Conservative Mismanagement

As we, here in Alberta, watch our current government work to dismantle public services in an effort to push privatization. I would like to take a quick look at the conservative legacy of privatization, both provincially and federally. 

Today, after seeing the reaction of healthcare professionals online to the advertisements for Telus’  Babylon health app, I tweeted out a reminder that Telus Communications was once the Alberta Government Telephones Commission. A crown corporation that provided telephone service to Albertans located outside of Edmonton. 

For reference, between 1975 -1996 the Government of Alberta (Which happened to be PC) sold their shares in a total of 6 corporations to the tune of  $3,439,000,000.00.

The AGT, Alberta Energy Company, Syncrude Canada, Edmonton Communications, Vencap Equities Alberta and CTV2.

  1. The initial public offering of shares in AGT in 1990 raised 896 million and in 1991 the GoA sold its remaining shares for 839 million. The AGT was renamed Telus Corporation after it was privatized. 
  2. Telus Corporation bought Edmonton Telephones in 1995. 
  3. The Alberta Energy Company was privatized in stages, originally a crown corporation the AEC offered a sale of public shares in 1975 (which reduced the Alberta government’s stake to 50 per cent). The Alberta government received $104 million in 1985 for shares sold to AEC and $456 million in 1993 through a secondary offering of the provincial government’s remaining shares. Of that revenue from the sale in 1993, $273 million was transferred to the province’s General Revenue Fund, and the remaining $183 million was used to repay loans made by the Alberta Heritage Savings Trust Fund to AEC.
  4. The GoA sold their 16.7% ownership in Syncrude Canada in 1993 
  5. The GoA sold their shares in Vencap Equities for $174 million and “Special Loans to Vencap”.
  6. CTV2 also known as Access or the Alberta Educational Communications Corporation was privatized in 1995 and is now owned by Bell media.

*It is important to note that the privatization of Crown corporations can have a negative fiscal impact as their remittances to the government as private entities could be offset by the loss of dividends and investment revenue.  From an accounting perspective, the sale of an asset such as a corporation has an impact on the government’s fiscal position depending on the gain or loss from the sale. Selling corporate holdings impacts budgetary deficits and net debt based on the difference between the sale proceeds and net book value.  If the government has invested huge amounts into a crown corporation the sale of that corporation may not be enough to recover the amount of the original investment. Of course the opposite can also be true, but it’s difficult to determine which is which externally as allowances for valuation aren’t generally available to the public from what I can tell.**

When we look at trends of privatization Federally, we find that much of the privatization of federal services was at the hands of Conservative governments as well (*cough, all of it *cough*), which, in my opinion, shines a light on the lie of the “Fiscally Responsible Conservative Government”. If a government is effective in their financial management, there should be no need to sell off crown assets. 

For reference;

  1. Air Canada was privatized in 1988 (PC), 
  2. Cadadair was privatized in 1986 (PC), 
  3. CNR was privatized in 1995 (PC)(Bill Gates holds majority shares in the Canadian National Railway).
  4. Petro-Canada was privatized in 1991 (PC) and operated as a private, independent corporation until it merged with Suncor Energy in 2009 (PC). 
  5. Polymer Corporation was a successful crown corporation that operated from 1942 until it was privatized through its sale to NOVA corp in 1988 and its subsequent sale to Bayer AG of Germany in 1990. Polymer Corporation was featured on the back of the 1971 ten dollar bill and has been cited as an example of how a crown corporation can be profitable and contribute to the economy over a sustained period of time.

Conservative governments like to play act at being sound financial managers, yet history shows us they are, in fact, incapable of maintaining any kind of financial balance whether provincially or federally. Since 1957 they’re been transforming balanced or even surplus budgets into deficits like shitty magicians, right before our eyes and lying about it to our faces.

Even when conservatives inherit a deficit, like Mulroney did ($40B), they somehow manage to make things about $474 billion times worse. Mulroney started selling Crown assets to bring down his deficit and introduced the GST. He also sold the refinement and lucrative parts of Canada’s once profitable medical isotope industry to MDS health Group and kept the refinement (the expensive part for us) at the ACEL reactor at chalk river which eventually broke down after Harper fired the president of the Canadian Nuclear Safety Commission.

Harper then bailed on the medical isotope business altogether, abandoning the 2 reactors that were supposed to be taking over from Chalk River. This resulted in Canada being in breach of contract with MDS health and being sued for $1.6 B. Thanks Steve. 

Evidence of poor conservative management is illustrated in the handling of Nortel and the technology that was put up for auction as well, but hey, maybe  conservatives just aren’t great at managing tech businesses, right? At least they cut corporate taxes, that’ll create growth and protect jobs, right?

Well, no actually. A recent study from the Canadian Centre for Policy Alternatives shows that reducing federal and provincial corporate taxes has not created jobs. What it has done is help to increase the profits of Canada’s 198 largest companies by 50% since 2000 and this report from the Globe and Mail shows that, instead of investing profits back into their business companies are now hoarding cash – and that includes anything that comes their way in the form of tax cuts. 

What people seem to misunderstand is that tax cuts can create jobs, just not corporate tax cuts. The tax cuts that create jobs are actually income tax cuts, because they stimulate the economy through increasing the purchasing power of citizens, which increases demand, which forces businesses to keep up to that demand through increased production, which creates jobs. Consumer spending drives 68% of economic growth. Targeted income tax reduction for low and middle income families are more effective than across the board tax cuts (sounds a lot like what the Liberal government is trying to do), particularly during a recession as low and middle income families spend every dollar they get to keep in the local economy. 

Corporate tax cuts don’t seem to do much at all, according to a 2018 study by the Institute of Policy Studies in the US. The study compared 92 publicly-held corporations who paid less than 35% in corporate taxes. What it found was that between 2008 and 2015, these corporations lost jobs while the overall economy increased jobs by 6%. Instead of creating jobs or contributing to the economy through taxes, these companies bought back their own stocks and increased CEO pay.

So, what does all this tell us?

In short, it shows that Conservative Governance as it has existed in Canada thus far is ineffective and even detrimental to our economic health. The behavior we’re seeing from our Conservative government in Alberta is not, in fact, new. Jason Kenney and his team are just really bad at the act that their predecessors tried to teach them and they keep accidentally showing us their cards.  

Calamity out.

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