From the Provincial Archives of Alberta’s collection of papers from the late Lou Hyndman comes an interesting case of the economic intelligence capacity of the Province’s financial institution. As the Alberta cabinet’s anxiety rose following the October 1980 federal budget and National Energy Program, evidence was being gathered on how damaging the federal policies were to the provincial economy.
At the end of August 1981 the Office of the Superintendent of Alberta Treasury Branches (at the time the Superintendent of ATB was Fred Sparrow) prepared to update what were called “economic Assessment Reports” aggregated from Treasury Branch managers across the province.
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The highly summarized five-page report divided the province into three “divisions”- Northern, Central and Southern. The report labelled “Confidential” focussed on central drivers of the Alberta economy: commercial construction; private/residential construction; business; and employment. The report was an update of two previous surveys conducted in February and May of 1981.
On the commercial construction front, the report noted the assistance of government capital spending on roads and schools as well as the cancellation of expansion plans due to the “continuing cycle of high interest rates.”
With respect to private/residential construction, while noting the same or increased levels of activity, the Superintendent observed there “has been a definite, province-wide reduction in this sector.” The residential construction sector had been extremely frothy in the early 1980s as a result of vast immigration into the province and limites supply compared to the demand. Indeed, the report went on to say:
As evidenced by all reports received from across the Province, the Housing Market has been virtually destroyed. With interest rates at their current levels, the majority of Albertans do not qualify for even a modest mortgage. The consequences of this will escalate monthly as mortgages come up for renewal/ Public pressure for Government intervention will intensify in the months ahead if rates do not subside.
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Source: Provincial Archives of Alberta, PR1986.0245, (Hyndman papers) Box #47, File #666.
Whether ATB’s policy advice on mortgage subsidies was exactly a dispassionate analysis is doubtful as ATB was first and foremost an institution interested in expanding its business which might explain the strong language used in this section.
On Business lending, the provincial lender noted the same or increased business activity in its August update. However, the detail noted a slippage due to high interest rates, reduced sales, higher operating costs, and the poor investment environment caused by uncertainty in the resource development sector. A slowdown was reported with a “significant increase” in branches reporting bankruptcies, notably in the northern division. 
With respect to employment, the overall result was employment at the same or increased levels, with ATB noting that deterioration in the strength of the commercial and private construction sector and business investment has not translated into employment losses “to any appreciable degree.”
What comes out rather clearly is the damaging impact of high interest rates on the Alberta economy. Forty years after the National Energy Program, its economic impact continues to be debated largely in terms of the Canadianization of the industry and price controls on oil, with less emphasis on the crushing effect of the Bank of Canada’s interest rate policy. This analysis confirms that brutally high interest rates, which afflicted the national and continental economy, was a very large factor in the province’s relative decline over the 1980s. Given the capital intensity of the energy industry which necessitated both high levels of debt and equity raises, it is understandable Alberta’s economy faced a mounting economic crisis.
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