A look ahead to 2015 shows a few hangover trends from 2014 that won’t go away after a good night’s sleep and some Aspirin.
The most interesting are the ones that appear to be working against each other, but maybe aren’t. I can’t predict which winners will become losers, and where win-wins will emerge over the next 12 months, but I can confidently predict that these cross-trends will be pivotal to our well-being in 2015 – and beyond:
1. Canada’s oil economy bumping into carbon pricing.
Canada’s oil and gas industry is now fourth in the world by production volume, confirming our nation’s – and our province’s, if the B.C. government’s determination on LNG delivers – status as a petro-state. Our dollar and much of our governments’ revenue floats on fossil fuels. We are already succumbing to the distortions of petro-states around the world, where all public policy is measured by its impact on the oil industry.
Yet carbon pricing is looming large, pushed by a growing cavalcade of catastrophes due to climate change, and growing political pressure. Even the Harper government will not be able to hold out forever, especially with the U.S. and China getting serious about reducing greenhouse gas emissions. Combined with low oil prices, a meaningful carbon tax will jolt our confidence in raw petroleum extraction as the backbone of our economic future.
B.C.’s history with a revenue-neutral, albeit faltering, carbon tax shows that taxing carbon doesn’t have to be a zero-sum game. B.C.’s economy kept growing even as our fossil fuel consumption fell after the introduction of the tax.
Circling that square will be Canada’s biggest economic and political challenge in 2015.
2: A regulated consumer economy clashing with the self-regulated sharing economy.
Consumer purchasing has long been a mainstay of our economy, but the combination of big data, mobile technology and breakthrough sharing companies like Airbnb, Uber and others is making it easier and cheaper to get access to something (a car, a room, my neighbour’s tools) than to own it. Lower costs and greater convenience are just part of the trend. Sharing goods and services also creates new micro-jobs (providing courier services when I’m already driving home from Walmart), reduces waste and provides owners of assets (e.g. a mostly unused car) a better return on their investment.
Today’s news angle is the clash between the new collaborative economy and threatened entrenched industries (like hotels). This gnarly policy knot will challenge regulators everywhere in 2015.
How much regulation do we need when new technologies allow us even greater protection than government oversight? Do I really need a health safety inspector to purportedly protect me if I choose to take up a neighbour’s offer to sell me dinner and all his previous customers testified online that they were happy and unharmed?
Spinning off from this trend is the clash between investing in efficiencies (motion-activated lights, doing the laundry in off-peak hours, mobility road pricing) and buying new hard assets (new dams, new bridges). Here, too, 2015 will see legacy providers disrupted by new opportunities to deliver the same benefits in a completely different – and less expensive – way.
3. Rising debt in Canada meets rising savings in China.
The biggest untold story of 2014 was China pushing into top spot as the world’s largest economic power. China is awash in credit while we pile up debt at an unsustainable rate. Canadian consumers are the most indebted in the world. Canada’s household-debt-to-GDP ratio is now higher than the U.S. ratio at its peak in 2008. Nowhere is debt more out of balance than in the high-end Vancouver real estate market, where steadily rising stratospheric prices are completely disconnected from flattened household incomes.
The ability of Chinese (and other elite foreign) buyers to take advantage of this gap is just one small sign of a world being changed by China’s newfound economic muscle.
Peter Ladner ([email protected]) is a co-founder of Business in Vancouver.
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