Capital Punishment$$

[ivbinconned]

Prairie Centre Policy Institute

Weekly Commentary



WHERE DO WE GO FROM HERE

October 27, 2003



Title: Capital Punishment?



If Saskatchewan is to grow and be prosperous, it must be capable of attracting private investment capital. And you don’t have to be an economist to know that it is virtually impossible to attract investment when you keep biting the hand that feeds you.



A healthy private sector and business friendly environment are often the first things the private capital market looks for when allocating their investment dollars. They tend to shy away from Saskatchewan, where investment funds are often allocated by the government rather than the market. Investors don’t like it when politics replaces return on investment as the basis for allocating funds. The problem with government intervention is you end up with investment projects that often reduce rather than enhance wealth because resources are wasted on political boondoggles like Spudco, mega bingo, the land titles registry and other such expenditures that seem to be favoured by the current NDP administration.



No where is the effect of government intervention more evident than in the Western Canadian oil patch. For years we’ve been told that Alberta is wealthy because it has oil and gas. And, as you can see from the attached map, that statement appears to be absolutely true. The oil and gas fields do stop abruptly at the Saskatchewan border. The question is, however, do they stop because: a) that’s where the oil and gas ends; or, b) the industry does not want to invest in Saskatchewan.



Obviously, it’s investment and not the resource that ends at the border. In fairness, I must point out there is a difference between the geological formations of the two provinces. As a result, the sweet light crude oil found in Alberta is worth more and costs less to recover than and the heavy crude found in Saskatchewan. But, that is not necessarily the main cause for the cut-off along Alberta’s eastern border. According to industry insiders, the real culprit is Saskatchewan’s Oil and Gas Conservation Act.



This Act gives the minister responsible absolute power over the oil and gas industry. It states, in part, that the minister has exclusive jurisdiction over all matters pursuant to this act. It also says the minister may reconsider any matter that has been dealt with and rescind, alter, amend, suspend or confirm any decision or order made, approval granted, or permit or license issued. Furthermore, there is no appeal from an order or decision of the minister and all decisions, findings and orders pursuant to this Act are final and conclusive. They are not reviewable in any court of law, and no decision, finding or order of the minister shall be restrained by injunction, prohibition or other proceeding or be removed by certiorari (appeal to a higher court) or otherwise by any court.



Now, Minister Cline has stated he would never use this power and I believe him. But, I’m not a big investor either. It has been widely reported that many of those who do have the capital and desire to invest purposely avoid Saskatchewan. The reasons for this are closely related to the perception that public policy in this province is largely driven by a long-standing contempt for capitalists and private sector investment. Success is a dirty word and we don’t want any of that here. This anti-business attitude was ignited by the 1933 Regina Manifesto, which created the CCF along with their now infamous declaration that they would not rest content until capitalism was eradicated. Fuel was added to the fire when the CCF joined with the labor unions to form the NDP. It was in full fury when a Saskatchewan NDP government nationalized the potash industry by expropriating private property. And, this sentiment is not exclusive to New Democrats. Given its political history, no wonder investors are more than a little reluctant to put their money in Saskatchewan.



I read somewhere that any government that destroys capital markets will pay a severe price for their folly. Do we call that Capital Punishment?



Allan Evans



Allan Evans is a marketing consultant and Business Manager for the Prairie Centre Policy Institute. “Where Do We Go From Here” is a feature service of the Prairie Centre”

[cowman]

I will note first of all that Allen Evans is a "market consultant and business manager". Therefore I suspect his view might be a little slanted?
I mean he isn't going to tell you that Saskatchewan actually gets higher royalties tha Alberta, right?
I definitely am not going to defend the NDP in Saskatchewan! I believe they are a bunch of incompetents. But is Alberta any better?
Consider that our government gets the lowest royalties of any area in North America and then tell me what great fiscal managers they are. Has it provided mega bucks for Alberta? Without a doubt! But at what cost? If I sell the farm I'm going to have one hell of an income in the short term, but things could be a little bleak when I've blown it all!
Did you ever wonder why Alberta took off in the seventies? Well world events saw oil explode for sure, but also we got a government that was bound and determined to give away our resources to their American oil company pals! Peter Lougheed? The great Albertan? Or the biggest traitor we've ever had?
It is with a lot of shame that I admit I voted for him the first time he came to power! Anyone who thinks the Alberta tories are good fiscal managers needs to educate himself! And that includes "market consultants and business managers"!
Was Saskatchewan so wrong to take over the potash? I don't know. But I do know if the industry is profitable at least the money stays in Saskatchewan and isn't sent south to some rich American corporation!

[wilagro]

Good post.

[jensend]

cowman i cant disagree with anything youve said about alberta and lougheed. i lived there for just about fifty years and came to pretty much the same conclusions although i think you have to admit some good things for alberta came out of those times as well. one big difference between sask and alberta is that alberta is now starting to plan for when the energy resources are depleted. this fall a committee of some sort was announced (saw it in the calgary herald) to look at how alberta 's economy might be working in thirty to fifty years. saskatchewan has no plan other than to keep the teachers, nurses and other unions voting ndp and keep the civil service bloated enough to have them voting in their self-interst. saskatchewan is where it is because there has been no acceptance of the notion that as the rest of the world changed changes, change would occur here too. instead the reliance on the grain economy has been regarded as a birthright and the rest of the world owes this province the right to deny what is happening outside its borders. i have heard people blame everybody but saskatchewan for what has happened here and the sad fact is that the longer change is resisted the more painful the change will be. when we were looking to buy out here we felt sorry for people whose grandchildren live hundreds of miles away but after being here for a few years it looks to us that the older generation essentially expelled the younger people by denying them the opportunity to stay here and make a living. the ndp wanted the oil and gas companies to come here and develop the resources for nothing. why wouldn't they go elsewhere and make a profit. to calvert's credit he has lowered royalty structures to try and make it more attractive but he has to do more to make the whole business environment suitable for long term investment. the government here (and it looks like it will be ndp again) is going to have to recognize that it has bled the rural economy to near death to support its socialist ideals. a good health care system is a wonderful thing but it cant be the only focus of a govenment of a healthy province. there has to be a balance that tells business that it will be treated fairly and allowed to prosper if it has to contribute. by the way sask potash is completely privately owned now and doing very well. once the government got out of the way there were enough brains around to make it successful. the government here has been so interventionist that it has destroyed businesses and peoples livelihoods and set the economy back decades. this is a failed socialist experiment and like socialist economies left in other parts of the world it is still struggling to cope with the last half of the twentieth century. it is unwilling to accept that the world around it has to be recognized and dealt with. i was told by somebody who has lived here their entire life that the sense of entitlement of people here (and she included farmers) was probably the biggest factor holding things back. many people here feel that saskatchewan will always be what saskatchewan has always been. it is amazing how often you hear somebody describe a tough situation and then say 'but what are you gonna do?' they just accept that it cant be changed. saskatchewan is a great place and is hugely blessed with natural beauty and resources. in many ways it is a much better place to live than alberta but if it is to prosper in the future it will have to endure a lot of change some of which will be painful.

[cowman]

Well I did not know that Sask. Potash was privatized, so I guess you learn something new everyday!
I will give you an example of a crown corporation gone private in Alberta...Telus, formerly Alberta Government telephones.
First of all when the Alta. government decided to sell AGT they let a select group "buy" the shares. In reality they never got one red cent from these investors! A billion dollar asset given away free.
Right away rates started going up and the local AGT offices started closing! They needed to be more efficient you see. Now they were Telus and they needed large profits to operate. In a short time rates had doubled and the local employees were all looking for jobs at MacDonalds! But Telus definitely was making a good profit so that was a good thing, right? Well it was if you owned Telus for sure! Maybe not so good for the rest of us though?
This is the so-called Alberta advantage! If you have cronies in high places you have a place at the trough and a right to get both front feet in. If not you should be happy that there are so many MacDonalds to get a job at!