Demographic Shift challenges Alberta
by Margret Kopala

A shorter version of this article appeared in the Ottawa Citizen, November 3, 2008

The election of Alberta’s first NDP member of Parliament in two decades places Edmonton, politically speaking, on its way to becoming another Toronto or Vancouver. The shift, electorally speaking, isn’t difficult to trace.

Early in their candidacy aspiring politicians learn to target their voter base. For Liberals and Conservatives, this tends to be among home owners in established neighbourhoods. For the NDP, those in Canada’s urban “new left” and more closely aligned with identity, environmental and anti-globalisation issues increasingly supplant the labour and farm movements forming its traditional base.

Hard fought conservative victories in Edmonton-Strathcona against Liberals, four by Rahim Jaffer, was proof enough of this growing urban dynamic in the city of Edmonton even before NDP MP Linda Duncan, an environmental lawyer, surged after the sponsorship scandal and was elected in October. Settled historic neighbourhoods around the University of Alberta immediately south of the North Saskatchewan River have access to trendy Whyte Avenue and are flanked by sprawling suburbs to the south and east.

The riding’s demographics include immigrants (17 per cent), the single, divorced and widowed (61%) and the majority of Edmonton’s francophones (3 per cent). But in a city where in five years the population has grown 10 per cent and at times received 1,600 newcomers a month thanks to Alberta’s oil-fuelled economic boom, it was inevitable that one riding would tip to demographic shifts affecting not only Canada’s major cities but the whole of the western world.

So far for Edmonton, a boom in real estate and infrastructure demands are its two, apparently modest, effects.

On the global level, the effects are more worrying.

Much analysis is emerging in the wake of declining markets and fallen financial institutions. Among these, last December’s Atlantic Monthly considers the cultural importance of homeownership and finds it has deep roots. Most western democracies gave property owners the franchise first, writes Clive Crook; homeownership, the theory goes, benefits the nation because homeowners are more invested both in their property and in the community and so contribute to social stability. Accordingly, mortgage interest rate deductibility – a form of subsidized home ownership Canada’s bean counters shrewdly avoided - has been standard U.S. policy. The United Kingdom too allowed mortgage interest deductability until Margaret Thatcher phased it out, though even she understood the benefits of what George W.Bush calls the “ownership society” when she privatised council homes.

It was former U.S. President Bill Clinton, however, who created the housing bubble when he turned homeownership into a social program. According to the Financial Post’s Terence Corcoran, Clinton’s National Homeownership Strategy loaned money to people who couldn’t afford to pay it back while computer-modelled mortgage derivatives and credit default swaps consumed Wall Street and the rest of the world’s banking community. The rest is history and it is still in the making.

So far no one is discussing the elephant in the global ballroom. Why the need for expanding housing inventory? Why the stratospheric real estate values?

For answers look to post-war western democracies where shifting demographics have been a fact of life. Leading the pack, the United Kingdom opened its borders first to citizens of Commonwealth countries and then to those of the European Union. The prosperity that followed would mask the decline in civility and threats to a culture and security built over millenia but, no matter, the housing and financial markets boomed. Up next: the U.S. would not only facilitate but cater to vast numbers of the socially dispossessed and geographically transplanted, including millions of illegal immigrants, who needed some measure of social stability. Meantime, Europe, with its own variations on the demographic shift, is caught in the global financial turmoil where large trade deficits (Hungary) and currency mismanagement (Ukraine) will, as London’s Anatole Kaletsky in The Times observes, “decide the fate not just of banking systems but entire nations”.

Heavy spending on housing, concludes Crook in the Atlantic Monthly, twists the pattern of economic growth. It bleeds investment from those areas that expand the economy and improve future living standards, such as commercial building and business equipment.

Fortunately for Albertans, the housing boom followed the economic boom, not vice versa (though its condominium market, like that of Vancouver and Toronto, now appears over inventoried). In addition, Albertans who also survived the late seventies boom-bust cycle fueled by oil and speculation will now assuredly survive any slump caused by the economic downturn. Even if today’s newcomers leave as quickly as they arrived, the oil will continue to flow and mortgage payments will be up to date. Edmonton-Strathcona could yet return to the Conservative or Liberal fold. But for a nation whose social and financial trends soon follow those of the U.K. and the U.S., the warning signs posed by shifting demographics cannot go unheeded.

MARGRET KOPALA’s column on western perspectives appears every other week.

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