In response to the economic damage done by COVID, governments everywhere are planning to spend on infrastructure. But Linda McQuaig writes, in Canada, that spending will benefit the wealthy. Justin Trudeau has established the Canada Infrastructure Bank and endowed it with $35 billion:
Of course, municipalities badly need new infrastructure so the bank, endowed with $35 billion in public money to help finance infrastructure, should be a godsend.
But it isn't -- except for business and investors.
That's because of the business-friendly way the Trudeau government designed the bank. Municipalities that want the bank's financial support for an infrastructure project must "partner" with a private business.
These public-private partnerships (P3s) ultimately drive up the cost of the projects and leave municipalities with less control over their own infrastructure.
The problem is that " if municipalities don't want to "partner" with business -- if they want instead to handle the projects themselves, raising the money through municipal bonds as they've traditionally done -- Canada's new public bank won't help them."
Consider what happened in Mapleton, Ontario:
Like many municipalities, Mapleton needed to upgrade its water and wastewater systems. The CIB offered a $20-million debt-financing package, and proudly promoted Mapleton as a "pilot project" for its new model of financing municipal water projects.
But the $20-million financing package was aimed at ensuring the private partner achieved its profit targets, and offered nothing directly to the municipality.
When Mapleton township studied the deal carefully, it realized that it would be cheaper for the township to do the water project itself. So it cancelled the deal -- and received no help from the CIB.
All that Mapleton was left with was a $367,000 legal bill in connection with the CIB process.
But why didn't the CIB offer the $20-million subsidy directly to the municipality to help finance the project? Why must a private partner be involved?
What the CIB calls its "innovative financing model" is really a mechanism for directing taxpayer dollars to private companies so they can earn profits managing our infrastructure -- even though we can build and operate these projects more cheaply on our own.
What's the point of this bank -- besides ensuring businesses profit from our public services?
That really is nice work -- if you can get it.
Image: cib-bic.ca
16 comments:
Given the track record of P3 projects, the CIB is a total scam. It looks a lot like Obama propping up the banks in 2008. There are better ways, but I don't think most of us are yet awake enough to stand up and howl.
McQuaig always tells it like it is, Owen. For those interested, I highly recommend her latest book, The Sport and Prey of Capitalists, where she fully explores the history between government and privatization interests in our country.
You're right, Danneau. This scam has been going on for years. And most of us aren't concerned.
She's been on this beat for years, Lorne. And she courageously soldiers on.
What's the point? What's always the point? Where do the political know-nothings always go to get the "technical expertise" needed to manage any project?
Does this help:
https://en.wikipedia.org/wiki/Canada_Infrastructure_Bank
"Pierre Lavallée was the first President, Chief Financial Officer (CFO) and Chief Executive Officer (CEO) of the Bank. He resigned from his position in April 2020. Upon his resignation, he was awarded a bonus worth $720,000, or 120% of his annual salary.[7] In October 2020, he was replaced by former McKinsey & Company partner Ehren Cory."
http://www.cfba.ca/images/newsmanager/newsfiles/2017-03-09-14-39-56-i11h-273-273GR%20Report%20February2017%20(002).pdf
"As a partner at McKinsey & Company, [Cory] was a leader in the Infrastructure and Public Sector practices, and worked closely with clients in the energy, mining and public sectors to effectively structure and execute on their capital investment programs and overall strategies."
Yuk, yuk and yuk.
As I wrote, John, it really is nice work.
Yeah, well, “Public / Private Partnerships” has a nice ring to it, eh. Everybody getting along, contributing to a better society for all. So what’s the problem?As McQuaig points out, there are several. I won’t repeat them.
Couple of points however. in any major municipal project, most local governments if not all, already involve the private sector, given that these municipalities lack the expertise and equipment necessary for such big undertakings. Consultants, surveyors, engineers, and on and on from private companies get contracts and the public funds that go with them aplenty. So certain players from the private sector have always been getting public funds. Lots of public funds.
What seems more to the point with this scheme, are the investment dollars to fund projects. Don’t use just public funds anymore, from whatever level of government but private ones as well. Which is a neat situation in the short term if you’re government cuz now you don’t need to raise as many public funds, especially the ones that might require dreaded tax increases. So what the heck, why not involve private financing. The drawback from the public perspective is of course that private investors are not making their bucks available as a public service. Au contraries, they want good returns on those investments, even better returns than they might get elsewhere. So another hand in the pot that needs to paid in the end. Ergo, overall costs rise to cover that ‘expenditure’.
This business reminds me of the ads for CHIP reverse mortgages. They’re cleverly done to give the impression the banks are just out there trying to help out old (55+) folks in their retirement years with notions of ‘free’ money. As if. These financial institutions are spending millions of advert dollars (I must see 5 of these things a day and I don’t watch much tv but likely at geezer prime times though) pushing these things cuz it’s obvious these CHIP deals are damn good for them in the long run.
Conclusion: the investor class has gotta eat too. And eat well, at that! Mac
They continue to do well, Mac -- better since the pandemic.
Linda McQuaig has been covering the scams of plutocrats for years, and I've got a couple of her books kicking around here. Another person who's written about their scams is Chrystia Freeland, our current finance minister.
The CIB was set up by Freeland's predecessor, plutocrat and former C.D. Howe chair Bill Morneau. It's the kind of corporate welfare scheme the Tories used to specialize in, back when they were interested in governing instead of silly culture wars. I wonder if Freeland will take a fresh look at the CIB. I hope so, but I haven't seen much commitment from her to acting on the problems she identifies in her book.
Cap
When you get into the halls of power, Cap, your perspective changes.
Just as I have come to believe that the bar is now set so low that what really distinguishes the Liberals from the Conservatives or New Democrats is insignificant, these grand projects seem like just ways to dole out federal revenues to private interests. Why does SNC Lavalin come to mind?
Your Hwy 407 shines a powerful light on this chicanery. A project built with public funds on the promise that tolls would only be exacted until cost recovery but then sold (99 year lease) for three billion against an estimated value of over $30 billion with the private owner intending to levy tolls for as long as anyone chooses to travel it. Thank you Mr. Harris.
When you go this PPP route, the private sector naturally gravitates to the highest-return projects, leaving the chaff to be funded by government. If the returns aren't rich enough the private sector has no compunction to play ball.
35 billion does sound like a lot of money but it's peanuts in the context of the investment needed to repair, upgrade and replace Canada's failing infrastructure including our electrical grid, our highways and railbeds. During the Calgary floods a few years ago a professor emeritus from McGill who specializes in disaster engineering estimated the costs of infrastructure rehabilitation would run to a trillion dollars. 35 billion and one trillion bear little resemblance to each other.
There used to be a recognition in this country that some projects could best be done by the government, Mound. That's how we got the CBC and Trans-Canada Airlines. Now we appear to believe that government is only our second-best option.
Blogger Owen Gray said...
As I wrote, John, it really is nice work.
Very true but not unusual.
We had a situation here in Nanaimo .
https://www.nanaimobulletin.com/opinion/city-council-must-take-a-good-look-at-its-record/
There remain many unanswered to Mr Berry's record of employment along with members of the ,then, Council.
The issue is freedom to information and the medias willingness to pursue such.
All too often we remark ; follow the money , but seldom do.
TB
The disease is everywhere, TB. If the pandemic has taught us anything, it's that we have to contact and trace the sources.
Why wasn’t that money borrowed from the bank of Canada? The Canadian people need to know about another steal from the Canadian tax payer. Anyong
It all raises the question, Who are they working for, Anyong?
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