Corporate Canada declines
Published in the Ottawa Citizen, August 9, 2008
Some call it treasonous but however you regard the hollowing out of Canada’s corporate sector be assured it continues apace. To takeover numbers worth some $835 billion and swelling since 1985 to around 11,000 corporations, we may soon add the venerable Alberta based TransAlta Utilities.
What’s remarkable is how LS Power Equity Partners (LS Power) and Global Infrastructure Partners (GIP) didn’t consider this takeover sooner. As a major generator of coal, gas and wind energy whose forerunner Calgary Power Company was founded by W.Max Aitken in 1903, TransAlta Utilities has fifty such assets located around the world with the majority located in Alberta where it also supplies most of the province’s power. In addition, LS Power already has 9% of TransAlta’s common stock and owns power generation assets all over the U.S. Adding to the mix, GIP specialises in infrastructure investments worldwide while its owners - Credit Suisse and the world’s fifth largest multinational conglomerate, General Electric - are providing the financing though for all their riches, they don’t explain why the $7.8 billion they are offering is only a fraction of what it would cost to build such assets from scratch.
Perhaps, then, it was all those billions recently announced by the Alberta and federal governments for carbon capture and storage technology that provided the real incentive to make an offer? TransAlta is after all the country’s largest emitter of greenhouse gases. Retaining Transalta CEO Steve Snyder who chaired a bluc chip carbon capture committee will undoubtedly give unimpeded access to the handouts. For now, anyway, the head office will surely remain in Canada. Won’t it?
Well it didn’t for the Hudson’s Bay Company, or for Inco, or for Canada’s meatpacking industry, 80% of which is now owned by Tyson and Cargill, or for … You get the drift. Of that $835 billion noted above, only 2.3% went to new investment and you wonder why Canada’s productivity levels are so low?
For decades, Edmonton book seller and publisher extraordinaire Mel Hurtig has been chronicling the sell out of corporate Canada and the further entrenchment of Canada as a branch plant economy - the latest in his new book The Truth About Canada.
His outrage is understandable. No other country on the planet has had its assets so easily or so thoroughly plundered without any shots being fired.
If you think Hurtig is overreacting, check out Diane Francis who recently called for ‘reciprocity’ (no foreign national should be allowed to invest in Canada if we can’t invest in their country). Or market analyst John Budden who says outright that Canada must decide which Canadian companies are strategic, vital holdings. Foreign investment is fine, but not control. “Once these companies are gone”, he says, “we don’t get them back.”
If corporate hollowing out was the only insult, there might be cause for concern but not for despair. In the end, the economic levers of power do reside with the government of the day. But corporate hollowing out combined with other worrying indicators suggest the crust of a country that remains will require every ounce of ingenuity to sustain a unified future.
Here are some reasons why. As discussed by Andrew Cohen earlier this week, the devolution of powers to the provinces must inevitably hollow out federal powers. Labour mobility agreements between provinces and other countries, for instance, such as that underway between Quebec and France, effectively undermine meaningful federal immigration policies, as well as the newly agreed economic union between the provinces. For insight into this dynamic, a report from the British House of Lords reveals how European Union labour mobility has, in places like London, created throngs of foreigners that statisticians have been unable to track.
Labour mobility also dominates the North American Community project whose vehicle is the Security and Prosperity Partnership Agreement between Canada, the U.S. and Mexico. Here corporate takeovers merely deepen continental integration, security and other so-called efficiencies.
With the centre failing to hold economically or politically, confederation must crumble with Quebec and Alberta, and under the guise of autonomy, the first to go.
No political party appears willing to reassess this situation.
Ottawa should position now to become the Brussels of North America.
MARGRET KOPALA’s column on western perspectives appears every other week.