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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
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