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From: robinson@ubc-cs.UUCP (Jim Robinson)
Newsgroups: can.politics
Subject: Re: Nationalization/Crown Corps.
Message-ID: <1135@ubc-cs.UUCP>
Date: Fri, 5-Jul-85 01:17:47 EDT
Article-I.D.: ubc-cs.1135
Posted: Fri Jul  5 01:17:47 1985
Date-Received: Fri, 5-Jul-85 05:18:05 EDT
References: <1121@ubc-cs.UUCP> <1110@mnetor.UUCP>
Reply-To: robinson@ubc-cs.UUCP (Jim Robinson)
Distribution: can
Organization: UBC Department of Computer Science, Vancouver, B.C., Canada
Lines: 117
Summary: 

>There have to be better arguments against crown corporations.

*
Crown corporations, like all government ventures, are inherently 
inefficient. This is due to the fact that they are not subject to
the discipline of the market place. If a Crown corporation finds
itself losing money, rather than cut costs and attempt to streamline
itself it will come hat in hand to the government (i.e. you and me )
for more money. The politicians, being the way they are, will then
invariably dish out the (our) money to the "needy" corporation and
all will be well until next year's books once again don't balance.

The June copy of _Report_on_Business_ (no, I don't subscribe, I got it
as a freebie with a Globe and Wail) ranks the performance of corporations
in Canada. From the numbers reported it is obvious private corporations 
generally do much better than Crown corporations.

Let's take a look at the airline industry (year end 84 except Nordair, 83):

                    Return on        Operating    Return on    
Company             Capital          Margin       Assets
-------             ---------        ---------    ---------
Air Canada            5.76             1.7          4.2
Nordair              18.03             2.8          9.9        
Pacific Western       8.28             6.6          7.2
Wardair              22.21            13.0         14.6


Now let's look at the oil industry:

             Return on
Company      Capital              Return on capital is profit before tax
-------      ---------            and interest expense divided by average 
Suncor         12.13              capital (debt plus equity)
Petrocan       13.92
Shell          16.65              [Operating margin and return on assets
Husky          18.75              were not published]
Imperial       20.17            
Gulf           24.08              
Chevron        28.42
Texaco         44.03
Mobil          57.01

(Can you pick the crown corporation(s) :-)


Now let's look at some real scewups (not a complete list):
[The following are all Crown Corporations]

               Return on
Company        Capital              
-------        ---------            
CBC              -1.05
Sydney Steel    -10.40 
De Havilland    -33.02
Flyer           -66.15    (ouch)


Of the 37 large Crown Corporations listed 20 had losses (one other broke even)
Of the 114 large private companies listed 10 sustained losses and, of those
with losses the return on capital was below -2 for 7 of them and none exceeded
-9.87.

The moral of this story is that even when the government pretends to be 
acting like a private entity one should not expect anything other
than typical government productivity (even in industries that others
seem to do quite well in).

>>...    Survival of the fittest is another natural law and it applies
>>to business without loss of validity.
>This outlook is was seen as simplistic in the nineteenth century.  "Survival
>of the fittest" is a phrase Darwin and his pals considered muddle-headed
>when applied to biology.  Apply it to society and economics and you get
>"social darwinism" (poor Darwin), one of the underpinnings of our recent
>history of racism and fascism.

I don't see any problems in applying "survival of the fittest" to 
corporations. Why should a corporation that has proved itself inefficient
be propped up? The *only* people that benefit (possibly only in the short
run) are the owners and the employees. (Should governments have subsidized
buggy whip manufacturers in the early part of this century?) The taxpayer
doesn't benefit because it's his money that does the propping up. The
consumer doesn't benefit since this subsidizing allows the company the
luxury of not rationalizing its production and thus maximising the use
of its resources which would, in the long run, result in lower prices
(though not necessarily for that product). As for linking racism and
fascism to free enterprise - give me a break. 

>Surely you don't believe that supply and demand is going to take care of
>your aged mother, or keep the rivers and the air clean -- unless there's
>some nasty socialist interference?

No I don't. But I'd also prefer if the government did not spawn a
new Crown corporation every time it wanted to solve some new
"pressing" problem. At any rate the purpose of a Crown Corporation is
*not* to perform an activity (such as pollution control) which is 
inherently a money loser - this type of thing can be handled by a 
gov't department quite well without introducing some semi-autonomous
body. The stated purpose of many Crown corporations is to provide
a "window" into a given industry, e.g. Petrocan. The problem I have
with this is that there is nothing that you  can achieve by government
ownership that you can't achieve otherwise with the right combination
of carrots and sticks. Can anyone out there give me an example of
a benefit that Canadians have experienced  by "owning" Petrocan? If so,
could this alleged benefit not have been achieved by applying the 
use of regulatory measures and tax break policies to private companies?
[We all know about the fiasco concerning the Petrofina stations that
the Liberals paid way too much for] Since private companies are generally
more efficient than Crown corporations, does it not make more sense to
do it this way? 

J.B. Robinson

"If you want blood, you got it"  AC/DC