Thursday, October 27, 2011

Privatizing potash was a costly mistake

Privatizing potash was a costly mistake |

In researching provincial debt in Saskatchewan during the Devine days, I came across the above article on

While I wouldn't normally send readers to rabble, nor would I view rabble as a place to receive good economic information, it interested me as to what the author's reasons were that privatizing Potash Corp was a mistake.

After sifting through her reasoning, it comes down to one fact:

PCS was privatized for $630 million in the 80's. BHP Billiton offered $38 Billion last year for PCS.

Now granted, this is typical socialist thinking - assuming that the difference between the two numbers means that the people should have got more for PCS back then, and if not, then it's a subsidy or a handout.

The problem with this line of thinking is that PCS ran for over 2 decades post-privatization as a private company. It purged its operations of political appointees. It adopted a growth strategy that didn't depend on taking the most risk adverse approach possible. In short, it made sound investments, and the management of the company did so with the best interests of the shareholders in mind, not necessarily the government of Saskatchewan or the individual's job. She also missed the point that because the privatization was made via an IPO open only to residents of Saskatchewan, there could be residents of Saskatchewan still holding their shares from that time. If that's the case, then those people most assuredly would have reaped the benefit of the company's growth in the takeover bid. One thing I know for sure though, because of that privatization, the province reaped more in taxes and royalties over the past 2 decades than they would have had the government kept it as a Crown corporation - even taking a dividend to the province into account.

This is especially fitting considering one of the major themes of this campaign (and the NDP's biggest plank) is that they would pay for all their promised expenditures by messing with Potash Corp and the potash industry and taking more money out of the companies - money that would otherwise be used to expand operations and provide immediate and future benefits to the province.

1 comment:

  1. I suppose,in theory,a government could run a successful business,but to do so it would have to create a corporation run by the best experts in that field,not friends of government and assorted political hacks.

    No government has ever resisted the temptation to fill the executive positions with the latter. The writer of the article linked to works for a Union now,so her statements are those of a person ideologically opposed to capitalism.

    In other words, highly biased.