Selling Potash Corp, greed and market fundamentalism
The Potash Corporation of Saskatchewan is poised for sale to the highest bidder, and shareholders, not to mention company executives, stand to stuff their pockets from a deal when and if it occurs. The company has spurned as inadequate an offer of $38.6-billion (U.S.) from an Australian-based giant called BHP Billiton and has also been in talks with other companies, including two from China. The great and tragic irony for the people of Saskatchewan is that in 1989 a provincial government sold Crown-owned PCS for $630 million, a minute fraction of what it may sell for now. Itâ€™s like selling your house and having the new owner flip it for 60 times the price. What has this to do with a blog called Pulpit and Politics? Letâ€™s start with the morality of greed, market fundamentalism, and the common good.
I was a young journalist with a ringside seat in Saskatchewan in 1975 when a government led by Premier Allan Blakeney took over half of the potash industry. I later wrote a biography of Blakeney called Promises to Keep and the potash story is told in that book. Potash (potassium chloride) is used as a component in farm fertilizers, which are in growing demand, notably in China and India, countries that have enormous populations to feed. Saskatchewan has the largest potash deposits in the world.
Multinationals on strike
By 1975 the multinationals that had been allowed to mine the resource were on strike against the province. They were in court saying that Saskatchewanâ€™s royalty rates were unconstitutional and they also decided to stop paying their taxes. The companies were miffed when Blakeney, who came to power in 1971, insisted that the existing low royalty rates must be raised. He believed that the resource belonged to the people of province and that revenue generated from higher potash royalties could be used to pay for prescription drug, children’s dental, seniorsâ€™ and other programs. Blakeney had established a number of new Crown Corporations and he wanted them to become involved in joint ventures with private industry in oil, potash and uranium. That would give the province more influence over the pace and conditions of development and a bigger piece of the profit from each resource. Blakeney also believed that having resource company head offices in Saskatchewan would provide quality and well paying jobs that would give the provinceâ€™s young workers and graduates a reason build to lives at home rather than leaving for greener pastures elsewhere.
The legislation introduced in 1975 gave the government the power to purchase and, if necessary, to expropriate potash mines. By 1978, the province had purchased three mines and had a share in a fourth. The industry lawsuits were dropped and PCS was on its way to becoming a successful mining company, which co-operated with private sector companies in an offshore marketing cooperative that exists to this day. David Dombowsky, the first PCS president, was plucked from Blakeneyâ€™s civil service and paid an upper end civil servantsâ€™ salary, likely less than $200,000 a year.
Blakeneyâ€™s government was defeated in 1982 and by 1989 a Conservative administration had privatized much of PCS. Erin Weir, a Saskatchewan native who is now an economist for the United Steelworkers in Toronto, says the potash privatization â€œwas the worst fiscal decision in the provinceâ€™s history.â€ The governmentâ€™s public share offering earned $630 million, an artificially low price driven by ideology and cronyism and abetted by incompetence. The government and its supporters in the mining industry, not to mention the brokerage houses and law firms who made millions in preparing the privatization share offerings, argued that governments have no place in business, that a Crown corporation would lack the capital to expand the industry, and that private enterprise was inherently more efficient than a government owned company. These arguments have become ubiquitous since the 1980s and their constant repetition constitutes the mantra of market fundamentalism.
Economist Weir points out that mines owned by PCS 1989 still account for 80 per cent of the privatized companyâ€™s potash production and capacity. â€œDepending upon which assumptions one accepts, the costs of privatization exceeded the benefits by between $18 billion and $36 billion. In other words, the Saskatchewan government gave up between $17,000 and $35,000 for every man, woman and child in the province.â€
PCS, privately-owned, continues to mine and sell potash and its head office nominally remains in Saskatoon, but anyone close to the industry will tell you that the nerve centre of the operation is now in Chicago. The majority of PCS shareholders do not reside in Canada. While they will profit handsomely from a sale price in the range of $40 billion, there is rarely a word about how the sale would benefit the people of Saskatchewan. As Globe and Mail columnist Jeffrey Simpson writes, â€œthe only debate seems to be about price.â€ In the minds of shareholders and most of the media, self-interest is considered to be synonymous with public interest, assuming the latter concept is even considered. In effect, there is no common good.
The Globe and Mail newspaper reports that, depending on the PCS sale price, Chicago-based CEO William Doyle, stands to gain between $400 and $700 million from his salary, severance and pension plans, as well cashing in on his stock options in the company. Thatâ€™s a long way from the civil servantâ€™s salary paid to the first CEO of the Crown corporation.
The chairman of BHP, which made the $38.6 billion offer, has made the usual noises about being a good corporate citizen in Saskatchewan and Canada, and keeping jobs and the head office in the province. Similar promises have been made by a myriad of other companies, including U.S. Steel, which promised to keep jobs in this country after a takeover but promptly closed Canadian mills. The Saskatchewan and Canadian governments have said little. The Saskatchewan Securities Commission will look at any offer that is made but appears under-resourced for so massive an undertaking. Columnist Simpson says the federal government, â€œgoes through the motionsâ€ of reviewing any such takeovers and applying to them a â€œnet benefitâ€ test â€“ but Ottawa never stops a takeover. Canada has lost Algoma Steel, Falconbridge, Dofasco, Hudsonâ€™s Bay Company and others, all in the name of allowing private enterprise to flourish. Ironically, if BHP doesnâ€™t buy PCS the company may fall to the Chinese â€“ and both of the suitor companies are government owned.Â The Chinese would love to control the pricing and production of potash, a resource that they covet. BHP, for its part, has troubled relations with unions and Aboriginals in project locations and a spotty environmental record — in Papua New Guinea, South Africa and Northern Canada.
Acclaimed historian Tony Judt (recently deceased) wrote that: â€œSomething is profoundly wrong with the way we live today. For thirty years we have made a virtue of the pursuit of material self-interest: indeed, this very pursuit now constitutes whatever remains of our sense of collective purpose.â€ A similar observation might well be applied to potash and other takeovers.