for economic freedom
Updates from the Prairie Centre/Centre for Prairie Agriculture in Regina, Saskatchewan.
Hot off the press! Don Baron's Jailhouse Justice
web posted May 27, 2002
When unions support privatization
By Craig Docksteader
Selling government corporations to the private sector can be a contentious issue. But when the questions are answered, the misunderstandings cleared up, and the myths laid to rest, the merits of privatization outweigh the fears.
When done right, moving Crown corporations into the private sector ends up benefiting the corporation, its employees, the government, and the public. Often, to the surprise of some, even unions end up supporting the plan.
One such case is currently playing out with the Ontario Power Workers' Union. As Ontario moves toward privatizing their power utility (Hydro One), the Power Workers' Union recently took out a full-page ad in the Globe and Mail, expressing their support for the initiative. Called an Initial Public Offering (IPO), the ad explained the union's reasons for supporting the move, and is reprinted below in its entirety.
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The Globe and Mail, May 7, 2002.
Public Offering Best Way to Meet Hydro One's Investment Needs
A Message from the Power Workers' Union Don MacKinnon, PWU President
When it comes to Ontario's Electricity system, there's a lot more at stake than simply who owns Hydro One's transmission and distribution systems.
Significant investment is required to ensure continuing reliability and safety of the Hydro One system which includes transmission lines for the whole province and distribution lines for about 1.2 million customers, mostly in rural settings.
When the Ontario government froze electricity rates in 1992, it was both good and bad news for electricity consumers. The good news was that it helped control prices. The bad news is that the cure was worse than the disease. Hydros debt grew, along with the 'maintenance deficit' due to the stalled investment in Hydro One's infrastructure.
The Power Workers' Union believes that a key element for a healthy electricity market is a strong wires company to ensure a high level of safety, reliability and innovation.
Proceeding with the IPO to get the necessary investment
No government - current or future - will underwrite the billions of dollars that will be needed to ensure the necessary maintenance and expansion of the Hydro One system. An IPO brings needed investment while giving Ontarians a chance to invest in the future of the company.
Ensuring the Continued Integration of Hydro One's Transmission and Distribution Systems
The synergies between transmission and distribution realized by Hydro One in recent years have kept costs down and reliability up.
Continuing with Effective Regulation
There's more regulation now than ever before. The result is good for customers. The Electrical Safety Authority is broadening its mandate over the utility industry to increase worker and public safety. The Ontario Energy Board now has the power and expertise to regulate the wires sector by setting rates and ensuring service levels.
Members of the Power Workers' Union are electricity customers just like everyone else. We, too, depend on a strong, safe "electric highway" system. Investment, not rhetoric, will ensure the system is maintained and the high value services our members provide continue. The debate isn't about public versus private power - it's about investment and jobs.
Craig Docksteader is Coordinator with the Prairie Centre Policy Institute.
web posted May 20, 2002
The Function of the Entrepreneur*
By Kevin Avram
Alberta needs to attract and encourage entrepreneurs because the provinces economic future depends on them. This is true because entrepreneurs are to economic growth what songwriters like Lennon and McCartney are to pop music, and Mozart, Beethoven, and Bach are to classical music.
Songwriters are creative artists with an ability to bring a new sound or lyric into being that never before existed. They dont settle for the way things are, but let their imagination go to where they want it to go and create as a result of that imaginative exercise. Entrepreneurs do the same thing by imagining economic conditions and opportunities that do not yet exist. Theyre dreamers who act upon those dreams. Some invent new products. Others invent new ways of doing things.
Consider Sam Walton: Some years ago, Walton owned one tiny store in a one-horse community in what was then the have-not state of Arkansas. Using his imagination and management skill, Walton anticipated what the world would be like in the future and set out to create a service that would meet needs and make life easier for consumers. His success at doing exactly that turned his small town enterprise into WalMart, which is the single biggest corporation on the planet -- bigger than Exxon, General Motors, or Microsoft.
In addition to making Walton a wealthy man, WalMart made thousands of investors wealthy and provided employment for thousands more. The company is a corporate giant because its better than any other company on earth at providing high quality low-priced goods to consumers. WalMart solves problems for people, which is why shoppers go there. Its success is a consequence of Sam Waltons foresight, creativity, and risk taking.
To some extent, all successful entrepreneurs are problem solvers. They see things that dont exist, ponder new ways of doing things, and take risks with their own time, money, and effort. Theyre visionaries who apply management principles to their hunches and creative imagination. If they succeed they prosper. If they are wrong they fail.
Entrepreneurs are motivated by profit and loss. They respond to profit and loss. And these steering mechanisms guarantee that consumers exercise complete supremacy over the market, the entrepreneurs ideas, and even ownership of the means of production.** When consumers avoid certain products, theyre declaring that they are the ones who will ultimately judge the decisions made by entrepreneurs and the business community. Avoiding certain products because of disinterest, poor quality, or high pricing is a sound financial practice for shoppers. At the same time, its one of the ways shoppers send signals to entrepreneurs about their desires and needs.
Interestingly, government cannot duplicate entrepreneurialism because economic development bureaucrats and the politicians that oversee such portfolios risk nothing of their own. They take no risk. There is no consequence when they fail. In fact, economic development by political decree is a fantasy thats preached by politicians who dont understand the creation of wealth. Certain journalists and other folks that share this economic illiteracy believe it. In its purest form, entrepreneurialism cant even be taught or learned. If it could, everybody would embark upon entrepreneurial risk-taking ventures and have the same success as J. D. Rockefeller or Andrew Carnegie.
Entrepreneurs need to be attracted and encouraged because they are to a vibrant and growing economy what a can opener is to a fully stocked kitchen pantry.*** They anticipate our needs, risk their own capital to provide those needs, organize production, and arrange delivery or pickup. They open things for other people. We reward them when they anticipate correctly. They suffer the consequences when they do not. Either way, the more entrepreneurs there are, the richer we all will be.
* See: "The Function of an Entrepreneur" by Ludwig von
Kevin Avram sits on the Prairie Centres Board of Trustees. "Where
Do We Go From Here" is a feature service of the Prairie Centre.
Changes Needed to Ensure Stronger Saskatchewan Economy: Only 1 in 17 Saskatchewan residents will be net tax contributors by 2026
LLOYDMINSTER Only 1 in 17 Saskatchewan residents will be net tax contributors by 2026, unless the province embraces a new approach to economic development, says a recent report released by the Prairie Centre Policy Institute.
"Saskatchewan is headed for significant demographic challenges," said Craig Docksteader, Coordinator with the Prairie Centre. "In order to meet these challenges, it is imperative that the province establish a market-friendly environment so it can realize its full economic potential."
Speaking at a luncheon in Lloydminster, Docksteader explained that although all three prairie provinces are facing the challenges of an ageing population, Saskatchewan will feel the effects more significantly because its population is not growing, the aboriginal employment rate is decreasing, and young people continue to leave the province.
"The findings of this report are clear," said Docksteader. "By 2026, 46 per cent of Saskatchewan's population is going to be either under 15 or over 60 years of age. After accounting for those who are not working, and those who work but do not pay taxes, each Saskatchewan person of working age making a positive net tax contribution will have 17 people dependent on them to pay for their social and economic services. This is simply not sustainable and clearly demonstrates the need for change. The province must pursue a stronger economic future."
The Prairie Centre's report, entitled, This Year Country: Creating Wealth in Saskatchewan, examines the potential for economic growth in Saskatchewan, and considers the factors which will be necessary to see the province attain this potential. Written by Dr. Graham Parsons, former chief economist for the province of Saskatchewan and former chief economist at the Canada West Foundation, the study concludes that Saskatchewan has significant potential for economic growth if the right decisions are made.
"The keys to economic growth are no mystery," said Docksteader. "In his report, Dr. Parsons notes that jurisdictions with low tax rates, few trade barriers, modern infrastructure, deregulated markets, and a vibrant private sector tend to enjoy strong economic growth. Saskatchewan needs to abandon policies which constrain growth and wealth creation, and establish an environment which attracts investment and rewards success."
Established in 2001, the Prairie Centre Policy Institute is a non-profit, non-partisan think tank dedicated to advancing ideas on wealth creation in order to enhance the economic and social well-being of Canada's prairie region. Copies of Dr. Parsons' study can be ordered by contacting the Institute at 1-800-827-3417.
web posted May 6, 2002
Fish before people
By Robert D. Sopuck
In 1999, the federal government, through Fisheries and Oceans Canada (FOC), took fish habitat protection away from the Provinces. To do it, they used Section 35 (1) of the federal Fisheries Act, arguably the most powerful piece of environmental legislation in Canada. That section makes it illegal to destroy fish habitat. That sounds good, until you consider its ramifications in practice.
The Act says, "Fish habitat means spawning grounds and nursery, rearing, food supply and migration areas on which fish depend directly or indirectly in order to carry out their life processes:" Furthermore, Section 35.(1) says: "No person shall carry on any work that results in harmful alteration, disruption or destruction of fish habitat."
Communications documents developed by FOC note that "The Act also states that no one is permitted to deposit a deleterious substance into water containing fish."
This program introduces more uncertainty into the development process, especially for rural communities. It is now unclear as to what, if any, jurisdiction the provinces or local communities have over natural resource development, since the definition of fish habitat now includes entire watersheds and extends the reach of the federal government into unfamiliar areas such as watershed planning.
Under the program, all fish habitat is considered "important" which removes any regulatory discretion. Our lack of knowledge about Prairie fish populations makes implementation of the program very difficult. So if there are three scrawny pike in a pool, they take precedence over you.
FOC does not consider the costs of its regulatory program to Manitoba. Staff in the provincial government estimate that the costs of maintaining or creating drainage infrastructure will increase by 25-30 per cent in order to comply with the new fisheries enforcement efforts. At Netley Creek, Manitoba, the province was required to build two new channels around the existing creek, because FOC would not let the "natural" watercourse be disturbed. What happens when these new channels silt in? Will the province be required to build two more around the now three channels? Think about this as you are waiting for health care services.
This is but one example. A municipal staff person notes that the FOC program adds a whole new layer of uncertainty to development projects. One can only imagine what kind of economic disasters may befall communities, as much-needed infrastructure projects are delayed or placed out of reach.
It is up to those communities to fulfill the terms, regardless of cost. Not only that, the new FOC program is layered on top of other regulations like the proposed Species at Risk Act, the new animal cruelty provisions in the Criminal Code, and the odious Firearms Act. The regulatory burden is therefore increasing exponentially. The FOC program may well place other environmental and stewardship programs at risk as even they will be put through this "fish screen."
The FOC bureaucrats say their job is to enforce the Act, not promote community well-being. It's clearly fish before people with this department. And rural communities will pay the price.
Robert D. Sopuck is Director of the Rural Renaissance Project for
the Frontier Centre for Public Policy (FCPP). This article originally
appeared in "Rural Renaissance Notes from the Frontier", and
is reprinted here with permission from the FCCP. The FCPP is an independent
public policy think tank based in Winnipeg, Manitoba. For more information
on the FCPP, see www.fcpp.org.
web posted April 29, 2002
The problem with equalization
By Kevin Avram
Imagine what it would be like to live in a large family where after the kids grow up and leave home, the two or three that are the most industrious are forced to send money home to mom and dad every month so it can be sent to the two or three kids that aren't doing so well. Mom calls it a policy of "family equalization".
Such a policy would mean that the two or three family members that get up the earliest and work the longest and smartest would never be able to fully enjoy the fruits of their own labour. The money they earn, and that should have been available to do such things as add on to the house or build a garage would always be sent home to mom and dad. The new garage would never get built. At the same time, the two or three least industrious family members could sleep a little longer in the mornings, work a little less, and still get by pretty well. It's easy to do that when someone else buys the groceries.
Welcome to Canada's version of federalism and the policy called equalization. Equalization is a policy whereby the richer and more industrious provinces -- Alberta and Ontario -- pay billions to Ottawa in taxes every year so the money can be transferred to the governments of what are said to be the have-not provinces. It's money that is used to pay for public services, the idea supposedly being to ensure that there is a similar level of public services available right across the country.
In 2001, equalization accounted for a third of Newfoundland's total budget and about 25 per cent of the budget in the other Maritime Provinces. In Manitoba, 19 per cent of the budget comes from equalization.* Quebec and Saskatchewan have received billions in equalization payments. Arguably, what the policy does is allow some provincial governments to implement and maintain policies that have a negative effect on growth.
For most of the 20th century, Saskatchewan and Manitoba backed policies that were detrimental to their own economic development. They have both been outspoken advocates of federal transportation subsidies that discourage livestock production and the value added processing of prairie grown grain. Debt-ridden Crown corporations dominate Saskatchewan's economy. Last year Crown corporation debt in the province jumped by almost $500 million.
Saskatchewan has laws that restrict how much farmland an individual from Alberta or elsewhere in Canada can own. The policy keeps money out of the province and ensures that land values stay artificially low. At the same time, giving a higher priority to co-ops and Crown corporations than the wealth creating private sector means the most innovative of its own children pack up and leave as soon as they're finished high school or university. Equalization rewards provincial governments that maintain policies such as these that are detrimental to their own well being.
For obvious reasons, there is a growing chorus of voices calling for an end to equalization. If it were ended, every province on the receiving end of these payments would immediately be forced to fully shift its focus from spending wealth to creating wealth. Provincial governments would have no choice but to rethink their policies on Crown corporations, value added processing, and the impact tax rates and other regulations have on wealth creation.
Kevin Avram sits on the Prairie Centre Policy Institute's Board of
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