In the News April 15

Economic Matters of Concern

Public Versus Private Enterprise for Big Ticket Items

The investment from the public treasury for big ticket items can vary enormously between public and private enterprise; the difference in large measure arises from the amount coming back to the treasury with public investment in public enterprise. The reason why is not complex. Even when the price of production and initial investment between the two forms of ownership is considered relatively the same, a big difference is found in who claims the profit.

The profit for public enterprise flows back into government coffers either directly or indirectly. In this case, the profit not expropriated by private interests flows to the public and not into the pockets of the rich. The money gained can be used elsewhere in the public interest such as increased investments in social programs.

In contrast, profit paid to private enterprise, at least for big projects, mostly disappears into the coffers of the global rich for use elsewhere in their empires.

How governments spend public money is a huge political issue, especially with neo-liberalism now in control of most governments with their suffocating pay-the-rich agendas and war economies.

In a modern economy almost everything is “big ticket” because of the nature of the enormous productive forces. For public enterprise, the biggest savings or benefit to the public occurs — or at least could occur — with public enterprise building and maintaining the country’s infrastructure. This would include all manner of modern transportation, the constant maintenance of cities and towns, owning and managing financial institutions in the public interest, and investing in social programs in particular education and health care, with public enterprises researching and producing pharmaceuticals.

Just imagine the enormous public profit within all those sectors of the economy and how that added-value could be put to good use to solve problems and humanize the social and natural environment.

Shipbuilding in Canada

Apart from profit, another difference between public and private enterprise can be in how payment for big ticket items is structured to favour private interests. An incentive for private owners is found in constantly inflating the price of production, if the contract with the government allows them to do so, in an arrangement often referred to as “cost plus.” Other factors may also arise such as with the current building of two Coast Guard icebreakers.

A December 2014 article by The Canadian Press highlights the problem of private enterprise being contracted to produce big ticket items. The item is called, “Skyrocketing shipbuilding costs continue as estimate puts icebreaker price at $7.25B.” The article looks into “Ottawa’s decision to build two new polar icebreakers for the Canadian Coast Guard.” The price of production has “skyrocketed” to $7.25 billion. The item notes, “That represents a dramatic increase over the government’s most recent estimate, released back in 2013, that it would cost $1.3 billion to build one such vessel.”

The government plan is to build the two vessels at separate private enterprises: Seaspan Shipyards in Vancouver and Quebec-based Chantier Davie. This factor alone, which negates the economy of scale and the gain in learning, expertise and experience involved for a single enterprise, will add almost $800 million according to the federal parliamentary budget officer Yves Giroux.

Private enterprises guard their methods, expertise and technique for themselves and will not share this knowledge without being paid, as knowledge is considered private property. With one public shipbuilding enterprise doing the work even in different locations if warranted any economy of scale and gain in learning, experience, expertise and technique belongs to the public and is shared for the benefit of all.

Cartel Party Government Reflects Private Ownership of the Economy

The form of ownership on the economic level is reflected in the prevailing cartel party political system controlled by big business. Inevitably, favouritism and even corruption occur in the awarding of contracts. The “winners” are those private enterprises, which along with the necessary size, have the needed social contacts and influence, and in return for the contract can assist the political operatives with their electoral ambitions supplying them with money, media noise and other means to gain office.

The article reads, “The decision to add a second icebreaker and split the work between Vancouver and Lévis, near Quebec City, has been seen by some analysts as intended to help the Liberals’ electoral chances in those two politically important communities.” Note the casually corrupt comment “politically important communities” by which CP infers some communities are unimportant.

An attendant problem is the delivery of means of production to build the ships, in particular steel. Canada does not have regional production of steel and even its national capacity, concentrated in southern Ontario, does not meet demand. Shipping steel long distances is a costly endeavour.

The article alludes to a problem of “cutting steel” in Vancouver and doubts Seaspan, a U.S.-controlled company, can meet any deadline or budget given supply and other problems. It writes, “Seaspan has repeatedly struggled to meet past timelines when it comes to other shipbuilding projects. Those include the navy’s new support ships, which are already years late and billions over budget, and a new offshore science vessel for the coast guard, which was originally budgeted at around $100 million but is now nearing $1 billion in cost.”

Seaspan mostly sources the steel it uses from outside Canada with supply and delivery delays a constant feature. Canada could solve this problem with steel production from public enterprises in the five main regions of the country. Availability of raw material for steel is not a problem in Canada; the main hurdle to overcome is wresting control of the sector from the global oligarchs, which is a political problem.

Representatives of the global oligarchy are now manipulating the price overruns and delivery delays for the two icebreakers to suggest Canadians are incapable of even having a shipbuilding or steel industry. They insist ships should simply be bought overseas from countries with lower prices of production, namely lower standards of living for the working class. Canadians should be left to hewing, drawing, growing, mining and hauling and they should forget manufacturing and any dream of an all-sided self-reliant economy without recurring crises.

Giroux himself seems to be jumping on this imperialist bandwagon. CP writes that for Giroux, “It has become clear that the government’s drive to build ships in Canada rather than overseas comes with a ‘significant premium’ in terms of cost. The question of whether that premium is worth it is a political discussion that needs to take place, he said. ‘It’s a question that’s eminently political, because there are regional benefits that need to be taken into account and also the issue of national security when it comes to maintaining the capacity to build these types of ships domestically,’ he said.”

In a backhanded way, Giroux points to the key issues of whose economy, who controls and who decides, which of course are “eminently political.” He does not suggest the possibility of public enterprise solving the problem.

With politics and the economy in the hands of the people in a country the size of Canada, which has all manner of available resources and an educated and experienced working class, shipbuilding, steelmaking, machine building, other manufacturing, modern infrastructure and social programs are all possible. This would be a vibrant all-sided public self-reliant economy that serves the people and not the global oligarchy and its vassals.

Workers’ Forum, posted April 15, 2022.