife area are without a Treaty. The rest now have unequivocal and uncontested ownership over thousands of hectares of northern land, self government powers, large capital funds and other things they sought in return for giving up ownership and control over vast amounts of the land.

Not so the Deh Cho. The Deh Cho Dene want a different kind of settlement. In the other settlements the First Nations agreed to drop their claims to large territories of land in return for clear ownership over a smaller territory, continuing wildlife harvesting rights, compensation, financial support and self government powers and other assets of value. The Deh Cho Dene have held out for co-ownership of all of the land with the Federal Government, co-management of resources, co-equal resources revenue sharing, and other provisions that would leave it with a high degree of continuing control over and interest in all of the lands and resources in their region. The Federal Government has outright refused, saying the Deh Cho must accept something similar to the rest. In response the Deh Cho have said that they will not give their go ahead to the pipeline. Not long ago that sounded like a real obstacle to the pipeline proceeding.

The industry led by Imperial Oil have promised aboriginal governments a substantial ownership interest in the pipeline provided the federal government will come up with the money. An Environmental Assessment, underway for the past five plus years, is due to report and give its approval in two or three weeks. Feverish survey and other preparatory work has been going at full tilt for some time and the communities along the river and in the delta region have been booming as things ramp up.

However, there now have been a couple of immense doses of cold water thrown on the project. Today much of the talk in the north is about a long and often bungled regulatory process, federal neglect and declining industry interest. The big industry players say that major federal financial support to offset some of the total costs estimated to be in the range of $15 – $20 billion dollars is needed. Opponents say that this is just standard industry rhetoric in search of government subsidies. But now it has come out that the federal cabinet see industry demands as serious obstacles, has reviewed the demands for money and other things and said no to proceeding on these terms.

Some think this means the project is just stalled. But it is more than that. The project just does not make sense in today’s terms. Gas prices have collapsed. New sources of shale gas in the south are hanging over an already well supplied market into the foreseeable future.

In fact, ten years of planning, $750 million of Imperial Oil Ltd. and parent Exxon Mobil Corp., Royal Dutch Shell PLC, ConocoPhillips Ltd. and the Aboriginal Pipeline Group (APG) money already spent, hundreds of millions spent by exploration firms, millions spent by Northern businesses and governments to provide services and infrastructure, and millions of hours of person time is now about to be washed away as sure as if it were flushed down the mighty MacKenzie into the Beaufort Sea.

The project is dead. The disappointment of northern and aboriginal groups is palpable. The waste, disruption of lives, communities and the environment, and the social disruption has been immense. For the big companies the termination of plans will be nothing more than a deductible blip on immense balance sheets bloated by recent high energy prices. Not so for many many others, particularly in the north.

This may all be a good thing in the end. But unless you live in the north, it is hard to understand the pain, bitterness, and disappointment. Those who oppose the pipeline might well have some sympathy for those in the north who awaited its arrival as a sure route to prosperity. Another dream has come and gone. It is a hard life north of 60*.

The word corruption is one not normally given much credence as an explanation of government behavior in Canada. I have of late written much about the pervasive corruption of the Karzai government in Afghanistan. Now an essay by a reputable economist and analyst has raised the spectre of corruption in the recent behavior of the BC Liberals in setting hydro electricity policy. (See Marvin Shaffer at http://www.policynote.ca/2009/11/03/you-dont-have-to-sell-bc-hydro-to-give-it-away/ ).

This is not to be taken lightly. Shaffer is a careful, thorough researcher highly regarded by experts in the field, including the BC Utilities Commission. There are some extremely sophisticated ways governments can use today to pay off those who have provided support and money to the party in power. Shaffer knows how the hydro power system works. He makes a pretty convincing case that only corruption offers a meaningful explanation of what is happening, or at a minimum that that is where we should look if we are serious about getting an answer.

The government has just announced three highly important moves around hydro power. First it has gotten rid of the top manager at BC Hydro. It is no secret that he and the senior executives of Hydro BC are deeply disturbed by government directives that run contrary to the interests of Hydro and BC citizens. Clearly it was untenable for him to continue in the face of gross government malfeasance.

Second the government has directed that the large, cheap, efficient and clean burning Burrard Thermal generating plant be taken out of the base generating capacity of BC Hydro. This means that Hydro can no longer plan its power development with the Burrard plant as part of its continuing base supply. Because by law, Hydro must have the capacity to supply BC on a continuing basis, Hydro must now find a large new replacement source of power generation. Where is that to come from? The government has directed that Hydro must obtain any new supplies of power from private power producers, therefore, it will come from investors in private power. It is well known that these investors are supporters and close friends of the Liberal Government. It is now clear that they will all at government direction be paid a much higher price than the cost of producing it at Burrard Thermal. BC Hydro eats the loss and power customers must make up the difference in increased power rates. These are the same power producers who helped organize for the Liberals in the last election campaign and who contributed large amounts of money to the campaign. The power deal is the same as a direct transfer of taxpayer money to corporate coffers. If not corrupt, what?

The Government claims that the Burrard power station adds to greenhouse gases. That is a lie, although a somewhat complicated one, as all good lies are. Burrard Thermal uses natural gas, which is one of the cleanest energy sources available. It is very cheap and efficient. True, gas supplies will decline in supply in the future, and so there is an argument for conserving it, but the government will not conserve the gas not burned at Burrard. It will sell it to be burned elsewhere. It aggressively markets BC natural gas in unlimited quantities for shipment to the US and elsewhere, where it is burned. It has no intention of curtailing the overall burning of BC gas to help global warming. Every unit of BC gas not burned at Burrard will be sold cheap to other markets to be burned, with an equal or greater impact on total green house gases. As I explain below, much of it will be sold back to BC in the form of externally generated electricity at much higher gas equivalent prices in the late fall and winter. The claimed benefit in reducing global warming is another of the lies this government has become practiced at telling as a matter or course.

As I said, replacement power capacity will have to be found for Burrard by law. Who in the main will this come from? Surprise, surprise largely from private hydro producers, as set out in the third government directive just issued. Not surprisingly, however this is not quite as the government claims either. Private hydro produces most of its power in the spring and summer when BC already has a surplus of power from Hydro’s already established large Hydro plants. It doesn’t need more power in the spring and summer when the run off is high. But the government is making Hydro buy the power from these producers at inflated prices, even though it will have to turn around and sell it into export markets at much lower spring and summer market prices. Then, in the winter, BC Hydro will have to buy very expensive power from producers in the US. The private hydro producers will make a lot of money, Hydro will lose huge amounts of money on the whole complicated deal, and BC Hydro customers will make up the difference in higher rates. Thus it is that the Liberal Government rewards its supporters with our money. Frankly, it makes sense only if that is its purpose.

Does that sound like corruption to you? You can decide. But the government explanations just don’t add up when subject to scrutiny. If this was happening in India or Pakistan we would be raising no end of questions. Let’s be honest with ourselves. Possible corruption should be named and exposed wherever it appears.

It is a puzzle as to why this has not been exposed in higher profile mainstream media sources. Rafe Mair and the irrepressible Tyee have been doing an admirable job – thank goodness for the new media – but they are a lone voice. Perhaps the government has made it sufficiently complicated that it is very hard for the general journalist to understand. Cut backs in the media have meant that the experts in fields like energy are no longer around. Still, one would hope that the general outlines of what is happening would be enough to cause journalistic outrage.

Or maybe it points to the failure of the professional training of journalists. Perhaps it is time for the return of the muckrackers. That may be the only way the government will be called to account and the truth will be out.