The Dubious Privatization of BC Rail: The NDP Stance

November 20, 2002

Last week we began a discourse surrounding the issues of the privatization of BC Rail and examined the Liberal standpoint on the subject. This week, we continue with a closer look at the NDP viewpoint.

During the run-up to the May 28, 1996 British Columbia general election, the two foremost contender parties”?the incumbent BC New Democratic Party (NDP) and the BC Liberal Party (Liberals)”?took divergent stands on their future plans regarding the province’s publicly-owned railway, BC Rail. “Liberal leader Gordon Campbell placed BC Rail front and centre as an election issue when he released his economic plan before a television audience: A key component of the plan [had] a new [Liberal] government privatizing BC Rail:to earn a one-time $1-billion revenue windfall” (Lewis, 1996). When faced with northern opposition to the privatization from within his own party, Campbell stated: “The BC Rail sale is part of our policies, and the candidates are expected to support them. I’ll have to talk to [the dissenter(s)]” (Lewis, 1996). NDP leader Glen Clark, on the other hand, made it clear to BC voters that his party had no intention of divesting the province of its publicly-owned railway transportation network. The Liberals lost the 1996 election. Looking back on the campaign in early 1997, Campbell admitted to a “litany of errors that:cost his party the election” including “the alienation of voters in the north with a promise to privatize B.C. Rail” (Palmer, 1997).

The predecessor BC NDP government, in power between October 17, 1991 and May 16, 2002, was not immune to neo-conservative pressures within Canadian society. A so-called social democratic government, it was somewhat surprising to witness its use of tactics and policies most often attributed to the right-wing. In addition to its numerous utilizations of ad hoc and institutionalized anti-labour measures such as back-to-work legislation and public sector wage controls, the NDP “sought to highlight its “?fiscal restraint’ and tax cuts” (Vogel, March 2000, p.3) while in power. In fact, the NDP flirted with the idea of privatizing BC Rail before the BC Liberals. A 1995 draft submission to cabinet that was leaked to the press “recommend[ed] BCR seek private partners in the short term, but eventually back out of the public sector altogether [through] a general share offering [which] could raise between $300 and $420 million in equity as well as pay down $320 million in BCR’s government-guaranteed debt” (Hunter, 1995). Although BC Rail was “one of the most profitable arms of government” at that time, the report predicted that the crown corporation was “facing two serious threats to its fiscal health. One danger [was] increasing competitive pressures and the other [was] potential declining revenues from BCR’s lifeline”?forest products and coal” (Hunter, 1995). Both of those factors have come to pass and have indeed affected BC Rail’s profitability. However, had the corporation been in private hands, forest product and coal haulage would still have declined and changes in competitive forces would still have existed. Privatization of BC Rail at that time would not have prevented the company’s decline, but merely moved a company facing difficult times into the private sector, where the BC government would have been unable to direct policy for the province’s only north-south rail carrier and most likely would have ultimately been faced with a hospitalization reacquisition of the carrier in order to protect the province’s transportation infrastructure and the economies of BC’s northern communities which depend on it. In fact, BC Rail’s CEO of the time, Paul McElligott had this to say about the company’s possible privatization: “As CEO, it’s not going to make a big difference to my life. I’m there to run the company as best as I can for the shareholder [the BC government]. I think the things we’re doing today would be no different under a [private] owner” (Schreiner, 1995). The province’s initial acquisition of the railway, then known as the Pacific Great Eastern (PGE), was in response to the private sector’s failure in the first place. “The province took over [the railway] in 1918, when the company defaulted on its bonds, and has run it ever since, primarily as a tool to open access to the rugged province’s resources” (Schreiner, 1995).

For whatever reasons, the BC NDP decided against an outright privatization of BC Rail in 1995. The choice was likely made after correctly gauging the mood of the electorate, a task at which the Liberals failed at the cost of the 1996 election. That is not to say that portions of the railway were not privatized under the NDP, they were. But the acts were carried out without the usual fanfare and without the term “privatization”. The preparations for the privatization of BC Rail; began more than a decade ago with the creation of the so-called BCR Group of Companies. Under this scheme, the railway was split into several different companies. “BC Rail restructured its own communications system as Westel Telecommunications Ltd. : [it’s] 18,000-hectare real estate portfolio was moved into BCR Properties Ltd. : [and] Vancouver Wharves Ltd. was acquired as a defensive investment” (Schreiner, 1995). BCR Ventures Inc. was formed and BC Rail retained only its rail division and its intermodal trucking operations. In 1999, Vancouver Wharves Limited combined with Canadian Stevedoring Limited and Casco Terminals to form BCR Marine Company. Major portions of the railway’s profitable divisions were removed from its control, all of which had been built with the past profits of BC Rail with its divisions intact. In fact, prior to the creation of the BCR Group of Companies, BC Rail had been “regarded as a Crown jewel by politicians:It ha[d] turned a profit in 15 of the : 16 years [prior to 1996], and hasn’t drawn any taxpayer subsidy since 1993. Net income for 1995 was $46.7 million:” (Lewis, 1996). “The railway had net income of $40 million in 1994, up from $3.4 million in 1993, when there was a nine-week strike” (Wilson, 1995). Acquisitions such as the Vancouver Wharves were made with the profits that the railway had previously accrued but were separated from the railway under the BCR Group umbrella. With hindsight it is easy to see why.

Right-wing politicians and business lobby groups have long despised publicly owned enterprise and BC Rail was, and is, no exception. Canada’s former Minister of Finance, Paul Martin, has stated, “the growth of Canadian private enterprise is clearly inhibited by the existence of commercially oriented crown corporations” (Cameron, 1988, p.9). For years, private sector groups such as the BC Trucking Association and BC Telecom complained loudly at having to compete with a public sector crown corporation. The former decried that “B.C.’s over-taxed and over-regulated private sector trucking industry, which continues to survive on slim margins, should not have to compete with a Crown corporation that, by comparison, has virtually unlimited resources” (Landry et al, 2000); the latter “complained that provincial government business transferred to Westel gives the Crown-owned competitor an unfair advantage” (Schreiner, 1995). However, virtually nothing was seen in the mass media regarding the fact that, as the then BC Rail CEO Paul McElligott stated in 1995, “We [BC Rail] don’t drain a nickel out of the provincial treasury. This is as commercial as you can get” (Schreiner, 1995). Perhaps private sector business was not so concerned about competing against a public sector enterprise per se, but against any enterprise that could fairly gain competitive advantage”?it just so happens that BC Rail is owned by the people of British Columbia and, as such, it is an easy target for right-wing accusations of “unfair competition” and other common privatization rhetoric. I have previously written in depth about the debates surrounding the privatization issue (Benedict, 2002) and will not re-examine those arguments here. However, it is clear that those who benefit from the divestiture of public holdings are not the general public, nor the state, but those few private individuals who are in a position to exploit the formerly public-owned assets and/or services through acquisition or profit from their demise”?capitalists. The business lobby and their right-wing politico bedmates belong to the very voices heard eschewing the merits of privatization from every form of mass media under their control. Jane Kelsey believes that “the real purpose of privatization has been to transfer economic and political power into the hands of private corporations seeking maximum profits” (Vogel, 2000, p. 13). In the case of BC Rail, the voices of privatization-proponents apparently carry more weight than do the desires of the majority of British Columbians as recorded in various public polls.

Next week: A look at the history of BC Rails Privatization


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Wilson, M. (March 17, 1995). Industry hailing `private’ BC Rail. The Vancouver Province, p. A42

Wilson, M. (July 8, 1998). Westel sold in a $55-m deal. The Vancouver Province, p. A26.

Wayne E. Benedict is a Locomotive Engineer at BC Rail and President of the Canadian Union of Transportation Employees Local 1. He is working toward his Bachelor of Administration in Industrial Relations and Human Resources at Athabasca University.