Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.1 6/24/83; site hcrvax.UUCP Path: utzoo!hcrvax!chrisr From: chrisr@hcrvax.UUCP (Chris Retterath) Newsgroups: can.politics Subject: Re: Crown corporations Message-ID: <999@hcrvax.UUCP> Date: Wed, 15-Aug-84 18:51:28 EDT Article-I.D.: hcrvax.999 Posted: Wed Aug 15 18:51:28 1984 Date-Received: Thu, 16-Aug-84 03:16:11 EDT References: <740@ubc-ean.CDN> <1050@dciem.UUCP> Organization: Human Computing Resources, Toronto Lines: 117 + I have been thinking about Crown corporations and was interested to see Martin Taylor's (mmt@dciem.UUCP) defense for having them. For some reason this county loves to set up government companies, much more than many other Western nations. I personally think that, as a consequence of our relative economic backwardness and proximity to the largest economy in the world, we want the market to move faster and provide things that we have "deemed" desirable -- therefore, the government is pushed into "doing something" to solve our frustrations. Just going over the items Martin has raised, it is interesting to note how subjective they really are. For example, his point (i) states that a faltering *important* business that is a national asset would be a prime candidate for nationalization. (Note: I am not quoting directly, and all italics (*) are mine; the 5 points as presented by Martin appear below.) Obviously, someone has to decide just *how* important the business is, and be alarmed sufficiently by the poor performance of that business to decide that it will disappear COMPLETELY unless something is done. What I don't think is realized by the doom-sayers is that companies that do go under are often taken over successfully by other parties, with "business as usual" minus the unprofitable bits. Example? Well, if Chrysler HAD gone belly up, do you really beleive that GM/FORD/NISSAN, or other companies would NOT have bought out the manufacturing plants, et cetera? Particularly at bankruptcy prices? Martin places CN into this category of business; do you really beleive that the ENTIRE CN empire would have been disbanded if CN had gone broke? Of course not; private companies would have bought the profitable tracks and useful rolling stock and provided a rail service. Unprofitable rail lines would have been closed down immediately, rather then years later as CN is currently doing, after wasting millions of tax dollars keeping the lines open! In category (ii), a business is non-existant in a field that is *deemed* to be important. Alright, how do you decide? What is important and necessary for some may be overpriced, inefficient, and downright silly for all. Since Martin has no examples in this field, I assume it is because he cannot think of any (I may be wrong), and I cannot think of any myself. Oh yes, there is the case of the guy building fiberglas coffins on an Indian reservation somewhere with government money; for some reason he is having trouble selling the coffins. Seems that the idea hasn't caught on yet. My argument is that this is silly, and that a new venture like this should have been financed privately. Category (iii) covers businesses in a field unlikely to be profitable for a private company. The example that Martin uses in Atomic Energy of Canada, Ltd. This is a bad example given that AECL is likely NEVER to be profitable -- their loss statements are in the order of millions a year. Martin's argument says that AECL brings other profits to the economy and consequently are not net losers. Well, I don't buy this, because the money that is used to run these unprofitable dinosours could have been used to provide other things that the market wants more of. Two can play at this "total social benefit" game -- I would first have to be convined that there ARE other profits coming in and not just to a few small engineering companies affiliated with AECL; and secondly, there IS a cost to the people who have had their money confiscated from other far better investments that probably would have had a higher net benefit! Those lost benefits are not entered onto the balance sheets of national companies! Category (iv) covers nationalization for nationalistic reasons; "...in the national interest". This is an interesting category because it is not concerned with economic efficiency, or, indeed, any sort of rational thinking whatsoever. We want to "own" it -- whatever that means. Why don't you go go and buy stock in a foreign company -- you will then have a far more tangible form of ownership in that company? What exactly are the benefits of having our "own" oil company, anyway? Are their prices cheaper? If so, is it at the expense of our tax dollars? I think that the answer to this is fairly clear in Petro-Can's case -- the gasoline/oil is the same price with the added insult of an extra at-first-temporary-but- now-permanent tax to pay for the company. The only national interest at all applicable would a war or other national emergency, and it is not clear that we need an oil company for that. We fought WWI & II without one, and future conflicts are unlikely to be as prelonged. An oil crisis? C'mon, folks, that legend is dead. How about increased self-sufficiency; we can explore for our own higher priced oil on the frontiers while the world has an oil glut! Category (v) covers a large risk of failure to a new business. Ye gods, has the man never heard of venture capital, bank loans, trust companies, or credit unions? Do we really need a new crown corporation for every high-tech window? The new techie centres popping up all over the hinterland are pure puffery --- political porkbarrels of money handed to places like Peterborough and Dalhousie to hire high priced people from the industries that need them and then provide some of their services to the local fledging non-existant electronics industry! Martin feels that a large backing is necessary to get started; I guess Steve Wozniak didn't agree when he started Apple from his garage. Did Ford need a nationalized industry to start mass producing automobiles? Would we be better off as a nation if we gambled stolen tax dollars on many new industries in the hope of a "jackpot" payoff, or if we left the gambling to those trained people in the financial world who support new companies? Is there really any comparison? Martin makes the comment that we are better off with a functioning De Havilland -- maybe we would be even better off if it was sold off to the highest bidder and a re-vitalized smaller company started selling planes! Here are Martin's original categories, from <1050@dciem.UUCP>: ~ 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). All opinions are my own; comments are welcome. -- Chris Retterath {decvax,utcsrgv,utzoo}!hcr!hcrvax!chrisr