Saturday, July 18, 2015

Broadening Alberta's Economic Base

Since oil and gas were discovered in Alberta, which was already mining coal, Alberta has been a fossil fuel petro state. We’ve done well from carbon. But since Premier Peter Lougheed, we have been trying to diversify our economy – find new forms of wealth generation which make us less dependent on the ebb and flow of the oil price. The reason is obvious – Alberta is a land locked, big place with mountains between here and the nearest sea port. Getting our goods to global markets is expensive. At some point, we price ourselves out of global markets due to the costs of transport and labour. Worse, our biggest potential is in heavy oil and oilsands – both expensive to get out of the ground and to market. We will find it increasingly tough to compete on price and value.

We have other goods and services. In the 1970’s Alberta opened its forests to forest companies. This led to Alberta as the home of North America’s largest pulp mill (Athabasca’s ALPAC) and several other mills, including North Americas largest supplier of quality newsprint (Whitecourt’s ANC). Our mills and lumber firms are efficient, productive and significant players in the Alberta rural economy – some 18,000 jobs and significant exports ($2.7 billion in 2014). It is a $5.4 billion industry.

Our agriculture sector is also a player on the world stage. With significant food, fibre and livestock systems, Alberta agricultural sector generated $12.9 billion in 2014 and represents some 22% of Canada’s agricultural output. The value added sector  - food and beverages – generated close to $14 billion. Our largest single employer (Sobeys – Safeway) is a significant food manufacturer.

Our ICT sector is also strong, with Canada’s leading geospatial companies clustered here and some smart companies doing great work in big data analytics, simulation, serious gaming and RF/wireless technology. The ICT sector employs some 43,000 people and generates some $13 billion in revenues.

We also have a robust creative industry sector – great theatre, ballet, music, art and film. Nurtured by the Banff Centre and good creative arts programs at our colleges and universities, a host of small companies have built a global reputation for excellence. Alberta Ballet being a great example. Its productions of creative ballet – ballets based on the music of Joni Mitchell, Elton John, Sarah McLachlan and Mozart’s Requiem – have been seen in many parts of the world, in part through the medium of television.

But none of these either individually or together are equal to our energy sector in terms of employment, GDP contribution or tax revenues. Alberta remains a fossil fuel state. It will be for a considerable time to come.

Even with a different royalty regime which produces a better return to the owners of the natural resources (the people of Alberta) from their assets and new regulations on climate change and land restoration, Alberta’s energy industries will continue to be the primary engine of our economy for many years to come. The only thing that will change this is the emergence of what is known as a “black swan” – a new form of energy which is so cheap, accessible, efficient and easy to install in homes, transport systems and other places that it displaces fossil fuels. There are many players looking for this black swan – few are likely to find one in the lifetime of my three grandchildren.

So what should Alberta do?

We should recognize that our primary asset is land and the uses we put land to. One use is tourism – already a major employer (135,000 people) and generator of wealth ($7.5 billion in 2013). This is likely to grow as more and more wealth retired people chose to travel and explore the world. The Rockies are an attractive place to visit, walk and explore. But so too are many other parts of Alberta.

The land has other values. We need to develop strategies and mechanisms for increasing the value of these lands to Albertan’s – finding new products and services which derives either from the land itself or from products grown or found on the land. New agri crops which produce higher value nutrition or health value, new ways of livestock breeding, new ways of responding to climate change (drought resistant crops), new forms of land remediation after spills, floods or drought.

One key development is the development of effective markets for eco-systems services. That is, trading in land remediation and development permits, CO2 and GHG emissions, wetlands protection and other eco-systems features. A roadmap for this work exists and should provide a strong focus for action. Such development would stimulate economic activity in rural Alberta, create a demand pull for innovative technology and new solutions (new soils which respond better to drought conditions, such as those developed from waste by the Eden Project in the UK) and new forms of eco-systems management and monitoring using advanced sensors and big data analytics.

Some see the demand for better environmental management and monitoring as a threat to the oil and gas industry and our energy companies. It is in fact an opportunity. Imagine if Nexen – now in the middle of dealing with the largest spill in Alberta history – had a rapid solution which not only cleaned up the spilled emulsion but did so in a way that enhanced the environment using synthetic biology solutions and nano materials. Imagine if it then installed a coating on all of its pipes that would enable rapid detection of future spills. Wouldn't there be a global demand for this solution and coating? Nexen could create what we might call a “spill-over” company focused on getting these responses and materials to market.

Linked to tourism, but also distinct in its own right, are our creative industries – film, television, theatre and so on. In other countries – notably the UK – these creative industries are real engines of the economy. The fashion industry in the UK generated some £26 billion ($52.6 billion) in economic impact last year and is growing quickly. Indeed, these creative industries – which includes gaming, serious play, simulation and ICT as well as design, architecture and other disciplines using design – are growing faster than any other sector of the UK economy. This requires young people to be taught design, encouraged to be creative and have opportunities to work with design related firms as part of co-operative programs. We should note that two of our most successful IT companies – BioWare and Smart – were not energy linked but were more aligned with these creative industries. We should be doing much more to incubate and support design related start-ups and enable their growth.

Finally, we have an excellent health care system in Alberta. While many see the health care system as problematic – sustainability of public health systems is always a challenge, wait times are not as we would like them and there are specific issues too numerous to mention here – it is in fact robust, responsive and focused. Within this health care system we have some world-class innovators – Dr. James Shapiro at the University of Alberta has a world-class reputation, for example, for his work on surgery and diabetes. He is one of many (and a fellow Yorkshireman). We have pockets of excellence in health innovation in Alberta, but a collection of pockets do not make a suit. We need to champion these pockets of innovation and leverage them to a new level, elevating the work to produce solutions to health challenges which the world needs to see. Alberta’s Strategic Clinical Networks (SCN’s) provide a vehicle for doing just that and should continue to be seen as engines designed to translate innovation into practice quickly and effectively. We should do more to promote these and ensure their effectiveness.

A colleague suggests that we should stop talking about diversifying the economy, since it is both unlikely to happen and sets up false expectations. Instead, he suggests, we should talk about broadening the economic base. He is right. Alberta’s firms are predominantly small – 95% of them are small or medium sized firms. We need to find the gazelles (firms growing at 20% each year from a base of $1 million or more) and nourish them in whatever sector or location they are. We also need to make sure that the infrastructure they need – like the Alberta Supernet – continues to be available to them to support their development. We need a focuses strategy for broadening the base of Alberta’s economy. We need this sooner rather than later.

Sunday, July 05, 2015

A David Dodge for Education in Alberta?

Premier Notley is making some smart moves. One of them was to ask former Governor of the Bank of Canada, David Dodge, to work with her on a financial strategy, especially given the challenging infrastructure needs of a fast growing Province.

Dodge, together with others, did something similar for Ontario some time ago. He proposed sound fiscal management through outcome based budgets and real investments in infrastructure.

More recently, he was a member of Premier Stelmach’s Council on Economic Strategy which produced a bold, creative and inspiring blueprint for the economic future of Alberta – still available here for those wishing to understand what opportunities have been missed over the last few years.

More recently, he has been clear: austerity is not a way to solve deficits, growth is – do what you can to stimulate economic activity by developing infrastructure (especially given that the costs of capital borrowing are so low), raising minimum wage and stimulating economic growth. Jobs create wealth through tax revenue and wealth creates opportunity. Expanding those on a living, paying which stimulates spending.

The idea of having such expert advice is sound and reflects a maturity in Government. The question I have is who will provide this for our education system?

In an open letter to the Minister of Education I released on the day of his appointment (here), I suggested that there were some key challenges that needed to be addressed, the most important of which was trust. So far, the Minister has done what the NDP said they would do – restore funding for growth, invest in new schools and enable School Boards to plan 2015/16 on a sound footing. But that is all.

Worrying, the Government is going ahead with the ill-fated Grade 3 Learning Assessments but has decided to make them worse by making them mandatory for all students and insisting that they be digital in form.While teachers have been given more time to mark these, it is not clear that any real improvements are being made to their design. It is also unclear just how these are intended to help learning, especially given how vague the Government continues to be on the use of the resultant data for accountability. All in all, a bad move that has removed teachers’ professional judgement from what could have been a very good program to support students.

Before making other similar bad moves, the Minister needs his equivalent of David Dodge to take a cold, hard look at where we are and what matters most. This person needs to look at assessment, accountability, curriculum, conditions of practice and identify pathways for the future. They should not be asked to specify the curriculum or the measures we can use to shift from accountability to public assurance – just the routes to these solutions. Just as David Dodge will not specify which roads need to be widened, where traffic lights should be and what should happen to Calgary’s Cancer hospital dilemma, so our education advisor should describe strategy and journey, not detail.

I have suggested Andy Hargreaves (Boston College) or Pasi Sahlberg (Harvard) or Dennis Shirley (Boston College) or Simon Breakspear (Australia) – all of whom have undertaken significant work in Alberta, know the players and are respected for their contribution. They have also undertaken this kind of advising before for the OECD and / or for specific Governments.

Now is the exact time for the Minister to make the call to one of these individuals and say “I want to our system to continue to be amongst the leading systems in the world and I need your advise before I really start to act in my capacity as Minister”. Do it now,  Minister. Make the call.

Greece, Democracy and Social Action

The people of Greece have just done something remarkable. They have defied the dictates of the oligarchs and bankers and said “no” – we actually want to live decent, meaningful lives out of poverty – especially a poverty imposed on the basis of failed policies, acknowledged as failed by the very people who imposed them – the IMF.

Think about this: over 50% of the young people of Greece aged between 16 and 24 are long term unemployed; overall unemployment is at 25%; food consumption in Greece has fallen by a quarter over the last five years and there is a sense of growing despair about whether or not there is a future.

The options before the Greek people were: (a) reject the deal offered by the EU/IMF/ECB and face dire consequences now; or (b) accept the offer by the EU/IMF and ECB and face dire consequences for a really long time with a growing loss of control. The Greek chose to challenge the system.

What happens next is anyone’s guess. The sensible thing to do would be for Greece to exit the Euro, devalue its currency and default on all of its loans. That is “do an Iceland”. Getting control back of their currency and their economic levers is key to their future. Leaving with the EU/IMF/ECB would be a disaster.

It will all be very messy for a while. But in the end, Greece can come out of the other side of this.

It has made a good start: using democracy to make decisions. While this is an anathema to Mrs. Merkel and her allies, it starts to raise questions about just how decisions get made. If Spain elects its own anti-austerity party and follows a similar course, we will see the end of the Euro and a shift of substance in Europe.

David Cameron, the British Prime Minister, will be watching carefully. He has promised an in/out referendum on EU membership for  the UK. He is campaigning for reform of the EU and all of this may just be helpful to his cause. It certainly creates spaces in which he can weave a plan or plot.

What happens in the next few days will be crucial, not just for Greece but for the Eurozone and the EU. Keep a keen eye.

Thursday, May 28, 2015

The Alberta Provincial Budget and Truth Seeking

Premier Notley signalled yesterday that the financial situation she inherited on Sunday afternoon when she became Premier was not "as advertised" either during the election campaign by the outgoing Wildrose Prentice Government or as documented in the Provincial budget. "We have already found a few skeletons in the closet" said Brian Mason, House Leader, "and this is before we have done a deep dive into the financial situation". Quite.

Some have dismissed this as "the NDP trying to lower the already high expectations". I dont think so. This new government is developing a habit of telling the truth. We had all better get used to it. It will be a new experience.

Almost all of our Universities and many colleges are in debt. You wouldn't know it from anything that was said either during the budget or by reading the financial statements associated with the Provincial budget. There are many other activities which are underfunded relative to their legal obligations - look at the whole range of disability measures and supports established by law and the available budget for them. Alberta has a substantial fiscal problem.

We are not delivering the level of service either required by law or expected by Albertan's, especially those lured here by the promise that Alberta would be a great place to "work, live and play". This was the basis of Prentice's "look in the mirror" comment. While inept politically, he was saying that the expectations of service we all have outstrip the ability of the Government to fund these services.

So how come we didn't know? More significantly, how come politicians on all sides of the house didn't know? What's missing from our system of government that leads our new Ministers and Premier to be so surprised?

Some clearly did know that things were not all that they seemed. Our financial public servants in treasury know what they are doing. I worked with them and they are very clear and very focused. Within many departments, the financial analysis and cost analysis are thorough and [generally] well done. Budgets are built carefully with a great deal of internal scrutiny. But we never get to see this detailed work. Published business plans pass through a political filter before being released and do not contain the detailed assumptions behind the financial analysis that leads to the budget. Nor do they contain a thoroughgoing risk analysis which looks at the risks of these assumptions.

Our Auditor General is a very decent man. Thorough, thoughtful and highly regarded in the audit community - we are lucky to have him. But his team can only look at so many things each year - in March 2015 he looked at school attendance in the Northland's school division (unacceptably low), at ESRD's oversight of certain activities and several other specific things. What he did not do was to report on the overall state of Alberta finances. Too political. But this is what we need.

In fact, I suggest we need three things to improve our collective knowledge of our current state on the financial side of Government:

  1. We need an independent office of budget responsibility. This would look at the budget proposals by government and assess these against the actual activities being proposed and see if the implicit assumptions make sense. Most governments now have an independent office of budget and I think the current state of affairs suggests we need one too. It would take the budget proposal, review it and offer an independent assessment of its reasonableness and risk. You can see the terms for such an office here - this is the UK office for budget responsibility.
  2. We need a whistleblower protection arrangement for public servants. When they know that what is being said in public (e.g. there will be no impact on front line services from budget reductions in education) they can blow the whistle and share their analysis through a system of whistleblowing (e.g. by reporting their concerns to the office of budget responsibility) and not fear consequences. Notice I am not suggesting they call David Staples or Paula Simons at the Edmonton Journal - but that a mechanism is established to enable truth telling. Take a look at the OECD's review of whistleblower protection arrangements - its here.
  3. Finally, we need to develop further the work on results based management started by Doug Horner as Minister of Finance. While this will take some time - the first round of this work showed just how far we have yet to go - we each need to know that we are getting the outcomes we are paying for. Too much of the funding in government is focused on process management and not enough focus is paid to outcomes. Budget development should begin with strategic intention (what are we seeking to achieve in the long-term?), then document the implications of this strategy in terms of outcomes (what specific things will we achieve when) and then show what is needed to achieve these outcomes (money, people, infrastructure, time, supports, etc.).  We also need to know more about the risks of the plan - especially financial risk. Showing results based budgets and risks assessments will give us all a more honest view of the situation.

Public servants have lived through a difficult time since Lougheed passed the mantle to Getty. There has been an erosion of confidence and a culture of fear - heightened under some regimes (Redford, for example), but ever present. We have some very able and capable public servants. They live and work in a culture that has been agnostic to evidence, reluctant to hear analysis and relentless in prosecuting those who spoke truth to power. Fear not evidence and analysis have dominated their work for too long. We need to build a culture in which the work of public servants are valued not vilified, sought after not rejected out of hand.

I would also like to see Premier Notley and her small team spend time spelling out the situation to Albertans. Dont wait until you have "solved all of the problems". Go out and show us the situation - "sell the problem, not the solution". We can all then help with the solutions.  Crowdsource solutions through collaborative, participative networks. You can do this in a way that our previous Governments could not.

Monday, May 25, 2015

Thinking About Our Schools

Schools shape our future as a society. They are the bedrock of a community – a place in which all of our futures are nourished and developed. A place where skills are taught, enabled and encouraged. A place where a young person discovers their passions and concerns and is encouraged to develop. We should all care about what happens in schools, even if we do not have children attending them. One of those kids stood at the bus stop with baggy jeans and a funny hat may well become your pension fund manager just a few years from now. Others will run businesses that will hire your granddaughter or work to ensure our planet survives the onslaught of climate change.

But there is something wrong with our schools. They are burdened with too much direction about what they should teach – too many curriculum objectives, too many politically correct imperatives and too many instructions for our instructors. They are held accountable but are not given the tools for the responsible tasks they are given. They are subject to high stakes testing where students, on a single day, determine the fate of the school and its teachers. They are vulnerable and stressful. They are permanently failing to deliver to all of our expectations.

We also do not treat our teachers as true professionals. They are given limited scope for independent action – as if we do not trust them, despite their years of training, to do the job entrusted to them. We disdain their professional development activities and scoff at their summer vacations. We do not show them respect when, as they must do, they tell us that our son or daughter is not the paragon of excellence we thought them to be and that they are struggling. 

We also see schools as a preparation for something else – for work, College or University – rather than places of learning in their own right. In fact, as one keen observer has noted, much of schooling is seen as a preparation for the work of a few – those who go to University - and is not, therefore, a great place for those for whom the trades, or creative arts or community service or retail is their chosen destination. We therefore teach, through our structures, large numbers of students to live with failure.

It is time for a radical change. Our schools need to do more to help our students be part of the solution to the problems our communities face – homelessness, poverty, isolation of the elderly, climate change, driver irresponsibility, the growing challenges of obesity and early onset diabetes, to name just some. Our schools also need to become less focused on being the pathway to post-secondary education and more focused on developing the skills which would enable all students to be life-long learners at any level and at anytime.

We need to counter the view that schools should narrow their focus to the basic science, mathematics, literacy and technology subjects and instead encourage a richness of personal learning which involves creativity, emotional intelligence, physical education, wellness and social skills  as well as the more usual subjects.  Creative diversity is a better bet for our future that a focused insistence on just a core. All need literacy and numeracy, but the development of these skills needs to be based on authentic and engaging learning activities.

We should reduce our division of knowledge into subjects and focus more on real world problem solving for authentic audiences where students are asked to contribute directly and in a meaningful way to the solution of problems facing their community. By focusing on project based work, the need to learn and develop skills normally associated with our “traditional” subject areas will arise naturally and be driven by student engagement rather than Provincial requirements.

We should empower and enable teachers to determine large “chunks” of the work their students do, rather than directing them with curriculum requirements – one Grade 9 science Provincial curriculum has over 260 objectives which teachers “must” complete during the year, 60% of which are likely to appear on a Provincial Achievement Test. This is pure nonsense, driven by the demands of post-secondary institutions rather than the learning needs of students. If we give schools back to the teachers, we should indicate the competencies at a broad level which students need on leaving school and let them, as professionals, determine the best route to these outcomes.

Finally, we should accept that teachers are best place to assess their students and reduce the focus on standardized, annualized, aggregated, average test results and focus instead on frequent, systematic and focused teacher assessments as the basis for pupil evaluation.

Our schools and the curriculum which informs their work were designed for nineteenth century education for an industrial world. It is the twenty first century and an age in which knowledge rather than industrial systems drive our economy. Our schools need a transformation – they need to be part of the future, not stand apart from our time or our destiny.