Global Trends
GLOBAL TRENDS
INCHING TOWARD PARADISE
CANADA—REASON readers should be seriously cautioned not to conclude from anything that follows that Canada is a land of milk and honey and that instant emigration is desirable. Far from it. But lately, modest signs of pro-freedom progress have emerged. Several of them have been in Alberta, the next province inland from the Pacific coast province of British Columbia.
One of the encouraging developments is selective lifting of a government roadblock to free economic exchange via a duty-free "port." Alberta's provincial cabinet has approved administrative work on a proposed inland, duty-free container port to be set up in either Calgary or Edmonton. Local manufacturers operating in the area, planned to cover 37 to 50 acres, could import materials and use them for finished products, and the goods could be exported without being subject to duties.
On another front, a group of Alberta business owners wants to take over a branch rail line (around since 1910 and about to be abandoned in central Alberta) to set up a private railway connecting several small towns in a rich grain growing area. The group, incorporated as Alcentrans Holdings, Ltd., would use its own locomotives to haul grain and other freight to connecting points on the government-operated Canadian National Railway and the private Canadian Pacific Railway.
Several major banks have agreed to provide $7 million to buy 1,000 miles of right-of-way, three locomotives, car-control computers, and other equipment. The group is convinced it can make a profit and predicts there will be more such operations in the future.
Meanwhile, Alberta's Conservative Premier Peter Lougheed, who is constantly feuding with the central government about something, warned Ottawa that Canada's state Medicare system will collapse unless the federal government does something about cost control. In an attempt to practice that preaching at the provincial level, the Alberta government passed legislation this year allowing hospitals to charge up to $150 a year for individuals or $300 for families for formerly "free" care. Hospitals will be expected to use the revenue, rather than rely on government grants, to cover operating deficits.
Moreover, the provincial government is currently studying a proposal to transfer the province's health insurance plan (available to all provincial residents) to the private sector, which includes handing over the administration of a new 500-bed hospital. One of the reasons for this move is that the feds have just passed the Canada Health Act, which gives them the power to refuse health-care transfer payments to any province that allows doctors to extra-bill patients, or to charge user fees. Alberta, not wanting to be under the thumbscrew of the feds, is thus considering opting out of the federal plan by letting loose a measure of free enterprise.
However, as is usually the case when governments "deregulate," there is a catch: the Hospitals Department would continue to oversee all private operators. But at least it's a step in the right direction.
Alberta has traditionally had one of the most generous welfare programs in all of Canada, but it is now making concerted efforts to change some features to convince out-of-province unemployed to stay out of Alberta. A year ago, the provincial government tightened its welfare rules, lowering dole allowances to $436 million for 1984-85 (down 8 percent from the previous year's $472 million). Single unemployed recipients are now required to document two and three job searches a day in order to maintain their benefits, under threat of a "repatriation" policy that would send shirkers back to their province of origin on a one-way bus ticket.
So even if Alberta is (like the rest of Canada) far from being a free-market paradise, it is not without hope. Positive trends can be discerned.
—BRUCE EVOY
LETTING THE MARKET PREVAIL
EUROPE—The recent trend among European nations to cut back government involvement in the economy continues to grow. While Britain still leads in the move to denationalize (see "Liquidating the State/' March, page 16), France's socialist government has been making some bold moves to sell off state-owned concerns. For example, in March the government put one-fifth of a state-owned electric company on the block, and there has been much talk of other sell-offs.
Such sales are attractive to France's government because it is hard-pressed to find the capital it needs to fulfill its grand strategy of boosting the country's high-tech industry. Moreover, state companies have been a huge fiscal burden on the French government, having lost about $4.5 billion last year, according to Business Week.
Earlier this year, French president Francois Mitterrand thrust out another prong of the government's austerity program: the lay-off of 75,000 workers at troubled state-owned industries, including heavy money losers like coal and steel. Business Week reported that the move, which went against Mitterrand's previous pledges against such lay-offs, is part of a government strategy to control budget deficits and inflation so that an 8 percent tax cut (and a 10 percent cut in government spending) can be affected next year.
The French government also is drawing a hard line on bailing out failing private concerns, turning around its reputation for being an easy mark for companies seeking succor. For example, when the financially troubled Creusot-Loire, an engineering firm, recently requested to be put under receivership, the government stood firm against pressure for a bailout. As one Paris banker commented to the Wall Street Journal, "Even the Socialists now realize it's no use throwing good money after bad."
In deficit-wracked Italy, state-owned energy and chemical companies are coming up for auction, and some of the country's nationalized banks may be on the Socialist government's liquidation list as well. Also figuring into the government's attempt to control state spending is the possibility of privatizing parts of the nation's health, telephone, and postal services.
Spain's Socialist government, too, is proceeding with streamlining state-owned industries. Not only does the government intend to sell state businesses to private investors, but it is closing down a number of such enterprises. The government recently shut down a state steel plant near Valencia that had employed 8,000 workers. And the government says that by 1985 it will have released to other endeavors 50,000 workers in various state-owned businesses.
Having sold or planning to sell state-owned assets worth $193 million (the electronics maker Luxor was the first to go), socialist Sweden continues to pursue what the Wall Street Journal called an "ideological about-face." In addition to selling off state enterprises, the Swedish government is pushing state-owned operations to emulate private businesses, even urging them to earn profits.
In contrast to its neighbors' history of having bailed out ailing industries through subsidies or nationalization—the painful consequences of which are now emerging—West Germany reports some good dividends from its general policy of resisting subsidization of troubled industries. Because German industries like steelmaking, shipbuilding, and textiles have been left to fend on the market without much government aid, they have had to adapt to an environment that includes competition from foreign government-subsidized firms. And many have adjusted well.
For example, the West German textile industry reacted to fierce competition from Asian producers by shifting to high-automation production of high-quality fabric. A shakeout process over the last 20 years weeded out about a quarter of the nation's textile makers and left the industry with a work force one-third its original size of 650,000. Textile orders are up 7 percent in 1984, and production is expected to increase for the first time since 1981. Similarly, West Germany's shipbuilding weathered a competition storm by moving into the production of specialized vessels, leaving the manufacture of less-sophisticated bulk-cargo carriers to the lower-cost South Korean and Japanese builders.