All things environmental

Musings about the environment and all it touches, from education to city planning

Oil rich states

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There was an interesting op-ed piece by Paul Krugman today about the performance of Texas governor Rick Perry.

Perry, from oil-rich Texas, is hailed as a model by the Republicans, and seems to be a serious candidate for the Presidential race.  Krugman rightly points out that the Texas economy is benefiting from the oil revenues and Perry’s governance has little to do with its success.  Or is it purported success?  The state’s GDP is high, there is investment, but unemployment remains high. Krugman also points out that what the Texas economy is really about is lax regulations and cheap labour:

What Texas shows is that a state offering cheap labor and, less important, weak regulation can attract jobs from other states. I believe that the appropriate response to this insight is “Well, duh.” The point is that arguing from this experience that depressing wages and dismantling regulation in America as a whole would create more jobs — which is, whatever Perry may say, what Perrynomics amounts to in practice — involves a fallacy of composition: Every state can’t lure jobs away from every other state.

In fact, at a national level lower wages would almost certainly lead to fewer jobs — because they would leave working Americans even less able to cope with the overhang of debt left behind by the housing bubble, an overhang that is at the heart of our economic problem.

So when Perry presents himself as the candidate who knows how to create jobs, don’t believe him. His prescriptions for job creation would work about as well in practice as his prayer-based attempt to end Texas’ crippling drought.

This doesn’t bode well for our southern neighbour, should Perry win the ticket.  It also echoes what is often said here about Alberta: with oil royalties coming in, a monkey could run the place.  I’ve always been curious about this saying.  Would Alberta have been better off with a real monkey (say, a macaque) as Premier?  Meaning, someone who doesn’t actively court the oil industry and offers neither subsidies nor tax breaks – would Albertans be wealthier?  A comparison with Norway may be interesting in this respect.

Be that as it may – it is easy to believe that someone has talent for governing when the going is easy.  Texas has population growth and high oil prices – but some of the lowest level of health care in the US.   And this sort of belief is influential, from the US to Alberta and the Harper conservatives, that see Canada through their oil lenses.  But, unfortunately for us, it is magical thinking.

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Written by enviropaul

August 16, 2011 at 10:49 pm

Posted in Uncategorized

One Response

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  1. Hi, this is a comment.
    To delete a comment, just log in, and view the posts’ comments, there you will have the option to edit or delete them.

    Mr WordPress

    August 16, 2011 at 10:49 pm


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