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Whither the Crown corporation? The semantics of privatization

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Photo: Reg Natarajan/flickr

The Saskatchewan government's recent legislative efforts to define what is -- and what is not -- "privatization," has left us all floundering in a game of useless semantics. Does the sale of a 49 per cent stake in a provincial Crown corporation constitute "privatization?" Or is it merely "partial privatization?" Can something only be "partially privatized?"

The arguments over the definition of privatization obscure what should be the real question we all should be asking. That is, if we sell a portion of our Crowns, will our Crown corporations still be Crown corporations? Not in the legal sense -- although most would define a Crown as wholly owned by the government -- but in the public sense of what we imagine a Crown corporation is for.

For Saskatchewan, Crowns have often been used as a tool for economic development in areas where the private sector was either unable or unwilling to invest. In a sparsely populated province such as ours, that has included things like heating, electricity, transportation, insurance and telecommunications. Unlike privately owned corporations which have the fiduciary duty to maximize profits, our Crowns have been used not only to generate profits for the province, but also to promote public goods such as universal access to low-cost services, skills and training, high wages and environmental sustainability. The question is, could a partially privatized corporation continue to pursue the twin mandate of both profits and public goods?

Depending on how the government structured any potential sale (such as the composition of the board of directors and the allocation of voting shares) the ability of what would be a "mixed-ownership" corporation to pursue these twin objectives could be severely compromised. Private investors invest to realize a profit. With a 49 percent stake in the corporation, the private investor(s) could exert a tremendous amount of pressure on the firm to ditch its public purpose objectives.

For instance, as the CRTC notes, while publicly owned SaskTel has made major high-cost investments to ensure rural access to its 3G network (98 per cent penetration) throughout Saskatchewan, private carriers have limited their investments to only the more densely populated and therefore more profitable urban centres (Regina and Saskatoon). There is little reason to think that private investors would judge this to be a sound business strategy. While it might be good for the residents of rural Saskatchewan, from a purely bottom-line perspective it makes terrible business sense to make costly investments in areas that will provide little in return.

The more control the government relinquishes to the private sector through any potential sale, the less our Crowns will be able to do what they were created to do. While the government can play semantic games over what constitutes "privatization" in a cynical effort to avoid breaking its myriad promises on privatization, we need only ask a simple question, will our Crowns still be Crowns at the end of the day?

Simon Enoch is Director of the Saskatchewan Office of the Canadian Centre for Policy Alternatives. 

Photo: Reg Natarajan/flickr

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