Delivered to the Regina and District Chamber of Commerce Luncheon, Sept. 23, 2009

INTRODUCTION

Thank you so much for the opportunity to meet with you today. I’m pleased to talk about economies that work in the 21st century, since we are just beginning to recover from a global recession, brought on by the failures of certain western economies that lost their way. I think the lessons of this latest global recession can provide some helpful guidance for our own province as it works to maintain positive growth, and ensure that more of our residents benefit from that growth.

THE SASKATCHEWAN ECONOMY

Until recently, some in Saskatchewan thought we would not have to heed these lessons. As the Finance Minister famously said: “There is a global recession out there, but Saskatchewan has chosen not to participate.” That tune has changed in recent months. No one disputes the fact that the past three years have been record-breaking times for Saskatchewan and its economy. The Provincial Auditor’s report, released yesterday, confirmed what Saskatchewan people already knew – due to record increases in Saskatchewan’s resource revenues, we’ve had record budget surpluses for the past two years.

But what of lasting value do we have to show for this? Or as more and more people are asking: “Where did all the money go”?

We seem to have missed an historic opportunity to diversify the Saskatchewan economy and ensure lasting prosperity for average families.

Saskatchewan people are concerned about the state of our economy for a number of reasons:

• They know that in spite of two years of record surpluses, the Wall government has drained its rainy day fund from more than $2 Billion to only $835 Million and it’s barely started to rain!
• They know that the Wall government’s spending today is 32% higher than what was proposed in the last NDP budget in the spring of 2007. That’s run-away spending and it’s unsustainable
• They see the Auditor confirm that 37% of the government’s record revenues last year came from resources, and they know that resource prices have fallen in this budget year

What goes up must come down. Since late 2008, the same resource prices that took our economy to new heights have dropped back to earth.

You’ve all heard how the government blew its forecast for potash revenues, by $1.3 Billion and counting. You’ve seen the economic predictions from a number of private sector forecasters – including the Conference Board of Canada – that the Saskatchewan economy will actually contract in 2009. You’ve seen natural gas prices spend the summer at historic lows, and agricultural prices continue to fall.

But that 32% jump in government spending remains.

The Wall government is now faced with one of three options: cut spending, increase taxes or run a deficit. The government that could do no wrong last year, now has to make some difficult choices. When the money is rolling in, and you have a large savings account, you can spend away your problems for awhile, but when your budget is in deficit that option is no longer available. When our provincial budget is in deficit, people are going to ask a lot of questions about the wisdom of spending $10 Billion or more to build nuclear power reactors, when renewable energy sources like wind, geo-thermal, solar and hydro can provide the additional energy we need at a fraction of the cost, and in far less start-up time.

When the provincial budget is in deficit, people are going to ask why Saskatchewan is spending more than any other Canadian province – at least $7 Million and growing – on a two-week vanity pavilion at the Vancouver Olympics. When money becomes tighter, the public will be asking a lot more questions about the government’s spending priorities. So, we’re entering a new period for the Wall government and the Saskatchewan economy. The next two years won’t be like the past two years.

THE SASKATCHEWAN WAY

How political leaders approach the job of managing an economy has a lot to do with where they were raised, and where they gained their workplace experience. I’d like to tell you a bit about my own experience. I'm a farmer first. I was raised on a family farm north of Shaunavon in Southwestern Saskatchewan. A grain and livestock farm I work to this day. Growing up in Rural Saskatchewan, we shopped at the local Co-op and banked at the local Credit Union. These community-based institutions allowed our family and our neighbours to put our buying power and our savings to work to help each other.

I remember that our southwest communities had worked together over many years to build a community-owned telephone company, which eventually became part of the SaskTel network. I remember that Medicare as we know it today had been pioneered in Swift Current Health Region #1, and that many years before that municipalities around Swift Current had come together to hire a doctor, because individual families couldn’t afford medical care on their own.

When I finished high school, I went off to University in Saskatoon. I could only afford to do so because reasonable tuition and a strong public education system had become an integral part of the Saskatchewan fabric. It's the Saskatchewan way; coming together to accomplish that which we cannot accomplish alone.

So, like many Saskatchewan people, I don’t have a fear of government when it is put to a clear public purpose.

Unlike some open line show hosts or some members of the government, I don’t see a ‘communist plot’ behind every government program or Crown Corporation. Being part of the Romanow cabinet that had to spend most of the 1990’s paying for the excesses of the 1980’s, I also know the importance of a well-managed government that lives with its means.

THE NEED FOR BALANCE

In 2000, I added to my life experience by taking a break from active politics to work for Nexen Inc., an international energy company with offices around the world including: London, Bogota, Lagos, Dallas, Sana’a, Yemen, and Stavanger, Norway. As head of Government Relations at Nexen for more than eight years, I worked in many countries around the globe, and was responsible for meeting with and negotiating with many different governments and organizations. I've seen first-hand how different governments have been able to encourage long-term prosperity for their citizens, and how different governments have been able to navigate the choppy waters of economic uncertainty. My time away only reinforced my belief that to secure long-term prosperity we need:

Strong governments – ready to defend people's interests

Strong businesses, both private and public enterprise to grow our economy, and

Strong unions – ready to defend the rights of working people

When these interests are in balance, our society grows and prospers, and more people can share in real progress. For those in the Wall government who argue that any form of government regulation is interference in the free marketplace, they should look to the United States and ask themselves what George Bush and his eight years of financial sector deregulation have done for that nation’s economy.

Responsible regulation and oversight is a positive and necessary role that strong governments should fill on behalf of all of their citizens. I talked about a role for strong companies in a successful economy, both private and public companies. SaskTel, SaskPower, SaskEnergy and SGI have all built Head Offices here, have all kept profits here at home, and have all provided the people of Saskatchewan with high quality services at an affordable price for decades. I argue that Saskatchewan’s economy is the stronger for having these public enterprises, but there are some who attack any form of public or community ownership on pure ideological grounds. I heard that a few months ago, when I talked about restoring the mandate of a public company like SaskEnergy.

Our public electrical utility, SaskPower, used to own substantial natural gas reserves until the nineteen sixties, when the Liberal government of Ross Thatcher sold the vast Hatton Natural Gas Field in southwestern Saskatchewan to the private sector. The Devine government disposed of SaskPower's remaining natural gas holdings as well as those of SaskOil as part of its privatization program in the nineteen eighties. Since then, SaskEnergy, the portion of SaskPower spun off by the Devine government with the intention of privatizing it, has been forced to buy all of the natural gas supplies it requires for the people of Saskatchewan on the open market.

SaskEnergy doesn't own any natural gas reserves. It buys all of its supplies on the open market at the going price. In effect, our province is forced to buy back our own natural gas at the going world price in order to supply our homes, businesses, and institutions with the fuel needed for heating, power generation, and industrial processes. A province with abundant reserves of natural gas should be able to use that natural bounty as a strategic advantage in economic development and to shield its people from frequent spikes in the world market price. We can't do that in Saskatchewan today, because we no longer own any natural gas reserves.

That’s why I suggest we restore the full mandate of SaskEnergy; to allow this public utility not only to buy natural gas on the open market, but to explore for and develop its own natural gas reserves on behalf of its customers, the people of Saskatchewan. Each year, a portion of the utility's budget could be set aside for the purchase of natural gas rights from the Crown, putting this public company on the same footing as any other private sector company when searching for and developing natural gas reserves. If the opportunity presented itself, SaskEnergy could even pursue the purchase of existing reserves on the open market. The public utility could pursue these opportunities in partnership with other companies.

If the people of Saskatchewan own the natural resource, why can't the people of Saskatchewan benefit from that ownership with lower prices?

The Wall government claims that a SaskEnergy with a restored mandate would somehow 'scare off' new private sector investment. The government needs to get out more often and take a look at what's really happening around the world. At last count, twenty-nine of the world's fifty largest oil and gas companies have some level of public ownership. For example, Norway's Statoil Hydro and Brazil's Petrobras are at least in part state-owned. Yet they are among the largest companies of their kind in the world, are leading edge offshore drillers, and have private sector partners standing in line to work with them. I think there’s a place for strong private sector companies and public enterprise in a mixed economy. You might find it unusual that I come to a business luncheon and say that a balanced economy needs strong unions. I want you to know that I get interesting looks when I go to union meetings and talk about the need for strong companies as well! But I believe a truly prosperous economy needs both in balance. You can’t build lasting prosperity unless the entire community can share in that prosperity.

ECONOMIES THAT ARE WORKING

So, let’s look at a couple of economies that seem to be working in spite of the global recession; that seem to be providing their citizens with that balance of which I speak. A few months ago the New York Times published an interesting article under the headline: “Thriving Norway Provides an Economics Lesson”. The Times noted that in spite of the global recession, Norway’s economy grew by just under 3% last year. With only 4.8 Million people, Norway is a small, energy-rich nation. It is the world’s third largest exporter of oil – but it has avoided the usual trap that plagues many energy-rich countries.

Instead of spending its riches lavishly, it passed legislation ensuring that oil revenue went straight into its Sovereign Wealth Fund, public money that is used to make investments around the world. Today, Norway’s Sovereign Wealth Fund is one of the largest in the world at more than 300 Billion dollars. In fact, when the global recession hit late last year, the fund had enough cash on hand to buy 60 Billion dollars in stocks across the globe. Norway is what some would call a welfare state, with strong private and public enterprise growing the economy, with strong regulation and oversight, and with a strong unionized workforce. I would suggest that Norway has some of the most stringent labour laws in the world, but that doesn’t scare away investors.

On the contrary, global energy companies, including Nexen, line up to work in Norway, because it is a stable economy, with clear rules and regulations that everyone understands, and with a well-trained workforce that you can count on. Norway is one small example of how a modern economy can be made to work well when there is balance. This balanced approach works in a small nation like Norway, but can it be made to work in a larger economy? Let’s look at Brazil with a population of more than 190 million people.

Petrobras, Brazil’s world class oil company is 55% government-owned. A few weeks ago, Brazil announced plans to boost its control of recently discovered offshore oil fields by giving Petrobras sole operating rights and a minimum 30% stake in any joint ventures. These offshore reserves are estimated to contain anywhere from 14 to 50 billion barrels of oil. Brazil says it will use the billions in new oil revenues to develop science and technology and improve its education system. Has this decision turned investors off of this Latin American nation? Not so far. In fact, private equity fund managers recently ranked Brazil second in the world amongst emerging markets for investment attractiveness.

CONCLUSION

Ladies and gentlemen, my simple message is this. In the coming months, as Saskatchewan works to maintain economic growth in a time of falling resource prices, let’s not reject solutions that can help our economy based on blind ideology alone. There are many examples across the globe of nations that have succeeded at providing their citizens with a balance between the roles of government, enterprise and working people. Balance ensures everyone shares in our prosperity. Sharing in prosperity helps growth endure. I look forward to talking with you about these and other economic ideas in the future.

Thank you very much for your time today.