Pension funds fuel privatization in Canada and Québec
Photo from BNN.ca
The federal Liberal government was elected in October 2015 on a platform that included a key proposal of some $100 billion in infrastructure spending, which they claimed would involve a significant expansion of the infrastructure program of the Conservative government that preceded them. This proposal was highly visible and understandably popular given the seriously underfunded and decaying state of much public infrastructure across the country — itself a result of neoliberal tax reductions and spending cuts over 30 years. What was not made clear during the election, but is now coming into focus, is that the now-governing Liberals’ infrastructure program, centred on the new Canada Infrastructure Bank, is actually a privatization bonanza — a plan to accelerate the involvement of private, profit-focused capital in the planning, ownership andmanagement of our vital public infrastructure.
A peculiar but important aspect of this destructive policy is the central involvement of workers’ pension funds in the process. It is not widely reported that the large Canadian and Québec public pension funds have become key institutional forces supporting and reaping profits from the privatization and financialization of public infrastructure, both here and, to even greater degree, internationally. If these funds are becoming agents of privatization, it is because they are embedded in a private capitalist financial system which is increasingly predatory and destructive.
Nearly all workers belong to either the Canada or the Québec Pension Plan, and a shrinking minority — now less than one-third — belong to workplacebased defined benefit pension plans such as the Ontario Teachers’ Pension Plan (OTPP), the B.C. Municipal Pension Plan or the Ontario municipal plan, OMERS. In the past 10 years, the large volume of funds that underpin nearly all of these plans have been increasingly invested in a relatively new asset class designated as infrastructure. This means they are becoming investors in and direct owners of hospitals, schools, toll highways, seniors’ homes, bridges, rail systems, energy systems, water utilities, airports and marine ports all around the world. As investors, these huge pension funds and their banking-sector partners view these already-built assets as steady new sources of value — of profits and investor rate of return — to be extracted. In fact, Canada’s pension funds have become such significant global players in the so-called international infrastructure market that the U.K.’s Telegraph newspaper recently referred to them as the “new masters of the universe.”
But private finance in infrastructure is not a new phenomenon. Since the 1979 election of Margaret Thatcher, the privatization of public assets and infrastructure has become an almost universal centrepiece of neoliberal public policy — including, all too often, the policies carried out by nominally social-democratic parties. Experience shows that the wages and job security of public-sector workers are undermined by the accelerating privatization of public infrastructure and public services. But infrastructure privatization can also draw down the wages of all of us through indirect charges. Whether it is tolls on highways, user fees, rising tuition and housing costs, or skyrocketing hydro rates, infrastructure privatization involves a drive to extend financial ownership and control over vital public goods in order to extract profits and re-distribute paid wage incomes from workers to wealthy owners. This kind of privatization is a key part of the larger neoliberal class project — a strategy for re-engineering our stagnating capitalist economies such that the incomes and wealth of the rich can continue to grow at the expense of the working classes. It is a way to make austerity permanent.
This flow of private finance into vital infrastructure also raises other questions. For example, in the context of the serious continuing crisis of water service provision and infrastructure in so many First Nations communities, it is particularly perverse that the Ontario Teachers plan has invested millions into existing water infrastructure in Chile in 2007. Such investments are not, as is sometimes claimed, about improving water provision to low-income Chileans. To the contrary, this investment (and many others like it) is intended to take monopoly private control over an essential public good that people will have no choice but to pay for regardless of the price. The murderous Pinochet dictatorship — itself a direct product of U.S. imperialism — cultivated one of the most extreme neoliberal legal zones on earth, including a 1981 law that officially designated water as subject to private ownership and commodification. The fact that Canadian pension funds (and some other finance capitalists from Europe) were keen to buy up already-privatized water utilities in neoliberal Chile — rather than help to finance water service provision in First Nations and other local communities here with uncertain “returns” — follows directly from their own internal logic. These and other pension funds have in fact been quietly buying up water and energy utilities, highways, airports, hospitals, ports, and a wide range of similar infrastructures not only in places like Chile but also the U.K., parts of Europe, the U.S. and Australia. In this respect, these Canadian pension funds have become financial predators.
In this context, the federal Liberal government and its new infrastructure bank can be seen as a vehicle for bringing this same neoliberal dynamic home to Canada. In February, it was announced that Jim Leech, the former CEO of the OTPP, had been named “Special Advisor on the Canada Infrastructure Bank.” Leech was in the leadership at OTPP when they initiated their Chilean water utility investments, and OTPP has since become one of the world’s largest investors and owners of privatized public infrastructure. In 2007, he publicly urged the then-new Harper government to pursue privatization more whole-heartedly, with a sly hint that previous governments had not had the stomach to do it:
It’s really a matter of the political will to have assets that have in Canada traditionally been held in government hands turned over to the private sector. (…) We’ve encouraged Mr. Flaherty, and it’s good to hear government policy talking about taking definitive steps.” (Globe and Mail, Nov. 27, 2007.)
The Harper government pursued precisely such “definitive steps” by establishing the crown corporation PPP Canada in 2009 and setting rules requiring provincial and municipal governments to prove that they at least considered public-private partnerships (P3s) if they wanted access to federal infrastructure funds. During the Conservatives’ tenure, P3 infrastructure continued to gradually expand across the country, often with the active support of provincial governments of all stripes. What David Harvey has famously called “accumulation by dispossession” has been all too active in Canada, and pension funds such as OTPP have become important and active leaders in an emerging P3 industry, both in Canada and internationally. The OTPP is not alone in this — CPPIB, the Québec Caisse de dépôt, OMERS, OPSEU Pension Trust, and the B.C. public sector funds — are all active in this growing industry. Smaller funds and those in the private sector are also involved as investors, usually through specialist fund managers such as Brookfield Asset Management, Fiera Capital and others. It is likely that all medium and large-sized funds now invest in infrastructure, either directly or indirectly.
Bankers and bridges
The biggest pension funds want even more infrastructure opportunities, and Jim Leech is now in a key position to provide the ultimate bridge between the deep pockets of Canada’s privatizing pension funds and this proposed Canada Infrastructure Bank. Recent federal announcements of two separate formal exercises to examine the merits of privatization for Canada’s eight largest airports and 18 marine port facilities will be conducted, respectively, by Crédit Suisse and Morgan Stanley. That such important public infrastructure assessment and planning is being privatized into the hands of these investment bankers is significant in itself.
Of even more immediate relevance, a massive new $5.9-billion light-rail project called Réseau électrique de Montréal (REM) has been proposed for part of the region of Montréal — a project that was entirely planned, and will be owned and operated, by the Caisse de dépôt et placement du Québec (CDPQ, the fund that manages the QPP and other Québec pension funds). It has been described as the largest P3 infrastructure project in Québec history. An impressive community and trade union opposition coalition (Trainsparence) has emerged in response, arguing that the privately-planned project is not ecologically sound and serves corporate real estate and financial interests rather than democratically determined transportation needs.
Much of what is called public infrastructure was either established by public authorities or taken into public ownership — even in the earliest periods of the most unregulated capitalism — for reasons that still make sense today. Infrastructure is often a natural monopoly, prone to self-enriching and parasitic ownership that can threaten both social stability and the profitability of other businesses. In the 19th and early 20th centuries, even very mainstream economic theory and conservative politicians accepted and even championed a role for public ownership of these infrastructures. The risks and costs of most large projects (canals, railways, energy, water systems) were so great that they were sensibly socialized. Of course, like so much of the hemisphere, Canada’s capitalist development was intertwined with its destructive and genocidal colonial project, which among other things meant that the social benefits that flowed from this early form of managed capitalism were profoundly uneven and riven with colonial (and racial) disparities and a shifting but patriarchal gender order. Within that historical frame, we can also see that various kinds of class and democratic struggle — often led by socialists and radicals — did win certain battles for specific social provisioning and government spending on improvements to the built environment. Today’s new Liberal infrastructure program (now tightly linked to the Canada Infrastructure Bank) involves facilitating the continuing neoliberal roll-back of those past victories, while deceptively claiming to protect them.
There is a bitter irony in seeing workers’ pension funds being implicated — alongside banks and other promoters and profiteers of privatization — in such a far-reaching neoliberal project. On the other hand, it offers us an opening for oppositional strategies. Trade unions, community organizations and advocates for improved and expanded public services and infrastructure can make common cause around our opposition to this agenda and to those who are pushing it — including these pension funds. In particular, we need to take on and challenge the pension funds that are funding and colluding with pro-privatization lobby groups like the Canadian Council for Public-Private Partnerships. We need to loudly affirm at every opportunity that we do not accept the argument that workers benefit when pension funds take advantage of the neoliberal structural adjustments imposed on other countries, including through NAFTA-style investment treaties.
To those quick to defend these pension funds by saying they have legal obligations to maximize their returns regardless of the social costs, we ought to respond that any such obligations should be revoked if they entail this kind of social damage. To those who think that workers gain when their pension fund reports big profits from such investments, we can point out that the history of privatization and P3s makes it clear that they are a corporate boondoggle that hurts affected workers and the publicsector partners. They cost more than public ownership, they socialize the risks incurred by private business, and they result in less accessible and more expensive services and infrastructure. Toll roads, user fees, higher tuition, water rate increases, hydro rate spikes, the list goes on — these things are not in the interest of workers even where some small fraction of these extracted profits may cycle back into a pension cheque. Finally, to those who argue, along with Thatcher, that “there is no alternative,” that we need to capture these profits from privatization in order to keep our pensions secure, we need to respond: any pension system that rests on such a profoundly anti-social foundation is part of our problem — and must be transformed.
It is in our collective interest, and would be a tremendous act of social and international solidarity, to develop stronger and more coherent strategies for blocking this cooperative neoliberal venture between governments and Canadian pension funds. How can we do this? Trade unions and workers who belong to pension funds involved in this process must find ways to publicly and vocally oppose it. All of us need to build new social forces and movements capable of resisting all further attempts to privatize public services and infrastructure, whether we are talking about water, energy, hospitals, schools, bridges and highways, airports, ports, seniors’ residences, student housing or any other public facility or service. This means organizing much more substantial material and political support for grassroots opposition movements such as Defenders of the Land and Idle No More, Trainsparence in Québec, Keep Hydro Public/Hydro One Not For Sale in Ontario, or even Chile’s Movimiento por la Recuperación del Agua y la Vida, a broad social and Indigenous peoples’ movement struggling to re-assert public control over their water systems. It also means demanding to know more about what our pension funds are actually doing, and demanding a significant change of course.
Alternatives and movements
As important as this defensive resistance is, it is equally important to fight for an alternative. We are not defenders of the grossly inadequate status quo, particularly with so many of our services and infrastructure being woefully underfunded. The Friends of Public Services project, supported by CUPW and a few other unions, was a great example of a more positively framed alternative. FPS champions an agenda for democratized public infrastructure that begins with expanding postal services to public banking, internet, and even energy distribution. These proposals link easily with an agenda for immediate action to accelerate the transition away from climate destructive fossil fuels and toward ecological alternatives. Like the Leap Manifesto project, Friends of Public Services also situates its work in explicit recognition of the leadership of Indigenous and First Nations land rights defenders whose work addresses pipelines, water rights and colonial dispossession. These efforts offer us a strong basis on which to build the kinds of movements and popular power necessary not just to halt the Liberals drive to privatize virtually everything, but to aim much higher — toward building a very different kind of economy and society.
Kevin Skerrett is a research officer at the Canadian Union of Public Employees specializing in pensions.