Trust, But Verify

In these troubled times, when existential threats force Canada to undertake bold, new initiatives, it is sometimes difficult to fully exercise our critical thinking skills. We have a prime minister taking our country into new realms as he seeks to bolster both our resilience and defence against deep hostility from the United States, a country still inexplicably in the thrall of a madman, and I applaud him for many of those undertakings. He is surely the correct person to be leading us at this time.

However, as expressed in my previous post, I think he is making a big mistake in his plans to privatize the operations of four of our major airports: Montreal, Torotno, Calgary and Vancouver. And I am hardly alone in those misgivings.

The Star's Althia Raj offers her thoughts:

Airports are cash cows. Mostly monopolies, they are fantastic investments, where new investors are often able to set prices on everything from passenger charges to parking fees and force them upon a captive audience. 

On the CBC, economist Jim Stanford warned, “This is going to be Highway 407 of the skies.”

Highway 407 was built north of Toronto using public money, then turned over on a 99-year lease to a private consortium, which steadily increased tolls to the point where it is now one of the most expensive tolled highways in North America. 

Even Liberal caucus members are divided on the issue, likely fearing that such a sale will mean only one thing for passengers: higher costs to park, higher costs from airport concessions, higher costs to fly.

Australia serves as a cautionary tale:

Australia privatized a number of its major airports in the late 1990s and early 2000s. While the government was able to get a good price for those sales, consumer costs went up, according to Rod Sims, former chair of the Australian Competition and Consumer Commission.

"They removed the regulation on the airports prior to privatizing them. That meant those buying the airports knew they had a free rein more or less to do what they wanted," he told CBC News.

The Canadian Labour Congress has a similar warning: 

“Private investors don’t put billions into airports unless they expect to make billions back. The government is pointing to Australia as its model, and we’ve already seen the results there: higher costs for passengers and airlines, pressure on workers, and more airport revenue flowing to private investors.

Those who drop off passengers may be in for a rude surprise, if the privatized Heathrow Airport is any indication:

A £7 charge applies at Heathrow every time a vehicle enters the terminal drop-off areas*. Drop-off areas are located right outside each terminal, making for the easiest and quickest way to drop-off passengers.

And, as always, there is the voice of the people: 

A reminder that from the end of the Second World War through 1975, between 20—25 per cent of Canadian public debt was financed and held by the Bank of Canada. During that period, federal government capital expenditure funded highways, bridges, schools, hospitals and yes, even airports. The government did not go begging for cash from hedge funds.

But today, Prime Minister Mark Carney plans to sell off Canada’s major airports and recycle the proceeds for other infrastructure. In other words, investors will get up-and-running projects with established cash flow (where prices can easily be jacked up), whereas Canadians will carry the heavier risk and less profitable investments until mature enough for private owners to buy.

Modern capitalism in action: Corporations get the rewards; Canadians pay the charges and take the risks.

Larry Kazdan, Vancouver, B.C.

 

Privatizing airports is a big mistake — just look at Hydro One

Prime Minister Mark Carney says he is selling our public airports but keeping the land beneath them. That’s like selling an art museum with millions of dollars in art for a bargain price but keeping the land the museum sits on. Carney says he is “unlocking” the value of our public airports. Then says he is going to reinvest that money in other important infrastructure.

We heard the exact same argument and plan when then Ontario premier Kathleen Wynne privatized Hydro One and sent hydro rates through the roof. It used to be, privatization was only done by Conservatives. Now our public assets will be used to maximize profits for corporations. There is no free money, investors expect a good return.

Given the failures and dismal record of public asset privatization here in Canada and around the world, it is astonishing that Carney continues to promote privatization of public assets and infrastructure. Carney is engaging in public relations propaganda to pretty up profit, selling the myth it’s a beneficial way to finance infrastructure. The privatization of long-term-care homes where many died from neglect during the pandemic and Highway 407 and Hydro One has left the people of Ontario with no appetite for any more privatization of public assets. The privatization of Connaught labs by then prime minister Brian Mulroney also hurt us severely during the pandemic.

The privatization of rail, electricity and water and hospitals along with Brexit has made the UK’s economy a complete disaster.

During both World Wars and the Great Depression governments did not privatize public assets. They wisely kept them and we worked our way out of those terrible times with a robust public sector and non-profit public enterprise.

Carney and his Liberal caucus need to be reminded that the provincial Liberals were sent to the political wilderness for three elections in a row for their sale of Hydro One and the resulting rate crisis. Privatizing airports is a really big mistake. The same goes for seaports.

Paul Kahnert, Marham, ON

 What could private investment mean to Pearson airport and Toronto travellers? Here’s what the experts say, Sept. 16

This article mentions a $19 drop-off-fee at London’s Gatwick Airport. Gatwick is privately owned. What could that look like here? If you took the UP Express train to Toronto’s Pearson International Airport, would you be charged a drop off fee? What if you took the TTC Express bus to Pearson, would you be charged a drop off fee? What if you wanted a drink from the water fountain at Pearson, would you be charged a fee? What if you wanted to use the bathroom at Pearson, would you be charged a fee — and extra for toilet paper? 

I have been at privately-run airports where it cost $5 for a bottle of water and at another where you had to pay to use the restroom and pay extra for toilet paper.

I reluctantly voted Liberal in the last election because I believed Mark Carney was the best candidate to defend Canada, but if they follow through with this ill-conceived idea, I will vote against them in the next election.

Gerrard Weedon, Toronto 

Debate is healthy, and one of the backbones of a well-functioning democracy. Let us all hope Mark Carney respects that fact. 

 

Paved With Good Intentions

 

To want Canada to prosper during these tumultuous times is both noble and natural. Federal government leadership to forge that path is something we expect, given that our problems are countywide. However, this is the point at which visions on how to achieve that sought-after prosperity diverge.

For the Carney government, it seems that more privatization is the route to go. He is openly talking about 'unlocking the value' of our airports.

Canada is willing to let foreign investors buy stakes in Canadian airports, Prime Minister Mark Carney suggested Wednesday, as the federal government considers trying to raise money to fuel its economic growth agenda through the privatization of public assets. 

“We are wide open to foreign investment,” Carney said when asked whether the government would allow foreign investment into Canada’s network of publicly owned airports that could be worth billions of dollars. 

Following its spring economic update last month, Carney’s government signalled it is looking at selling off Canadian airports to private owners as part of an effort to improve operations for travellers and raise money. The prime minister said the goal is to make airports “better serve Canadians” and to raise money that is “tied up in those airports” to reinvest in “other ventures that will grow are economy.” 

While those airports' revenue streams would induce salivation in many an investor, there are reasons to be cautious.

Drawing upon Ontario's disastrous experience in the selling of cash cow Highway 407 under Mike Harris, Linda McQuaig suggests the real losers will be consumers.

[S]ince its privatization in 1999, the 407 has cost drivers an estimated $25 billion in tolls. And we’re only getting started! The privatization deal lasts for 99 years, and by the end, Ontario drivers will have paid tolls likely amounting to a gut-wrenching $150 billion. The National Bank of Canada described the 407 as “a value-generating monster.”  

A sale of our airports will not, despite Carney's claim, be good for the flying public. 

Of course, not all privatizations are as disastrous as the 407. But one feature they all seem to share is that they ultimately cost consumers more — even though this higher cost is typically denied at the outset, when the privatizers often maintain consumer costs will actually fall.  

Because Hwy 407 is a monopoly, regular market forces such as competition do not apply. 

Airports are also regulated monopolies, offering lucrative revenue streams that make them highly attractive to private owners who can raise parking rates and charge airlines higher landing fees, which are passed on in higher ticket prices. 

Passengers can’t just switch to another airport any more than Toronto commuters can just move to another highway. In both cases, travellers are captives, even though they paid to build these assets through their tax dollars. 

Sufficient privatization of assets has taken place to draw some pretty solid conclusions: 

A 2022 study published by the U.S. National Bureau of Economic Research examined more than 2,400 airports worldwide; about 20 per cent had been privatized. The study concluded that, while airport privatization can increase efficiency, it often makes flying more expensive for travellers.  

To a hammer, everything is a nail. Given Mark Carney's extensive experience in the private sector, it is not surprising that he is looking at the issue of privatization through a very narrow lens. Unfortunately, that lens means he neither sees nor really cares about the negative effects it will have on those many of us ( i.e., the majority) who live outside his very privileged circle.

 

On Public Asset Sales

Selling off public assets that yield steady and lucrative revenue streams is rarely a good idea. In Ontario, Kathleen Wynne did just that with 60% of Hydro One so she could claim a balanced budget. It is a betrayal I will never forgive her for.

As I have written previously, Justin Trudeau would like to do the same thing, for similar reasons, with our major airports. It is a very bad idea, as are most of the schemes promoted by neoliberals.

Happily, the possibility of relief from such madness is shimmering on the horizon:

A Parliamentary committee is recommending against the Liberal government’s plan to sell off Canada’s airports to raise billions in capital to be used towards other public infrastructure projects.

“Limit rising passenger and operational costs by preventing the privatization of Canadian airports,” the House of Commons Standing Committee on Finance, said in its report of the Pre-budget consultations in advance of the 2018 federal budget.

The committee's report, Driving Inclusive Growth: Spurring Productivity and Competitiveness in Canada

summarized the strong opposition to airport privatization by various stakeholders, including the Air Transport Association of Canada (ATAC), which believes that the sale is near-sighted and will result in significantly higher costs for airlines and passengers.

“Recent experience in such projects, for example in Australia, has resulted in costs per passenger to increase by 50% in the decade following airport privatization,” ATAC told the committee in a briefing. “To add insult to injury, the government would impose a huge new burden on our industry and its passengers while not reinvesting one penny of the billions generated back into aviation.”

Empirical evidence like this should carry much weight, but the Trudeau government is refusing to release the privatization study by Credit Suisse Group AG that it commissioned. Therefore, whether such disquieting facts were even considered is unknown. This unwholesome secrecy is opposed by the National Airlines Council of Canada, which is calling for open and public discussion around the entire issue.

I seem to recall Justin Trudeau, upon taking office, promised an open and transparent government. What a difference two years in office have made to that promise, eh?

The Creep Of Corporatism

Responding to my post on the secret study conducted by the Trudeau government on privatizing our major airports to raise much-needed cash, BM offered the following, which I am featuring as a guest post today:

Well, this is the usual way corporatism works. Change a capital investment into an eternal loan with rent due sharpish at the beginning of each month, paid for by the citizens. When paper money is abolished in the next five to ten years (already started as an experiment in India by withdrawing low-denomination notes to see what happens - disaster - but who cares, they're brown people and not in the West; full story on the countercurrents.org Indian site last fall, studiously unread by white men in the West of all political persuasions), we'll be well on the way to mere electronic representations of our paid-for labour. Every transaction under full surveillance by our masters, no under the table cheapy house-painting, no cash at the farmer's gate for decent veggies and real eggs, taxes paid in full, citizens in thrall, and so on. It'll be sold as the Bright New World, like a super-duper schmarty-phone. All will cheer at how advanced we are.

No wonder Bitcoin thrives.

But as Amazon flogs groceries online, takes over Wholefoods, ruins supermarkets, what happens to old people? I see it all the time when I run from my rural lair into Halifax, old ladies carrying full shopping bags miles. Halifax is a food desert city, bus routes are organized at right angles to where people live to get to a supermarket, that is, they are 100% utterly useless. These old folks don't have PCs or even mobile phones. They're screwed in our brave new world, slain on the fields of corporatism. I drive them if they'll accept a lift, those old gals still dressing up to look presentable, living on OAP and a supplement if they're lucky, trying to keep up appearances. Makes me weep in frustration. The destruction of civil society on the bed of profits and eff-you attitude.

Don't know if JT has the brains to understand the consequences of flogging off public property, or doing the Canadian internal equivalent of an ISDS governed free trade pact called the Infrastructure Bank, I really don't.

But Morneau does, look at that Economic Council of his, set up in February last year with all the corporate and university academic wannabe rich types "advising" him. Telling him, more like. A $1 a year each, such noble types donating their valuable time, reduced to eating sandwiches from the caff at their Ottawa meetings in order to do their bounden duty for Canada, chaired by a man from a big accounting firm. It was then that I knew we were truly effed, seduced by hair and a smile.

Nothing has occurred in the last 18 months to make me change my mind at the neoLiberal's canny backing of JT, the intellectual waif with an aw shucks um and an ah at public speaking events that makes people buckle at their knees in abject adoration. Behind his back, the people that matter are planning ways to pilfer our back pockets.

Succeeding!

And we love it!