Economy Still a Sick Puppy

By David South

Id Magazine (Canada), December 27 to January 8, 1997

It was a year when banks recorded their highest profits ever; it was a year when the economy was supposed to be chugging along as the stock market hit new records. Despite our political and corporate masters telling us otherwise, government statistics tell a grim tale for anybody who isn’t making over $100,000. 

After years of being told high government debt must stop, all three levels of government managed to take debt up another $45 billion, to a record level of $796 billion. It makes you wonder what all the food banks, unemployment and poverty is achieving. 

Prime minister Jean Chretien’s rallying cry of “jobs, jobs, jobs” has not panned out. A combination of high levels of immigration, seniors clinging to jobs for longer and a growing working age population is keeping unemployment high. The percentage of the working age population employed is 58.5 per cent, according to Statistics Canada. It was 58.4 per cent in April 1992, before 944,000 mostly part-time jobs were created. Youth are the ones suffering the most, with only 52.3 per cent actually working, down from 62.7 per cent in 1989. 

If that isn’t evidence enough that 1996 was a bad year, according to the Labour Relations Board, more people are spending time out on the picket line. The number of days lost to strikes in 1996 was 1,783,700, up from 473,000 in 1995. The bulk of those days were lost in the crippling public servants and auto workers strikes. 

Province for Sale: Step Right Up For An Opportunity To Buy What You Already Paid For

“This is not being driven by fiscal or ideological motivation, though that may seem funny.” Conservative advisor James Small

By David South

Id Magazine (Canada), December 12 to December 26, 1996

It is looking more and more like the Conservative government will launch a massive privatization campaign by the middle of next year. And it is becoming clear how key government assets such as Ontario Hydro, liquor stores and public broadcaster TVO will end up in private hands. The prevailing ideology of key advisors to the Harris government, including influential financial heavyweights at Canada’s top underwriters, is leaning towards a free-for-all where the highest bidder will win. 

To date, the government has been coy about its plans, occassionally making vague threats that certain services need to be “looked at.” Assets that could go on the block include road maintenance, jails and the Ontario Clean Water Agency. In August, the government appointed former banker Rob Sampson as the minister for privatization. His days as vice-president of corporate finance at Chase Manhattan make him a popular candidate with the suit, tie and blouse crowd on Toronto’s Bay Street. 

While Sampson is so far surrounded by only a handful of advisors, the plan is to create a privatization agency that will supervise each sell-off after getting the go-ahead from Cabinet. 

Sampson’s policy advisor James Small, sums up the government’s attitude: “This is not being driven by fiscal or ideological motivation, though that may seem funny. We can do better for less, even though that may sound trite.”

The government’s taxpayer-is-always-right attitude means it believes the best option is to float the newly privatized companies on the stock market, letting the highest bidder win. 

“We have sophisticated investors in Ontario,” continues Small. “[Privatization] is not driving us to expand shareholders in Ontario. Can we, as taxpayers, benefit? What will give the best results. It is not ideological. In Canada we have a consumer culture and a very mature social structure. The market will determine what people will pay for things. We didn’t get elected to sell the family silver.

“There has been 16 years of this happening. But is Margaret Thatcher the way to go? One of the advantages for Ontarians is that we can pick and choose the best approach. It’s difficult to point to one part of the world, one way we could provide better service.”

Shareholder Democracy

A concept popularized by British prime minsiter Margaret Thatcher in the 1980s, shareholder democracy actually saw the light of day in British Columbia back in 1979. Then, premier Bill Bennett embarked on an ambitious scheme to give every citizen of the province, including children, five shares in the British Columbia Resources Investment Corporation, a mining and logging company. Out of a population of 2.4 million, 2.07 million applied for the shares. While that idealistic experiment eventually failed as a series of bad deals pushed the share price down and arrogant executives pissed people off, it was a bold initiative. 

Similar schemes have been used in Eastern Europe to increase private ownership in the economy. 

But it is looking more and more like the government is going to try and avoid even a semblance of giving Ontarians a fair shake, by selling shares on the stock market to whoever can afford them. While the NDP and unions are opposed to privatization for some very good reasons, they are missing out on an opportunity to push the government to divide the shares up amongst all Ontarians (not necessarily a big stretch for the NDP, who brought us toll highways). 

Shareholder democracy has developed two broad - and opposing - interpretations. For the left, a shareholder democracy in its truest sense is public ownership. For right-wing idealists, it means a nation of share owners playing the stock market with all the aggressiveness and greed of free-market capitalists. 

Like any ideal, the reality is far more disappointing. Any small-time stock holder will tell you about arrogant CEOs and board members not listening to them. Ask any Ontarian on the street, and they will tell you about arrogant and incompetent civil servants who aren’t listening to them. 

There is a more radical and fairer approach to privatization that would suit the populist rhetoric of the Conservatives. It involves selling shares along the lines of WWII war bonds. This solution would satisfy left-wing concerns the rich would run away with all the loot, while massively increasing share ownership in Ontario and raising funds to improve services and infrastructure. By selling millions of shares cheaply, and forbidding the trading of those shares, millions of Ontarians could reap the benefits of profit-making assets. This scheme would be contingent on reorganizing those agencies to become profitable, but could avoid a fire sale of taxpayer-funded agencies to wealthy corporations and investors. If critics of the government took the opportunity to guide the Conservatives, when a privatization is announced, towards mass share ownership, some good would come of it. 

With all its scandals, bad publicity, grotesque executive salaries and inconsistent service that has turned privatization into a dirty word in the UK, the fact is share ownership did go up. In 1979 when Conservative prime minister Margaret Thatcher was elected, shares were owned by 2.5 million people; by 1992, 11 million people had shares or a quarter of the population. Narrowly defined, that is a success. 

But the mainstream financial community loathes the idea for obvious reasons. At consultants KPMG, corporate evaluater John Kingston symbolizes the opposition to anything other than a straight sell-off at the stock exchange. “Issuance of shares to employees doesn’t put any new money into the coffers, like in the Eastern European example of gifting shares,” he says. “But selling shares to the public does provide some compensation. They must satisfy taxpayers by getting the right amount.”

“I think if government is going to privatize then it is a good time to do it,” says Deloitte and Touche’s Jim Horvath, a veteran of privatizations in Argentina, Hungary and Brazil, who supports a quick sell. “The stock market is up. There are a lot of deep pockets looking for investments.”

The mantra for an open sale will get louder as each privatization approaches. But such a sale does have its disadvantages. 

Advantages of an open sale: 

Can get the highest price. Use the funds to pay down debt or a one-time only increase in funds for something like health care. Argue protecting taxpayers’ interests by selling for the best price. The asset could raise funds on the stock market to improve infrastructure/services. Once in private hands, future governments will have a hard time trying to buy assets back. 

Disadvantages of an open sale: 

Taxpayers are also consumers; they could get screwed by any increase in rates. There is no guarantee the government will use funds for public good (maybe they will build another casino?). Any pay-off is once only, whereas the LCBO for example, makes money every year. Government could make a mistake and sell for too low a price. 

Government Agenda

Two factors could significantly slow down the government’s ability to launch privatizations. The Conservatives have relished making cuts to government services despite labour unrest, but it has shown little skill at the more intellectual task of implementing a new philosophy. Major planks of their Common Sense Revolution, such as workfare, are bogged down and in chaos. Privatization will need a sophisticated sales job to counter-attack the slick television and newspaper ads unions have been running for the past year attacking privatization. Encouraging mass share ownership would show that leadership the government sorely needs. 

The second liability is its own ambitious agenda. Already the Legislature has had to extend its term to try and deal with a backlog in reforms, including chopping another $3 billion, rearranging how government services are delivered and fighting the province’s doctors. But if it must privatize, then the honourable thing to do is to offer mass ownership. To do otherwise will show Ontario isn’t even capable of the heights of imagination some of Eastern Europe’s new democracies have shown. 

Note: I debated this topic on CBC TV’s Face Off after this was published. 

This work is licensed under a Creative Commons Attribution 4.0 International License.

ORCID iD: https://orcid.org/0000-0001-5311-1052.

© David South Consulting 2021

Innovator Stories and Profiles | 2012 to 2014

Southern Innovator was initially launched in 2011 with the goal of - hopefully - inspiring others (just as we had been so inspired by the innovators we contacted and met). The magazine seeks to profile stories, trends, ideas, innovations and innovators overlooked by other media. The magazine grew from the monthly e-newsletter Development Challenges, South-South Solutions published by the United Nations Office for South-South Cooperation (UNOSSC) since 2006.

Southern Innovator visited South Korea's Songdo Smart City in 2012.

UNDP Travelling Seminar: Environment and Development | Mongolia 1998

As head of communications for UNDP/UN Mongolia, I organised and led press tours across the country for international journalists in 1997 and 1998.

A book published by UNDP chronicled the press tour in 1998.

Innovation Villages Tackling MDGs

 

The global economic crisis that began to roll across the world in September 2008 is threatening gains made against poverty and hunger all over the South. As Kevin Watkins from UNESCO’s Global Monitoring Report told the Financial Times, “With the slowdown in growth in 2009, we estimate that the average income of the 391 million Africans living on less than US $1.25 a day will take a 20 percent hit.”

How well millions of people survive the economic turmoil will depend on how local communities respond. And there are innovating communities across the South that show it is possible to succeed. By studying the microcosm of test villages, where quantifiable results are being tracked, lessons are being learned on how to achieve the Millennium Development Goals (http://www.undp.org/mdg/).

The challenge of matching improving living standards and quality of life with environmental sustainability has been taken up by one village in Colombia. The technologies it has developed over the past few decades have been adopted around the country.

In Las Gaviotas, Colombia a unique experiment was hatched at the end of the 1960s: to see if a village could survive – and even thrive – while eschewing fossil fuels and industrial agriculture. It found its first test in the oil crisis of the early 1970s. For Las Gaviotas’ survival, meeting energy needs became paramount.

One of the simple concepts the community applied is a take on the physical reality that energy is never created or destroyed, it just moves from one medium to another. Las Gaviotas believes in using all the sources for energy that can be found in a local area first, before seeking out others.

Founded by development specialist Paolo Lugari,Las Gaviotas (http://www.friendsofgaviotas.org) is located in a desert region of Colombia. The area covers a vast territory comprising three-fifths of the country but is home to just 10 percent of the population. To Lugari, the harsh environment is a challenge to be overcome. To begin to reverse the arid environment at Las Gaviotas, the villagers reversed the dry climate by planting trees.

This had the effect of increasing local rainfall by 10 percent, making it possible to do other economic activities.”The only deserts that exist in this world are deserts of the imagination,” Lugari told the New York Times.

The 200 people living in Las Gaviotas have been able to get by without guns, police, a mayor, cellphones, television or the Internet. Nobody uses a job title — instead the adults in the community rotate jobs.

While the villagers do not use many of the technological tools people associate with modern life and prosperity, they do have a culture of invention. The inventions they have come up with include a solar kettle for sterilizing water and a 8,012 hectare pine forest which is harvested for resin to make biofuel for trucks and motorcycles. The resin is also used to make varnishes and linseed oil.

For years Colombia’s ongoing civil war raged around the community. Violent drug traffickers and private armies destabilized the country for decades. But despite this mayhem, Las Gaviotas has attracted rural peasants seeking to double their wages (US $500 a month) and enjoy the quiet life away from the war.

“We try to live a quiet life, depending on nothing but our own labor and ingenuity,” said Teresa Valencia, a teacher who has lived in Las Gaviotas for three decades.

Other products developed by the village included a turbine powered by a small, one metre high dam that produced 10 kilowatts of electricity, a windmill that was able to spin despite light breezes, and a pump strong enough to draw water from the hard-to-reach savannah water table.

Pride of place was the village’s hospital. Despite hot temperatures and high humidity, the hospital used clever technologies like subsurface tunnels and double ventilation systems in the walls to cool its operating theatre. The roof slid off to allow ultraviolet sunlight to disinfect rooms. After healthcare reforms in Colombia, the hospital was closed. Undefeated, the village turned the hospital’s kitchen into a potable water bottling facility, and reduced the need for hospital visits by making sure everyone in the area had access to clean water.

The community’s approach inspired scientists and architects, who came to design homes, laboratories and factories for Las Gaviotas.

One significant success has been the windmill-driven water pumps developed by Las Gaviotas. Invented by Jorge Zapp, head of the mechanical engineering department of Bogota’s Universidad de Los Andes, it is a lightweight windmill unit weighing barely 45 kilograms. The blades use the airfoil found on airplane propellers to make the most of light breezes.

In the 1980s, UNDP hired the Gaviotas team to install water and windmill pumps in other places in Colombia. Thousands have now been installed in Colombia and the design has been copied throughout Latin America.

Other inventions include a solar-powered kitchen, a water pump powered by a children’s see-saw, and a zeppelin that floats above the savannah plains to detect forest fires.

While the community has been able to forge a success, it can’t avoid the ups and downs of the global economy entirely. Competition from cheap imports of pine resin have pushed down the price the community can charge.

But in a topsy-turvy world, and surrounded by a civil war, what Las Gaviotas has achieved still seems impressive. “We have survived,” said Andrea Beltran. “Maybe, at this time and place in Colombia, that is enough.”

More recently, a much-publicized experiment is also underway in the Millennium villages. The Millennium Villages (http://www.millenniumvillages.org/index.htm) is a joint project between Columbia University’s The Earth Institute and UNDP, and is a bold experiment working with villages in Africa to identify and test solutions to help in achieving the Millennium Development Goals (http://www.undp.org/mdg/).

Britain’s Guardian newspaper has also been sponsoring and tracking changes in the villages of Katine sub-county in Uganda (http://www.guardian.co.uk/katine). Comprising 25,000 people, the project began in October 2007, and is conducted in partnership with the African Medical and Research Foundation (Amref) and Farm-Africa in Katine.

What is useful to people looking for solutions is the way the project is being tracked in detail on the newspaper’s website.

In India, the Model Village India (www.modelvillageindia.org.in) concept pioneered by Rangeswamy Elango, a head of the village of Kuthampakkam near Chennai, has now expanded to 30 model villages. Its approach is about being positive, eschewing griping about problems and instead getting down to work to solve them. Its success is based on an ancient Indian self-organizing model, the Panchayat, and Elango has modernized it to become what he calls The “Network Growth Economy Model” – a direct challenge to the “special economic zones that benefit only capitalist owners,” he said.

Gaviotas: A Village to Reinvent the World – 10th Anniversary Edition by Alan Weisman details further the achievements of the village (www.amazon.com)

By David South, Development Challenges, South-South Solutions

Published: November 2009

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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