The Neoliberal Creep - Part 2

While Part 1 dealt with the neoliberal agenda influencing Bill Morneau's retraction of his pharmacare promise, today's post deals with that same influence, this time on Canada's 'evolving' position on foreign aid.

International Development Minister Marie-Claude Bibeau says she wants to use the new $2 billion in extra aid dollars in the new budget to attract insurance and pension funds to invest in fight against global poverty.

Bibeau said her priority is going after wealthy private-sector investors, because governments can’t provide the level of spending needed to do development in a world where conflicts are lasting longer and displacing people for decades at a time.

Given the aversion too many people have to taxes and government expenditures, on the surface this proposal would seem to spread out the costs of doing good. A win-win situation, right?

Maybe. Maybe not.

The need for foreign aid is beyond question, both for the well-being of the recipient countries and the security of the larger world. Those who are suffering and disenfranchised today are the recruits for terrorist organization tomorrow. However, if improving the well being of those in the targeted countries is the overall goal, one has to ask a fundamental question: Is private investment the best vehicle by which to accomplish it?

Private investors, whether institutional or individual, are seeking a decent return on their money. If the goal of foreign aid is better the recipients' lives, how, exactly, is entering into partnerships with pension and insurance funds going to accomplish that? Unfortunately, Ms. Claude-Bibeau leaves that question unanswered. Perhaps she felt that given most Canadians' shallow engagement on public policy, simply making an announcement on cost-saving measures would satisfy them. But the key question to ask is whether or not the goals of private profit and foreign aid are compatible.

A report by the OECD-DAC sheds some much-needed light on this issue:


As you can see in the above, the first unspoken 'rule' is that 70% of the private investor's funds are guaranteed against loss. Guranteed by whom? The taxpayer, of course.

But surely that is not enough to attract such investment. There must also be the prospect of earning a healthy return on investment. And therein lies the tension and potential conflict between development and private sector goals. A 2013 study into the American experience with PPPs (Public-Private Partnerships) may shed some light:

Some development officials are concerned that opportunities to access private resources through partnerships can pull mission staff away from established country plan priorities. The availability of private funding, they argue, is hard to ignore, even when a proposed partnership does not fit well within an established mission priority. Given very limited staff resources at many USAID missions, the opportunity cost of following through on PPPs that are not necessarily aligned with stated mission priorities can be high.

In other words, the prospect of 'free money' can subvert a government's development goals.

There is a host of other problems associated with these partnerships, including overlooking needier countries in favour of more-developed ones so as to provide greater opportunities for the private sector to profit. This issue and many more you read about in the above report.

Will Canadian go blindly into this brave new world of foreign aid PPPs? Given the decidedly neoliberal bent of the Trudeau government, I think that is a distinct possibility.

Canada, and its foreign-aid recipients, deserve much, much better than this.

UPDATED: Infrastructure Crisis

While I think it is widely known here that Canada has a massive infrastructure deficit to the tune of $123 billion, people are perhaps less aware of the dire situation in the United States, where over 54,000 bridges are literally crumbling.

Why is this newsworthy? Well, in addition to the very real daily risk of injury or death, the American problem also offers a massive opportunity for the notorious public-private partnerships that, while lining the pockets of investors, rarely accrues to the benefit of the tax-paying public.

First take a look at this news report:



A dire situation, no doubt, but one which the Trump administration apparently sees as rife with opportunity:

As President Donald Trump delivers his first State of the Union address Tuesday, pay close attention to his next big priority—an infrastructure plan—which, over time, could eclipse the trillion-dollar giveaway to the rich in the GOP’s just-passed tax plan.

“[The GOP-passed] tax cuts have slowly opened the door to Wall Street, construction giants, and global water companies, who see enormous potential for profits,” wrote Donald Cohen, president of In the Public Interest, an anti-privatization advocacy group. “Some states and local governments have turned to expensive private financing, a.k.a., ‘public-private partnerships,’ and learned the hard way. Private financing often means higher tolls, parking rates, or water fees, lower labor standards, and less public control over decision-making once a project is up and running.”

Informed sources suggest that the Trump will reduce infrastructure budgeting:

... the plan will all but force states and local governments to privatize or even sell off infrastructure. Tax cuts have slowly opened the door to Wall Street, construction giants, and global water companies, who see enormous potential for profits. Some states and local governments have turned to expensive private financing, a.k.a., “public-private partnerships,” and learned the hard way. Private financing often means higher tolls, parking rates, or water fees, lower labor standards, and less public control over decision-making once a project is up and running.

And of course there is no guarantee that any of the private money will be directed toward the crumbling bridges where, unless tolls are imposed, profits would be hard to come by. Schools, water infrastructure and roads offer much greater opportunity.

Lest Canadians feel smug, remember the study that has been commissioned by the Trudeau government into privatization of our major airports.

The virus of neoliberalism is resilient and continues to spread. Unfortunately, there appears no vaccine on the horizon to rid it from our political systems.

UPDATE: The Washington Post has a penetrating analysis of the scam about to be perpetrated by Trump. Here is a brief excerpt:

Let’s be clear on what this kind of public-private partnership isn’t. In normal circumstances, the government decides it needs a new bridge, so it hires Joe’s Construction to build it. But the bridge still belongs to the government; we just have to pay maintenance costs. In the kind of “partnership” the Trump administration wants more of, the government decides it needs a new bridge, so it gives PriveCo Equity Partners a gigantic tax incentive to build the bridge, which the company now owns — and which will charge tolls on in perpetuity. Taxpayers could shell out nearly as much in tax incentives to the private company as we would have spent to just build the bridge, and then on top of that you’ll have to pay tolls to cross it — forever.