Let me emphasize that I fully accept that individuals are free to spend their money as wisely or foolishly as they choose and I acknowledge that what I might regard as frivolous expenditures are not necessarily seen that way by others. However, Ford’s belief – as stated – amounts to a less than subtle attack on government spending as inherently inferior to private spending.
Yet there is ample evidence to demonstrate that unless sufficient resources are allocated for the provision of public goods, our enjoyment of private goods can be seriously eroded. Lower taxes may allow people to buy fancy automobiles, but they must drive these cars on streets and highways that are not adequately maintained. Children have access to the myriad of electronic devices that are created, even as their schools deteriorate and are increasingly plagued by violence. People have no shortage of food, alcohol, cigarettes and other “creature comforts” that will soon include marijuana, but they often lack adequate medical and hospital care when health problems arise from the excesses of consumption. This dichotomy is increasingly prevalent and will increase with the Ford philosophy of governing, but it is hardly new. The issue of public-private imbalance was laid out some 60 years ago in The Affluent Society, written by Canadian John Kenneth Galbraith.
Ford Version of Government Efficiency
However, I must concede that Ford’s initial actions do make the case (unintentionally) that government financial management may be inferior to private decision making.
Power Politics – I
Attacking the six million dollar man in charge of Ontario Hydro and promising to fire him as his first act as Premier played well for Ford in his campaign against wasteful spending under the Liberal regime. Soon after taking office, the Hydro CEO and the entire Board were gone, and without the $10 million severance package that had been anticipated for the dismissal of the CEO. Closer examination, however, reveals that the CEO wasn’t fired and didn’t quit; instead, he was allowed to take early retirement which meant he could retain stock options worth over $8 million. The final arrangements also included just under $5 million paid to the departing directors for their stock holdings. Whether one uses discovery math or the more traditional approach that Ford wants back in the schools, it seems clear that the net result was a cost of over $13 million to get rid of the six million dollar man.
In addition, the instability surrounding this upheaval and the prospect of an increasingly politicized Board of Directors of Hydro One has had a predictably negative impact on its stock value, decreasing the value of the shares owned by the Ontario Government by $180 million in a single day. Moreover, analysts warn of continuing uncertainty surrounding the stock values because of the possibility of further government moves that could cut the company’s profitability and lower its value.
Power Politics – II
In a second example of its financial and management acumen, the new Ford Government announced cancellation of the White Pines wind project in Prince Edward County, even though its contract had been approved by the Independent Electricity System Operator, an arms-length government agency. There had been strong local opposition to this project and the MLA from the county is the new Conservative House Leader. Imagine – cancelling a power project because of local opposition. I bet if a Liberal Government had done that, the Conservatives would have been outraged. Oh wait, it did, and they were, and we never heard the end of the political decision by the Liberals to cancel the gas plants near Mississauga.
The Prince Edward County project had been 10 years in the making, and all nine of its wind turbines were scheduled for completion in the next few weeks. The company behind the project has announced that it will seek up to $100 million in damages if the Conservatives follow through on their plans to cancel the contract. For its part, the Ford Government claims that it will introduce legislation that not only cancels the contract but also prevents it from being sued in domestic courts as a consequence. Should such an outrageous and arbitrary action ever be upheld, what company would ever consider doing business in Ontario, with a government that does not honour its contracts? It is almost certain, instead, that the government will have to pay damages. As a result, instead of a private company paying for an operating wind project, the government (and, therefore, those taxpayers it values so much) will have to pay up to $100 million for a wind power project that won’t exist – another shrewd move by the new Premier.
Reconsidering Pokémon
So Ford’s determination to find efficiencies and make better use of taxpayer funds saved $10 million in severance costs that would have been paid to the six million dollar man but has so far cost close to $200 million in share costs for the departing CEO and Board and lost share value for the portion of Hydro One still owned by the government (that is, the taxpayers). Undaunted, Ford now proposes to cancel an existing contract and saddle taxpayers with up to another $100 million in costs in exchange for …. nothing. Based on the evidence to date, we may want to upgrade the wisdom of Pokémon purchases.