Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.1 6/24/83; site dciem.UUCP Path: utzoo!dciem!mmt From: mmt@dciem.UUCP (Martin Taylor) Newsgroups: can.politics Subject: Re: Crown corporations Message-ID: <1050@dciem.UUCP> Date: Tue, 14-Aug-84 17:45:54 EDT Article-I.D.: dciem.1050 Posted: Tue Aug 14 17:45:54 1984 Date-Received: Tue, 14-Aug-84 22:20:17 EDT References: <740@ubc-ean.CDN> Organization: D.C.I.E.M., Toronto, Canada Lines: 116 Jim Robinson writes: ****************** Unfortuneately, that is all the government is doing in such situations, namely acting. It is almost impossible for the government, which is not constrained by the market place ( as far as being competetive and having to have to justify their actions to sharaholders ), to operate in the private sector as if it were a private entity. They KNOW that they cannot go bankrupt, and that knowledge almost ensures that they will not be as efficient as a private sector company. If things go bad for them they merely reach a little deeper into the infinite well ( at least they think it is ) that is the taxpayers pocket. I have long come to the conclusion that the purpose of a Crown corporation is NOT to make money ( and thus create wealth ), but rather to carry out some other specific goal. e.g. Petrocan's goal is supposedly to help Canadians have some control over their oil resources and not to leave the multinationals with all the power. ( It certainly is NOT to give Canadian car drivers a break since they charge the same as the other oil companies but do not pay a cent in taxes ) ****************** What should be the ideal natural history of a Crown Corporation? I know, I know, some of you would say "stillbirth". But let's suppose that there is a reason for having a Crown Corporation rather than a direct element of the Civil Service to perform some action on behalf of the people (that's us, folks). Firstly, why is the Crown Corporation there? There are several reasons, all leading to different develomental paths: (i) one or more failing companies in an important field, where their failure might lead to a monopoly or to loss of the field for Canada (CN is a good example); (ii) non-existence of business in a field deemed important; (iii) need for a business in a field unlikely to be profitable for a private company (AECL); (iv) domination of a field by foreign companies, where startup of a new company would be difficult but in the national interest (Petrocan). (v) initiation of a business having considerable risk of failure but potential for great profit (e.g. micro-electronics). Typically, a gambling house will win if it has enough backing, but an individual bettor is more likely to lose because of fluctuations that at some moment pass his ability to pay, even though the expectation may be in his favour. There are probably other reasons, as well. Also, I bet that lots of Crown Corporations are created for other reasons that I would call illegitimate (Canada Post, for example). Crown Corporations (i) may need considerable infusions of public money until the revived company or companies can stand on its/their own. When they are profitable, I don't see any argument one way or the other for selling them to someone who might see a way to make them even more profitable (though I wouldn't want to sell off CN or Air Canada, no matter how profitable they might be). Crown Corporations (ii) and (iv) also demand public money, possibly a lot in case (iv), but perhaps not so much in (ii). In these cases, there seems to be a better case for going private once the companies are sturdy. However, because it is assumed (by me) that the reason for the Crown Corporation existing in the first place is that it is important for the country that there be a Canadian presence in the field, therefore we have to be very sure that the company will not fail once it gets into private hands. Crown Corporations (iii) will never be sold, and probably will always cost more than they earn. Their benefit is in the increased profits that they can bring to other parts of the economy (nuclear techniques and materials from AECL, for example). They are not (or should not be) net costs to the taxpayers, because the money going out through them comes back from many sources. Crown Corporations (v) will either die or be sold at a large profit to the taxpayers (or might be kept, to feed their profits into the Treasury, depending on your political philosophy). One illegitimate reason for creating a Crown Corporation is that the organization cannot function under Civil Service regulations. It is the regulations that should be changed, not exempting one small part of the Civil Service from them. ALL the arguments that were used in deciding to create Canada Post could be applied equally well to the Defence Department! Canada Post should be a part of the Civil Service and therefore (don't laugh) directly responsible to the people of the country. It should never be a profit-making organization, since communication is essential for the country's welfare. As with excessive gasoline taxes, excessive postal rates inhibit the economy. (There are separate arguments in favour of having very high gasoline taxes.) I don't think there is any natural law that says the profit motive will create efficiency and nothing else will do so. Generally, the motive of being perceived by onesself and others as performing well is a pretty powerful one. Lack of recognition is a great morale- destroyer, and one that I think is responsible for a lot of Canada's sad labour history (I mean that the workers don't get recognized as people with a stake in what they are doing). The problem with the Civil Service is similar, and one reason (illegitimate) for forming Crown Corporations: "We can't pay the top people enough in the Civil Service to get good executives and managers." What a damning comment on a public that insists on having a good Civil Service but also on not paying adequately for that service. There seems to be no single ideal natural history for a Crown Corporation. Some should be formed, stabilized, and sold; some should grow and be perpetually supported; some should grow and die when the need for them ceases. There should be no demand on them to be efficient and profit-making, unless that is part of their specific mandate. It is probably better that we have a functioning De Havilland that will sell its planes when the world economy recovers from its Reagan staggers than to let it die because it costs a billion to keep it through this period. (I recognize that there are legitimate arguments on the other side, but that's where I would put my $250 or whatever I contribute to them). Perhaps the top brass made some bad judgements, but perhaps they didn't and things could have been much worse. -- Martin Taylor {allegra,linus,ihnp4,floyd,ubc-vision}!utzoo!dciem!mmt {uw-beaver,qucis,watmath}!utcsrgv!dciem!mmt