Alberta a throwback to Medicis' Florence

Alberta is arguably the wealthiest jurisdiction in all North America and perhaps the world. Yet there is never enough money in the public coffers to sustain Alberta as a functioning society.

Amidst manifest opulence, the province's minimum wage is the lowest in the country, and real wages for the bottom 90 per cent are scarcely higher than they were three decades ago, eaten away by inflation. Homelessness, spousal abuse and suicide blight the social landscape. The daily news carries repeated stories of over-crowded schools and hospitals, strained universities and of seniors living in sub-standard care facilities; and of underpaid and over-worked child-care and day home workers, correctional officers, nurses, public school teachers, social workers and on and on.

It is not hyperbole to say that Alberta's social infrastructure is close to breaking.

There is, of course, money. And a lot of people are also doing quite well. They're the ones that, as my Newfoundland friends remark, are "on the oil." CEOs, accountants, trades people -- young or old -- can make a small fortune in no time, though they often lose it as quick, as long as they are in some way tied to the oil-patch. The rest of the province is left to beg, however, for the scraps that remain.

Before the last provincial election in 2012, Premier Alison Redford promised to change all this. Some thought she might take on the oil companies and raise royalty rates above their bargain-basement level, and perhaps even marginally raise taxes so that the province's finances might be stabilized. But none of this has happened. Alberta remains, as former Premier William Aberhart lamented in the 1930s, a place of "poverty amidst plenty."

Why is this the case?

One could look for answers in a lot of places. But lately, my thoughts have drifted to Florence, Italy. There are a lot of reasons to think of Florence; it is, I will admit, one of my favourite cities. Its beauty owes much to the Medici family that controlled the city for several centuries, beginning in the late 1300s.

But medieval Florence, like other European cities of the time, was no picnic. Poverty, illness, and death lurked in the darkening shadows; life was, to adopt Hobbes' famous description, "nasty, brutish, and short." Florence's allure today masks this truth.

Still, the story of the Medicis also carries a lesson for Alberta, and elsewhere, about what does -- and doesn't -- get done in an economy controlled by the few. It's a lesson that begins with demystifying what mainstream economics blandly calls "supply and demand."

According to economic theory, supply rises when there is a demand for a particular good or service, whether coffee or fresco painters. When demand falls, the result of changed tastes, cheaper substitutes or a saturation of supply, the amount produced will also fall, perhaps slowly, perhaps with great speed, until establishing a new (temporary) equilibrium. The market economy so constructed is proudly described as amoral, albeit self-interested.

The central word in all this is "demand." In order to fully understand demand, it is useful to contrast the term with a similar, but distinctly different, word, "need." Every individual -- every society -- has needs. One may be certain that Florentine society had a raft of needs not terribly unlike Alberta today.

But need is not demand. Demand refers to the ability to pay. The Medicis wanted monuments to their status that would ensure their family's eternal grandeur, and they got them. Common aphorisms such as, "He who pays the piper calls the tune," capture this truth.

Mainstream economics hides the truth of the "who" behind economic power. This is no more true than in Alberta where the province's Medicis -- the oil industry, its hand-maiden government and a bevy of lobbyists -- work constantly to convince Albertans that the way the economy is structured is natural and unassailable. The proof of these efforts can be seen in the corporate towers that stand as monuments above the skylines of Calgary and Edmonton, while on the streets below too many Albertans wonder where all the money went.