Governments Cannot Create Economic Prosperity — But They Can Sure Destroy It

The history of the Twentieth Century is littered with the detritus left by the legion of politicos and bureaucrats who thought they were qualified to “manage” the economy of their province, city, country, etc.   Just in Canada alone we have have the BCRIC fiasco (a momentary lapse by Bill Jr., who was in most other ways a fairly effective premier), the Bricklin affair in New Brunswick in the ‘Seventies’,  the National Energy Program (which nearly finished off an oil industry already wounded by a massive drop in crude prices), not to mention the many money-losing and inefficient Crown Corporations that only serve to suck money out of taxpayers’ pockets while making many goods and services, such as electricity, liquor, transportation, etc. more expensive than they need to be.  If you don’t believe me, look to Britain in the 1980’s, where the privatization of formerly-nationalized utilities made power, gas, water and rail travel considerably less expensive to the end user.  What do our Crown Corporations — BC Hydro, ICBC, and BC Ferries, to name a few — give us nowadays, except higher and higher prices and a never-ending list of scandals?

And now we have, possibly, the whole LNG business.  Possibly, I say, because the company that is supposed to pull the whole thing off, Petronas, is making noises about withdrawing because of  the rather long laundry list of conditions the Federal government is placing on the project before “allowing” it to go ahead.   To which I say, “Please do.”  And don’t let the door hit you in the ‘you-know-what’ on the way out.  Because, quite frankly, the whole thing is a terrible idea.

Put aside the lousy economics of it; the fact is that the mere extraction of natural gas (and oil, for that matter) is an extremely capital-intensive, cash-burning business – one that only survives with constant financing coming in, and that the further refining process to turn the stuff to liquid for (and keep it that way) for transport adds exponentially to the costs.  Put aside the fact that the work is slated to be done by an entity that is not only foreign-owned, but owned by a foreign government — Malaysia, to be precise – and that the lion’s share of any revenue earned by the project would obviously go to them first (after benefiting from billions of dollars in subsidies from the BC taxpayer to get the thing up and running).  Forget that Malaysia could easily become an Islamist theocracy, which would definitely put a strain on our relations with them, or ought to.  Forget that the whole premise and business plan, if you can dignify it with that term, revolved around the notion that consumers in Asia would continue to pay three to four times the fair market rate for LNG forever, and would choose expensive BC-produced LNG over far cheaper stuff coming out of Russia (a pricing model that collapsed some time ago, but still the BC government wants to go ahead with the project).

Even if none of the foregoing were true, Ms. Clark’s LNG scheme would still be a bad thing, for the same reason that all those things mentioned in the opening of this post were bad.  Whenever governments try to “intervene” in the economy, it always ends up creating a mess.  It always ends up with a few government-chosen ‘winners‘ walking away from their failed ventures with bucketfuls of other people’s cash (Elon Musk, anyone?), and a whole lot of ‘losers‘ — non-favored competitors, who get undercut by subsidized firms; consumers  who ultimately pay higher prices and have fewer choices;  and of course, the taxpayers who end up footing the bill for the political-bureaucratic class’s naive wishful economic thinking.

Not good.

Governments cannot create a healthy economy – that much is a given.  But what they can do (and should do) is create an environment conducive to true, broad-based economic growth.  And how to do that?

Stay tuned.

 

Ian Tribes

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