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Socialist Project • E-Bulletin No. 1296
August 25, 2016

Socialist Project - home

How Not To Fund Infrastructure

Michal Rozworski

Recycling is supposed to be a good thing, so when the federal Liberals quietly announced that “asset recycling” would be part of their strategy for meeting their much-ballyhooed infrastructure promises, not many eyebrows were raised. They should have been. Asset recycling is an obscure code word for selling our public goods for private profit. It's privatization by another name.

Wynne Zaps Us Again by Mike Constable

Don't have the taxes to pay for new buses? It's okay, you can sell your electricity utility to pay for them instead. In fact, this is precisely what the Ontario Liberal government is doing. Already 30 per cent of the profitable Hydro One have been sold and another 30 per cent will be sold before 2018. A public Hydro One could more directly fight climate change, lower energy costs for the poor or work with First Nations on whose lands generation often happens. A private Hydro becomes an instrument for profit first with other goals secondary.

What the Liberals have started in Ontario will soon be rolled out across Canada. Here are the problems with these schemes.

Cut Taxes to Create a Funding Crisis

First, there is no crisis that says you have to sell a bridge to fund a hospital or the other way around. Or, better put, we have manufactured crises. Decades of slow but crippling austerity, tax cuts and restructuring have led us here. We cannot afford transit and hospitals by choice and it is in our power to reverse things. Deficit spending can be part of a reversal in the short term; asset recycling cannot.

Second, remember that we need more infrastructure spending because what we have is often crumbling and the economy faces gaps in demand. Investment in infrastructure not only creates useful things we depend on, it also creates demand for materials and jobs, which themselves create... you get the picture. Business isn't investing, so there is a big role for public investment. Keepers of global order like the OECD and the IMF have recognized this. The IMF was applauded recently for walking back its support for austerity. Rightly so, but the same document reaffirmed support for privatization. Canada's Liberal Party is really at the forefront of this policy shift by elites.

However, getting funds for investment by selling other assets into a system that has created massive asset price inflation – seen in stock markets at record highs, a lack of sub-million dollar homes in Vancouver or smashed art auction records – seems questionable at best. The response to the global financial crash of 2007-08 saved the world from depression but left fundamental inequalities in place.

Third, shares in newly-privatized public enterprises can become bargaining chips. Asset recycling has already created space for new and refined forms of triangulation, with worse to come. The latest batch of Hydro One shares in Ontario will be sold at a slight discount to First Nations for loaned funds. What seems like new funding is, however, a cynical one-off.

This is the Ontario government effectively saying, “we've underfunded your schools and clinics, poisoned your rivers and abandoned your communities, let's make it right by helping us privatize Hydro.” Beyond slightly accelerating the sale of Hydro and coming at low political cost (the government gets a slightly smaller share of privatization income, rather than making explicit expenditure on First Nations), this scheme does nothing to address real grievances First Nations might have with Hydro. Seats on the Board of Directors or other regulatory bodies, deeper co-governance arrangements, priority hiring – none of this is on the table and neither is new, stable funding.

Pension Funds on the Prowl for ‘Investment Opportunities’

Finally, here's a quote from an investment manager in a Maclean's piece on asset recycling:

“‘If you took a road that used to be free and you tolled it, I think consumers are right to say, 'Hey, that used to be free and now it's being tolled, that's unfair',’ he said.

“‘But let's remember that governments need to balance their books somehow... I don't think they can raise taxes too much more. I don't think any of us want that.’”

Typical right-wing talking points. The problem is that these typical right-wing talking points are coming from someone ostensibly representing union workers: this investment manager works for the Ontario Teachers’ Pension Plan. Canada is a world leader when it comes to workers’ own pensions being turned against them and younger generations. What were once simple, safe pension investments in government bonds are today predatory arrangements with pension boards acting more like hedge funds. Asset recycling only accelerates this process and binds regular people more tightly to a system that ultimately works against them. [Ed.: see “Pension Funds and Privatization,” LeftStreamed No. 194]

So, too few buses in your city? Sell an airport. First Nations have inadequate health facilities? Here's a few Hydro shares. Need a pension? Buy a highway... and don't forget to contract out the maintenance and toll staff to make sure you're earning maximum returns. As a friend put it, “Trudeauism is able to sublimate both neoliberalism and social democracy into itself.” Just so, asset recycling is the wrong answer to each of the above good questions. •

Michal Rozworski is an independent economist, writer and organizer. He currently works as a union researcher in Toronto, blogs at Political Eh-conomy, where this article first appeared.


#4 Anonymous 2016-08-25 14:46 EST
Liberals and Neoliberalism
So, nothing in terms of the basic tenets of the Liberal party: neoliberalism, has changed. Paul Martin dumped us in head first, he said to pay the Conservative's debt, but it was a very useful piece of propaganda to really start the engine of privatization and deregulation ordered by his managers, big business. If we want to return to our Welfare State and dump the Corporate Welfare State we will have to take it on and manage the Liberals ourselves.

#3 Dave Patterson 2016-08-25 12:23 EST
time you folks at the Bullet moved into the modern age
- and started to understand the massive debt-scam and fraud that has been played on us all the last 40 years. We do NOT need 'deficit financing', we need to take control of the money-credit system. I don't think you want to hear this, so I won't get into details, but you might find a read of this enlightening, if you care to be enlightened:

If you don't understand this, and speak out loudly in favor of taking control of our money-credit system as a sovereign nation rather than letting a private banking cartel control it all for their advantage - you're just another capitalist-light group.

#2 Judy Lewis 2016-08-25 08:50 EST
How not to fund infrastructure
COMER - Committee on Monetary and Economic Reform - is also concerned about the deterioration of services and infrastructure, combined with the dramatic increase in debt at all levels of government. A major cause of this situation is that the federal government has stopped funding services and infrastructure through borrowing from the Bank of Canada (which is owned by the people of Canada) at minimal cost , and has opted to borrow instead from private lenders, some foreign, at high compounding interest.

This change of policy seems to have occurred in tandem with the rise of neoliberalism. The evidence strongly suggests that the change in policy was agreed to at a secret meeting at the Bank for International Settlements in 1974 (Trudeau Sr. was PM, Chretien was Min. of Finance). COMER is now suing the Government of Canada for failing to uphold its responsibility to manage the economy competently and fairly, in the interest of ALL Canadians. Please see for more details.

#1 Anonymous 2016-08-25 05:21 EST
The neoliberal steamroller crushed on. I say the answer to all this is to put in place legislation to nationalize any and every business that is shown to have had any of its constituents or owners acted in a corrupt or contrary to national interests. Scrutiny of PPPs especially should be relentless. It's only a matter of time before these greedy bastards get caught with their hands in the honey pot.

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