VANCOUVER – Only rich people will be able to afford cars. Everyone else will be taking public transit.
Commuters will move into Toronto leaving the suburbs to revert to their former status as farmland. The only provinces creating jobs will be those with oil. The poorest regions may resort to job-sharing.
Such is the controversial/bleak/contrarian view in Jeff Rubin’s latest book The End of Growth, published by Random House Canada.
The former chief economist at CIBC World Markets is once again rattling the cages with his take on the impact of high-cost oil.
“We’re going to see people get off the road. We’re going to see people all of a sudden drive different types of vehicles. We’re going to see people relocate and we’re going to see tremendous public pressure for spending on public transit,” Rubin predicted during an hour-long interview in the publisher’s offices in downtown Toronto.
Rubin’s thesis is that oil—not interest rates or government spending – is the key driver of economic growth. And when conventional low-cost sources of oil dry up, the world will be left with oil from places like the Alberta tar sands that are much more expensive to produce.
“When most people think about ‘peak oil,’ they think about what’s in the ground. ‘Peak Oil’ is not about how much you can drill. It’s about how much you can afford to burn,” he says.
This isn’t the first time Rubin, 57, has taken an unconventional – some might argue unpopular—view on global growth.
And he’s not always right.
Before parting ways with his employer in 2008 over his previous book “Why your World is About to Get a Whole lot Smaller,” Rubin predicted oil would reach $200 U.S. a barrel by 2012.
It has yet to hit that target. The U.S. price for Brent crude peaked at $145.66 in July 2008. And prices at the gas pump so far this year are well below his forecast of $2.25 a litre. The global recession in 2008/2009 and ongoing debt crisis in Europe have had a dampening effect.
Still, prices at the pump are among the highest they’ve been in recent memory, providing Rubin with fertile ground for his latest even more heretical theory: Higher oil means the end of economic growth as we know it.
And no amount of fiscal stimulus – the usual solution to an economic downturn—is going to change that. In fact, cutting interest rates and boosting government spending is making things worse as countries in the European Union have discovered, he says.
The only way out of the mess is to cut our dependence on energy, he says, a behavioural change that will come about naturally when oil inevitably resumes its upward trajectory.
“I don’t think people are going to be commuting on the 404 from Newmarket to Front and Bay streets when gas prices are $2 a litre. I think real estate prices are going to fall in places like Newmarket. I think inner city neighbourhoods are going to be much more attractive. I’ll even argue those far flung suburbs will return to the land use that was there 30 years ago because it’s just not going to make sense to import things from China.”
Within Canada, the country’s economic prosperity will split along regional lines.
Provinces like Ontario, a net importer of oil, will fall further behind its oil-rich neighbors like Alberta and Newfoundland, he predicts.
It’s already happening, he notes. Ontario is running a $17 billion budget deficit and just approved a 2-per-cent surtax on the rich. Meanwhile, oil-rich Alberta can afford to cut its provincial income taxes, he said. “And if that happens, how long do you think those bank towers would remain in Toronto?”
For Ontario, high oil is a double whammy as it boosts the value of the dollar, making the manufacturing heartland’s exports less competitive.
When economies slow down, they create fewer jobs, he says.
Rubin suggests like the Germans we adopt “zarbeit” or job-sharing. Instead of layoffs, three people will share four jobs and each take home 75 per cent of their former pay.
But if all of this sounds too depressing, Rubin’s vision also comes with several silver linings.
If the world burns less oil, it produces fewer carbon emission. If it becomes too expensive to import products from other countries, it helps restore the local economy. Even manufacturing jobs could come back to North America from China.
Indeed, it’s the poorest countries that have the most to lose from an end to economic growth “because it’s means the difference between two meals a day and one.”
Courtesy The Toronto Star
