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McQuaig: Privatization poses an existential threat to Canada’s public wealth

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Author and investigative reporter, Linda McQuaig’s latest book offers a very readable and succinct review of the history of key Canadian public services and the threat that privatization poses to our country’s public wealth.

She lays out how the virtues of public ownership have increasingly been replaced by the dogma that the market does all things better. McQuaig documents how this agenda has accelerated in the past four decades through deregulation, privatization and free trade initiatives.

The successful implementation of this three-pronged approach has, in her words, diminished “our collective power to own and control key aspects of our economy, our country, and our lives, thereby shrinking our democratic capacity as a nation.”

Of note, however, is not just that McQuaig rejects privatization—which she does in convincing fashion through six distinct chapters on a range of public policy issues—but that she outlines clear evidence of positive examples of sound public infrastructure and policy making.

Included here is a brief mention of C.D. Howe, Canada’s Second World War “Minister of Everything”, who presided over twenty-eight wartime Crown Corporations, employing 229,000 workers in key sectors including aviation, communications and weaponry manufacturing. The public sector’s track record in research and direct manufacturing both assisted in the war effort and was the birth of the modern Canadian nation state.

McQuaig begins with a recap of the 2015 federal election where Justin Trudeau’s Liberals moved from third place to government based on a strong campaign which included a popular commitment to spend billions on infrastructure renewal.

Within three months of that election, Trudeau attended the Davos World Economic Forum. Here Corporate Canada, in the presence of Dominic Barton (McKinsey & Company), Larry Fink (Blackrock, who would soon lure the head of the Canada Pension Plan Investment Board, Mark Wiseman into his firm) laid the ground work for the private sector’s central role in the proposed Canada Infrastructure Bank (CIB).

Corporate Canada had a willing partner for their vision of infrastructure renewal in Trudeau’s new Finance Minister, Bill Morneau, himself a longstanding Bay Street player prior to entering politics in 2015 (defeating McQuaig who ran for the NDP).

Morneau’s hand-picked Economic Advisory Council served up a vision that the Canada Infrastructure Bank would embrace, that being that the private sector didn’t just want to build infrastructure, they wanted to own and operate public infrastructure, a virtual no-risk, high-reward game plan, one that the public would finance and backstop.

Budget 2017 created the CIB which McQuaig correctly outlines as a radical departure from the infrastructure platform that Trudeau ran on in the 2015 election. Yet again, the federal Liberal’s had out-campaigned the NDP on the left, and once in office tacked right, in a pro-privatization direction.

McQuaig uses a number of experts to refute the case for privatization of infrastructure: there is simply no way to make the numbers work when government can borrow money at 2.5 percent, versus the expectation by private investors of a rate of return of 7 to 9 percent.

Former Parliamentary Budget Officer, Kevin Page is both succinct and caustic in stating that, with numbers like these, the private sector will, “rob us blind.”

The CIB has been slow off the mark. Public opposition caused the Liberals to retreat from one of their first trial balloons, that being the selloff of Canadian airports.

The Canadian Union of Public Employees has been critical of the CIB since its inception, citing the multi-billion dollar light rail project in Montreal, the Reseau Express Metropolitan, as key example of the advantage of public sector borrowing costs being abandoned.

McQuaig moves on to a series of chapters which profile positive examples of public ownership and the severe consequences of privatization.

The former Mike Harris Conservative government in Ontario, in a triumph of ideology over public interest, sold off Highway 407 (north of Toronto) for $3.1 billion, in 1999.

A 99-year lease was agreed to which offered an iron-clad guarantee that private interests would make billions off this asset that the National Bank values at $28 billion, and others believe could be worth as much as $45 billion by 2026.

McQuaig outlines how the private consortium operating the highway reported profits of $900 million in 2014. That the public built a highway and then saw it sold off at the cost of billions in lost revenue is ample justification for the author to call this the “worst deal of the century.”

She then turns to Canada’s railways. The CPR opposed the creation of the CNR in 1921, which is ironic given the level of public subsidy CP had enjoyed in the early years of the nation.

The CNR’s history is fascinating, including its positive track record with labour relations with its large workforce of over 100,000. Its role in linking up many rural communities, enabling massive Canadian immigration, and its entry into radio broadcasting are fascinatingly chronicled in the book by McQuaig.

By 1932 the federal government moved to purchase the CNR radio network and to introduce legislation to create a national public broadcaster, the CBC. Conservative Prime Minister, R.B. Bennett said, “this country must be assured of complete Canadian control of broadcasting from Canadian sources, free from foreign interference or influence.” How times have changed!

The privatization of CN in 1995 along with the wave of deregulation within the rail sector led to our current state of affairs which McQuaig documents in detail. She refers to an important book by Bruce Campbell, The Lac-Mégantic Rail Disaster: Public Betrayal, Justice Denied, which tracks in great detail the havoc wrecked on the Canadian rail system by American Hunter Harrison, not to mention the Harper government’s deregulation that the federal Liberals have largely left intact.

The birth of public power and the creation of Ontario Hydro is canvassed in detail. Widespread support for public power began at the municipal level and was effectively imposed upon a provincial Conservative regime that was not supportive at the outset. Lower rates and better service levels drove strong levels of public support.

The subsequent attempt to privatize Ontario Hydro by the Harris government, which was blocked by the courts, and the partial sell off by the Liberal government of Kathleen Wynne led to the chaos that is so evident in Ontario’s energy sector today.

The book documents in detail, two public success stories that sadly no longer exist.

The birth of the University of Toronto’s Connaught Laboratory began with dedicated public scientists discovering a serum to combat diphtheria, the leading killer of children under fourteen in 1913.

The same scientists produced a tetanus antitoxin which dramatically reduced the death rate of soldiers from infection or disease. The discovery of insulin by Canadians Frederick Banting and Charles Best was another dramatic product of the Connaught Lab.

In the 1950s, Connaught was part of groundbreaking development of a vaccine against polio, and played an important role in the global eradication of smallpox. The lab was profitable throughout its history, but was opposed by the university’s Faculty of Medicine and conservative university governors. Sadly, it was sold off for $26 million in 1972, and the private interests gained important ground which would affect pharmaceutical drug prices dramatically.

It is not hard to imagine that Canada could have had a less costly, fully universal pharmaceutical program had Connaught not been privatized, and had a subsequent Conservative government not extended generous drug patent protection to Big Pharma.

Public Banking and its history in Canada is outlined in detail, too. McQuaig provides convincing evidence to call for a return to postal banking, run by Canada Post, which would provide a valuable service to large portions of the Canadian population who the chartered banks long ago stopped serving.

The book ends with a detailed critique on the oil sector and the abandonment of public ownership options that would have been better for both our environment, not to mention the Canadian economy as a whole.

McQuaig has offered up an important work that ought to be used to spawn debate on the strong pubic options that still remain over key components of our economy. While many of these options are no doubt harder to pursue due to trade deals and the almost complete lack of political courage so evident today, the fact is that positive public options remain.

Ultimately, it falls to the public at large to assert their common will, as occurred with the birth of both Ontario Hydro and Medicare.

In our current cyber age where technology more often serves to isolate as opposed to unify individuals and communities, McQuaig offers important historical lessons to assist with current challenges and much needed public debate.

Research matters. Our history matters. The false solutions offered up by corporate Canada represent ‘fake news’ of the highest order. The public interest that most value is best served by exposing disinformation and offering up a positive public vision for the kind of Canada we want. To this critical end, McQuaig’s latest work makes an important contribution.

Paul Moist is a retired labour leader and research associate at the Canadian Centre for Policy Alternatives.

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