How not to fund infrastructure

Recycling is supposed to be a good thing, so when the federal Liberals quietly announced that “asset recycling” would be part of their strategy for meeting their much-ballyhooed infrastructure promises, not many eyebrows were raised. They should have been. Asset recycling is an obscure code word for selling our public goods for private profit. It’s privatization by another name.

Don’t have the taxes to pay for new buses? It’s okay, you can sell your electricity utility to pay for them instead. In fact, this is precisely what the Ontario Liberal government is doing. Already 30% of the profitable Hydro One have been sold and another 30% will be sold before 2018. A public Hydro One could more directly fight climate change, lower energy costs for the poor or work with First Nations on whose lands generation often happens. A private Hydro becomes an instrument for profit first with other goals secondary.

What the Liberals have started in Ontario will soon be rolled out across Canada. Here are the problems with these schemes.

First, there is no crisis that says you have to sell a bridge to fund a hospital or the other way around. Or, better put, we have manufactured crises. Decades of slow but crippling austerity, tax cuts and restructuring have led us here. We cannot afford transit and hospitals by choice and it is in our power to reverse things. Deficit spending can be part of a reversal in the short term; asset recycling cannot.

Second, remember that we need more infrastructure spending because what we have is often crumbling and the economy faces gaps in demand. Investment in infrastructure not only creates useful things we depend on, it also creates demand for materials and jobs, which themselves create…you get the picture. Business isn’t investing, so there is a big role for public investment. Keepers of global order like the OECD and the IMF have recognized this. The IMF was applauded recently for walking back its support for austerity. Rightly so, but the same document reaffirmed support for privatization. Canada’s Liberal Party is really at the forefront of this policy shift by elites.

However, getting funds for investment by selling other assets into a system that has created massive asset price inflation—seen in stock markets at record highs, a lack of sub-million dollar homes in Vancouver or smashed art auction records—seems questionable at best. The response to the global financial crash of 2007-08 saved the world from depression but left fundamental inequalities in place.

Third, shares in newly-privatized public enterprises can become bargaining chips. Asset recycling has already created space for new and refined forms of triangulation, with worse to come. The latest batch of Hydro One shares in Ontario will be sold at a slight discount to First Nations for loaned funds. What seems like new funding is, however, a cynical one-off.

This is the Ontario government effectively saying, “we’ve underfunded your schools and clinics, poisoned your rivers and abandoned your communities, let’s make it right by helping us privatize Hydro.” Beyond slightly accelerating the sale of Hydro and coming at low political cost  (the government gets a slightly smaller share of privatization income, rather than making explicit expenditure on First Nations), this scheme does nothing to address real grievances First Nations might have with Hydro. Seats on the Board of Directors or other regulatory bodies, deeper co-governance arrangements, priority hiring—none of this is on the table and neither is new, stable funding.

Finally, here’s a quote from an investment manager in a Maclean’s piece on asset recycling:

“If you took a road that used to be free and you tolled it, I think consumers are right to say, ‘Hey, that used to be free and now it’s being tolled, that’s unfair,”’ he said.

“But let’s remember that governments need to balance their books somehow… I don’t think they can raise taxes too much more. I don’t think any of us want that.”

Typical right-wing talking points. The problem is that these typical right-wing talking points are coming from someone ostensibly representing union workers: this investment manager works for the Ontario Teachers’ Pension Plan. Canada is a world leader when it comes to workers’ own pensions being turned against them and younger generations. What were once simple, safe pension investments in government bonds are today predatory arrangements with pension boards acting more like hedge funds. Asset recycling only accelerates this process and binds regular people more tightly to a system that ultimately works against them.

So, too few buses in your city? Sell an airport. First Nations have inadequate health facilities? Here’s a few Hydro shares. Need a pension? Buy a highway…and don’t forget to contract out the maintenance and toll staff to make sure you’re earning maximum returns. As a friend put it, “Trudeauism is able to sublimate both neoliberalism and social democracy into itself.” Just so, asset recycling is the wrong answer to each of the above good questions.

Originally posted at my blog,


  • Letter to Toronto Star (unpublished)

    Re: Ottawa eyes airport sell-off to raise infrastructure cash, Bruce Campion-Smith, July 3, 2016

    The current Liberal government has forgotten it owns the Bank of Canada which was nationalized under Mackenzie King in 1938. Currently working its way through the courts is an action filed by Canadian constitutional lawyer Rocco Galati on behalf of COMER (Committee for Monetary and Economic Reform) to restore the use of the Bank of Canada to its original purpose which includes making interest-free loans to federal and provincial governments for infrastructure expenditures.

    The Liberals have no need to resort to crony capitalism and to sell off valuable public assets to their supporters when the BoC is always available to provide financing, just as it did to when it helped the government fight WWII, helped build hospitals, universities, and transportation in the post-war era, and helped support financial institutions after the 2008 financial crisis.


    1. Call for Renaissance of the Bank of Canada

    Through our publicly owned Bank of Canada, which was established in 1935, the federal government has the power to borrow money in huge quantities essentially interest-free, and to make such funds available not only for its own use, but also for provincial and municipal expenditures. Such borrowing helped Canada to get out of the Great Depression, and to finance its participation in World War II. Continuance of this practice until about 1975 played a key role in creating Canada’s post-war prosperity and in making possible its social programs.

    2.. Improving Access to Financing and Strengthening Canada’s …

    To soften the impact of the crisis, the first phase of Canada’s Economic Action Plan included measures to provide up to $200 billion to support lending to Canadian households and businesses through the Extraordinary Financing Framework.

  • The Liberal party is owned by Red Tories because of our caveman voting system.

    The math is pretty simple. The electorate is divided up into: 60% centrist and left-leaning Keynesian; 10% Red Tory “neoliberal” (neoclassical) lite; 30% hard-core neoliberal. A “majority” is on 40% of the vote. So unless the Liberal party splits the Red Tory vote — by giving Red Tories the economy and the environment — Red Tories will give the Cons a 40% majority (or “minority” government on 36%.)

    My theory is that bloggers are generally opposed to electoral reform because if Canada was a democracy — like 30 of 32 developed countries and 74% of all nations claiming to be democracies — they would have a lot less to bitch and moan about. Why have progressive policies when you can complain about neoliberal policies? (As an unbridled ranter, myself, I can certainly see the appeal.)

    Of course, if Elizabeth Warren runs on a New Deal 2 platform in 2020, this little backwater establishment colony of ours could, very well, have Keynes imposed on it from above like during the 1930s through FDR.

    BTW, Trudeau’s election platform showed, quite clearly, his original “Keynesian stimulus package” was all nonsense. It didn’t even tackle the infrastructure deficit. The spending was back loaded beyond the election term. The present privatization scheme is just more government-by-bribe modeled after the Clintons. (Now we know why Trudeau was so cozy with Wynne, who recently became very rich privatizing Hydro One.)

    (Junior, the motivational speaker, is set up pretty nicely to collect juicy speaking fees for services rendered paid post-public-service. Too bad poor old Brian Mulroney didn’t receive his $300,000 payment from Karlheinz Schreiber for Airbus Group via a personal speech. Would’ve saved him from the harrowing ordeal of a public inquiry. Don’t know what these lawyer-politicians flap their gums about. But given they get around $300k a pop, their words must be, in some way, shape or form, music to the ears of these noble Masters of the Universe of ours.)

  • Edgardo Sepulveda

    Hello Michal: Thanks for the post. I liked the way you identified the policy elements and political and financial stakeholders that are behind this most recent push for “asset recycling”. A couple of points that you may want to consider in revising or expanding the post:

    1) I agree with your assertion that there has been an attempt to manufacture a crisis and that it is within our power to reverse things. However, you only mention deficit spending as an alternative response. I would also advocate for an increase in taxes as part of any progressive alternative. In my guest post of January ( I highlighted that total taxation revenues as a percentage of GDP in Canada are at their lowest level since 1980. Yet, there is a perception amongst many that we are over-taxed and that taxes cannot be raised – as per your Maclean’s quote “I don’t think they can raise taxes too much more. I don’t think any of us want that.” Actually, that is exactly what I want, for the reasons set out in my post and as an alternative to the specific kind of privatization that is actually likely to occur under “asset recycling”, if Ontario is any indication.

    2) I like the article’s focus on the ongoing privatization of Hydro One because this is another phase in a broader privatization effort of Ontario’s electricity sector. One of the most disturbing aspects of this process was the corresponding political decision to also deregulate; students of regulated industries know that this particular policy combination is the most likely to result in any windfall or efficiency gains accruing disproportionately to the companies and their shareholders. In effect, about 65% of Ontario’s total installed electricity generation capacity is now based on Ministry-directed power supply contracts with private companies (see the Ontario Auditor General’s 2015 Annual Report at The Government has legislated that these confidential contracts are not under the jurisdiction of the Ontario Energy Board (the sector regulatory agency) so there is no independent oversight to ensure that they represent good value. In this context, it will be interesting to see what kind of mechanisms are proposed, if any, to ensure that both the “sell” price for any newly-privatized assets and the post-privatization prices to be charged to the public are fair and reasonable.

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