Categories
Archive

Province For Sale: Step Right Up For An Opportunity To Buy What You Already Paid For

“This is not being driven by fiscal or ideological motivation, though that may seem funny.” Conservative advisor James Small

By David South

Id Magazine (Canada), December 12 to December 26, 1996

It is looking more and more like the Conservative government will launch a massive privatization campaign by the middle of next year. And it is becoming clear how key government assets such as Ontario Hydro, liquor stores and public broadcaster TVO will end up in private hands. The prevailing ideology of key advisors to the Harris government, including influential financial heavyweights at Canada’s top underwriters, is leaning towards a free-for-all where the highest bidder will win. 

To date, the government has been coy about its plans, occassionally making vague threats that certain services need to be “looked at.” Assets that could go on the block include road maintenance, jails and the Ontario Clean Water Agency. In August, the government appointed former banker Rob Sampson as the minister for privatization. His days as vice-president of corporate finance at Chase Manhattan make him a popular candidate with the suit, tie and blouse crowd on Toronto’s Bay Street. 

While Sampson is so far surrounded by only a handful of advisors, the plan is to create a privatization agency that will supervise each sell-off after getting the go-ahead from Cabinet. 

Sampson’s policy advisor James Small, sums up the government’s attitude: “This is not being driven by fiscal or ideological motivation, though that may seem funny. We can do better for less, even though that may sound trite.”

The government’s taxpayer-is-always-right attitude means it believes the best option is to float the newly privatized companies on the stock market, letting the highest bidder win. 

“We have sophisticated investors in Ontario,” continues Small. “[Privatization] is not driving us to expand shareholders in Ontario. Can we, as taxpayers, benefit? What will give the best results. It is not ideological. In Canada we have a consumer culture and a very mature social structure. The market will determine what people will pay for things. We didn’t get elected to sell the family silver.

“There has been 16 years of this happening. But is Margaret Thatcher the way to go? One of the advantages for Ontarians is that we can pick and choose the best approach. It’s difficult to point to one part of the world, one way we could provide better service.”

Shareholder Democracy

A concept popularized by British prime minsiter Margaret Thatcher in the 1980s, shareholder democracy actually saw the light of day in British Columbia back in 1979. Then, premier Bill Bennett embarked on an ambitious scheme to give every citizen of the province, including children, five shares in the British Columbia Resources Investment Corporation, a mining and logging company. Out of a population of 2.4 million, 2.07 million applied for the shares. While that idealistic experiment eventually failed as a series of bad deals pushed the share price down and arrogant executives pissed people off, it was a bold initiative. 

Similar schemes have been used in Eastern Europe to increase private ownership in the economy. 

But it is looking more and more like the government is going to try and avoid even a semblance of giving Ontarians a fair shake, by selling shares on the stock market to whoever can afford them. While the NDP and unions are opposed to privatization for some very good reasons, they are missing out on an opportunity to push the government to divide the shares up amongst all Ontarians (not necessarily a big stretch for the NDP, who brought us toll highways). 

Shareholder democracy has developed two broad – and opposing – interpretations. For the left, a shareholder democracy in its truest sense is public ownership. For right-wing idealists, it means a nation of share owners playing the stock market with all the aggressiveness and greed of free-market capitalists. 

Like any ideal, the reality is far more disappointing. Any small-time stock holder will tell you about arrogant CEOs and board members not listening to them. Ask any Ontarian on the street, and they will tell you about arrogant and incompetent civil servants who aren’t listening to them. 

There is a more radical and fairer approach to privatization that would suit the populist rhetoric of the Conservatives. It involves selling shares along the lines of WWII war bonds. This solution would satisfy left-wing concerns the rich would run away with all the loot, while massively increasing share ownership in Ontario and raising funds to improve services and infrastructure. By selling millions of shares cheaply, and forbidding the trading of those shares, millions of Ontarians could reap the benefits of profit-making assets. This scheme would be contingent on reorganizing those agencies to become profitable, but could avoid a fire sale of taxpayer-funded agencies to wealthy corporations and investors. If critics of the government took the opportunity to guide the Conservatives, when a privatization is announced, towards mass share ownership, some good would come of it. 

With all its scandals, bad publicity, grotesque executive salaries and inconsistent service that has turned privatization into a dirty word in the UK, the fact is share ownership did go up. In 1979 when Conservative prime minister Margaret Thatcher was elected, shares were owned by 2.5 million people; by 1992, 11 million people had shares or a quarter of the population. Narrowly defined, that is a success. 

But the mainstream financial community loathes the idea for obvious reasons. At consultants KPMG, corporate evaluater John Kingston symbolizes the opposition to anything other than a straight sell-off at the stock exchange. “Issuance of shares to employees doesn’t put any new money into the coffers, like in the Eastern European example of gifting shares,” he says. “But selling shares to the public does provide some compensation. They must satisfy taxpayers by getting the right amount.”

“I think if government is going to privatize then it is a good time to do it,” says Deloitte and Touche’s Jim Horvath, a veteran of privatizations in Argentina, Hungary and Brazil, who supports a quick sell. “The stock market is up. There are a lot of deep pockets looking for investments.”

The mantra for an open sale will get louder as each privatization approaches. But such a sale does have its disadvantages. 

Advantages of an open sale: 

Can get the highest price. Use the funds to pay down debt or a one-time only increase in funds for something like health care. Argue protecting taxpayers’ interests by selling for the best price. The asset could raise funds on the stock market to improve infrastructure/services. Once in private hands, future governments will have a hard time trying to buy assets back. 

Disadvantages of an open sale: 

Taxpayers are also consumers; they could get screwed by any increase in rates. There is no guarantee the government will use funds for public good (maybe they will build another casino?). Any pay-off is once only, whereas the LCBO for example, makes money every year. Government could make a mistake and sell for too low a price. 

Government Agenda

Two factors could significantly slow down the government’s ability to launch privatizations. The Conservatives have relished making cuts to government services despite labour unrest, but it has shown little skill at the more intellectual task of implementing a new philosophy. Major planks of their Common Sense Revolution, such as workfare, are bogged down and in chaos. Privatization will need a sophisticated sales job to counter-attack the slick television and newspaper ads unions have been running for the past year attacking privatization. Encouraging mass share ownership would show that leadership the government sorely needs. 

The second liability is its own ambitious agenda. Already the Legislature has had to extend its term to try and deal with a backlog in reforms, including chopping another $3 billion, rearranging how government services are delivered and fighting the province’s doctors. But if it must privatize, then the honourable thing to do is to offer mass ownership. To do otherwise will show Ontario isn’t even capable of the heights of imagination some of Eastern Europe’s new democracies have shown. 

Note: I debated this topic on CBC TV’s Face Off after this was published. 

Cover headline: “The Harris Tories have an opportunity to turn Ontario into a shareholder democracy. Will they take it?”

This work is licensed under a Creative Commons Attribution 4.0 International License.

ORCID iD: https://orcid.org/0000-0001-5311-1052.

© David South Consulting 2021

Categories
Archive Blogroll

Aid Organization Gives Overseas Hungry Diet Food: Diet Giant Slim-Fast Gets Tax Write-Off For Donating Products

By David South

Now Magazine (Toronto, Canada), December 2-8, 1993

Doling out diet supplements to recipients of food aid may sound bizarre, but that’s what US diet giant Slim-Fast has been doing.

The company’s cans of powder have been distributed to the conflict-ridden former Soviet republic of Georgia and other parts of the collapsed Soviet Union by the aid agency Americares.

Critics say Slim-Fast is far from appropriate and is, at best, in bad taste. New York-based food-aid critic and writer Michael Maren says such contributions are simply the result of agencies being used as dumping grounds for tax write-offs.

As an example, he cites Somalia, where he recenly spent time researching an upcoming book critical of aid programs. Pharmaceutical firms, he charges, are dumping unnecessary drugs in that country.

“If you want to help people, give them what they need, not the crap we have around here. That a so-called aid agency would bring over Slim-Fast is absurd.

“The attitude that they should take any shit we give them – it’s arrogance,” says Maren, who believes many donors have a beggars-can’t-be-choosers attitude to people in need of help.

At Slim-Fast’s corporate headquarters in New York, Adena Pruzansky acknowledges that the donations are tax write-offs, but insists that their product is very nutritious. No one, she says, has complained about their contribution.

Powdered cure

“If you look at our powdered products, there is a lot of nutrition in there. Certainly for people who don’t have food, this is something that could be useful to them.”

A spokesperson for Connecticut-based Americares, which directs surpluses donated by 1,100 firms to relief operations in 80 countries, praises Slim-Fast.

“They are a fine group of humanitarians,” says Elizabeth Close.

“Americares was just written up in Money magazine as the most cost-effective nonprofit agency,” she says of the organization, whose donations consist of overstocked, discontinued or obsolete items.

“We only accept a product for donation when we know we have a home for it. So we are not giving something inappropriate,” she says.

Close provides no details, however, about Slim-Fast’s participation. “Without their permission, I’m not really supposed to go into any further description of what they donated,” she says.

But those who see the devastating effects of eating disorders on women say Americares exercises poor judgement when it accepts such diet supplements.

“I think it’s quite bizarre,” says Merryl Bear of the National Eating Disorder Information Centre. “Many of these diet plans are starvation diets. In many of the diets, the caloric intake is less than or equivalent to what the Nazi concentration camps delivered.”

Slim-Fast’s chocolate drink powder, for instance, is made of skim milk powder, sugar, whey powder, cocoa, fibre, calcium caseinate, corn oil, fructose, lecithin, salt and carrageenan. It relies on mixing with milk to gets its nutrition.

Lynne Martin of the Toronto Hospital’s eating disorder clinic says Americares is encouraging dieting among starving people who need calories first.

“Women need a minimum of 1,800 to 2,100 calories per day – to meet that requirement with Slim-Fast, you would need eight glasses per day,” she says.

Low calories

Martin says the low calories available in the supplement become even lower if recipients don’t have access to milk and try to mix it with water.

“The protein level isn’t given without the milk, so you don’t know how much is in the powder, but certainly the calories would change if one were to mix it with water.”

At food relief agency CARE in Ottawa, program officer Ivan Connoir says what “the hungry need isn’t Slim-Fast but what is called a human daily ration (HDR).

“It is prepared in the United States especially for emergencies. It has no pork, so it can go to any country,” he says. “It is a kind of lentil stew and vegetable soup – just add water and it’s ready to eat. You even find bread in it. It can last for years.

“Of course the best thing is family food parcels that last one month.”

Now Magazine
Now Magazine (Toronto, Canada), December 2-8, 1993.

ORCID iD: https://orcid.org/0000-0001-5311-1052.

© David South Consulting 2021