People with lots of money have different problems than the rest of us. Where do you put all that cash? What’s a good investment? What’s a safe investment that will still provide a good return?
It’s an uncertain world out there. Climate change, war, and contagious disease are making many investments a whole lot riskier. Money managers are looking for solutions, and one solution they’ve been working on for a while now is this: let’s buy government assets!
Government assets are a sweet deal for investors. These assets have been built with public money, and any unexpected start-up costs have already been borne by citizens. Many assets, like Ontario’s electricity system or the LCBO, have been operating for generations; compared to most investments, their revenues and expenses are extremely predictable. Owning public assets is good business.
It is, of course, good business for governments too. That’s why the majority of Ontarians are skeptical about selling off golden geese like Ontario Power Generation, Hydro One, and the LCBO. These companies serve our public policy purposes, and they help pay for public services we need. Plus, as documented elsewhere, getting business to deliver public services and operate public assets has cost more and delivered less in case after case after case.
“Sure,” say the money managers, “but governments are broke, and they need money to build other stuff like public transit. So why not sell us what you’ve got and spend the money on new assets?”
This new spin on an old idea – privatization – is being called “asset recycling.” Originally dreamed up in Australia, asset recycling has now come to Ontario. Fans of asset recycling see it as a way to impose a permanent process of privatization on our province: government sells an asset; government builds a new asset; government sells the new asset; and so on, forever.
In this scheme, the public sector does the heavy lifting, and the private sector quietly reaps the benefits. Where do you think the profits end up? Who is in control? It’s not the people of Ontario.
It’s no surprise that Ontario has fiscal problems: for two decades, successive governments have been throwing away revenues on tax cuts that have only benefited wealthy individuals and big corporations. Under the Liberals, for example, corporate income tax cuts are now costing the treasury $2.3 billion a year. That’s half a billion more than the $1.7 billion dividend the LCBO gave the government this year.
If I had suggested to you a few years back that we should take the profits from the LCBO and donate them all to big companies like RBC, Rogers, and Imperial Oil, you would have called me crazy, and rightly so. But that’s exactly what the Liberals did. And now, the corporate sector is calling on them to do it all over again – this time, through asset recycling.
Fortunately, the sale of the LCBO is far from a done deal. Premier Kathleen Wynne’s panel on government assets may not even suggest it. In the meantime, though, we need to keep on making our case to the public: The LCBO is a great investment. That’s why we need to keep it.
Eduardo (Eddy) Almeida
First Vice-President/Treasurer, Ontario Public Service Employees Union