On public investments

So far in the Saskatchewan election campaign, most discussion of the role of Crown corporations (see e.g. the comments here) has been met at least in part with a question from Sask Party supporters as to why Crowns should be allowed to do anything more than carry out their "core" operations, mirroring the comments of Sask Party MLA Dan D'Autremont. I'll take a moment now to answer that question, and set the stage for the wider issue about the Sask Party's view on Crowns.

Let's start with the usual example, being SaskTel's place in offering home security services.

Now, one of the usual core principles of free-market supporters is that competition is good. And it seems fairly clear that as a general rule, the more suppliers there are pursuing the same dollars in the same area, the better the results will be for consumers.

So what happens when SaskTel offers a security service alongside its other operations? Simply put, the effect is to provide one more option in the marketplace.

Now, it may be that SaskTel has better connections to suppliers based on its existing knowledge base, as well as greater cost efficiencies due to the fact that its core operations already include a presence in most Saskatchewan homes. In that case, consumers benefit from receiving a better option than they would from private-sector competitors, and the province benefits a second time from SaskTel's profits in providing that more efficient service.

Or it may be that SaskTel isn't able to provide more efficient service. In that case, their private-sector competitors don't figure to have anything to worry about - though they may still be forced to meet better standards of price and service based on the existence of another option.

Either way, Saskatchewan residents benefit from the added competition provided by SaskTel. And in the best-case scenario, the province as a whole receives an added benefit, as any profits earned by SaskTel result in improved core services, lower rates, and/or dividends to the province.

So what's the Sask Party's take on that set of possibilities? It's eager to legislate away the Crown competition and see consumers pay higher prices for less if it means avoiding the risk that the profit might go into public hands rather than private ones.

Now, I'm sure some Sask Party apologist will start the usual rant about how additional competitors are driven away where SaskTel is already in the marketplace. Needless to say, I'm not buying that one: anybody capable of offering a better deal than SaskTel would still have every reason to enter the market, and consumers are obviously worse off if SaskTel vacates the market to make way for someone offering a worse option.

So it's clear that consumers benefit from Crowns which do more than just the bare minimum. But what about the Crowns themselves?

It should be obvious that in carrying out core operations, a Crown will acquire some resources which can be put to more than just one use - be they business connections, technological resources, physical space, or anything else. And by taking advantage of the opportunities created by those resources, a Crown can better carry out its core function of providing the basic services to the province as a whole for the lowest possible price.

In contrast, a Crown prevented from doing anything to make use of its additional resources will wind up having more difficulty carrying out its core services as a result. And a purge of non-core operations which represent an efficient use of public resources would be a natural first step in trying to paint the Crowns as stodgy, inefficient and ripe for a private-sector takeover. Which in all likelihood would lead to a new private-sector owner doing exactly what the Crowns are doing now - only with the profits flowing into private hands instead of public ones.

For reasons I'll get into in my next post on the subject, I'm not convinced that the Sask Party would wait before moving into whole-sale privatization in any event. But even if one takes at face value their claim that they'll only cut down the Crowns to avoid competition with private-sector actors, the end result is still to make the Crowns - and the province - far worse off in the long run.