In today’s New York Times, columnist Nicholas D. Kristof suggested solving America’s banking crisis through a two-step process that would involve, first, nationalizing troubled banks run by irresponsible bankers, and then “handing out shares to all American households.”
“President Bush used to talk about building an ‘ownership society.’” Kristof opined. “Well, giving shares in big banks to all American households would be a terrific way to do that. For many Americans, it would be the first time they directly owned stock — and, finally, something good could come from the banking Bust Bowl of 2009.”
Mr. Kristof’s suggestion reminded me of something… Here, let me tell you a story: “Here we are in the castle … one little chair for one of you, and a bigger chair for two more to curl up in, and for someone who likes to rock, a rocking chair in the middle…”
Once upon a time, not long ago in a land not so far away, there was briefly a social democratic government. In those days, there were economic storm clouds on the horizon. The place was called British Columbia. The time was the early 1970s. The government was called the NDP. And the problem was that some industrial enterprises were in trouble and if they failed, many, many jobs would be lost. Not so different from right now, come to think of it!
What to do? That’s what the social democratic government of Premier Dave Barrett asked. The answer, it was decided, was for the government to buy out the troubled enterprises and run them as Crown Corporations.
With our superior, scientific economic understanding, we know today that this should never, ever be done, or even considered. (Thanks to the research done by the Fraser Institute, which is a think tank, after all, and so always thinking about things, we know today that the private sector always does a better job than the public sector.) So what that NDP government did was a Very Bad Thing!
But, then, we didn’t know as much back then as we do now in our wonderful, globalized, marketized world. In those days, even Conservative governments, like Peter Lougheed’s right here in well-run Alberta, sometimes nationalized things, like airlines, to save jobs, or just to keep them close to home.
Fortunately, the B.C. NDP didn’t last very long. They were soon replaced by the rightful government of B.C., a political party that was in those days called the Social Credit Party, which was later know as the Liberal Party, but which was actually the same as the Progressive Conservative Party here in Alberta, which is also the same as the Conservative Party in Ottawa, which used to be known as the Conservative-Reform Alliance Party of Canada (CRAP-CAN), and which before that was known as the Reform Party, and before that as the Progressive Conservative Party of Canada. Get it?
Now, the Social Credit Party was led by a man called William Bennett. Bill Bennett was the son of a man who was also called William Bennett – always a good thing when it comes to sound government – who had also been the premier of B.C. Those Bennetts had a much superior understanding of the Economic Facts of Life than did the socialist NDP, so as soon as possible young Bill re-privatized those recently nationalized failing enterprises with which the NDP had done a Very Bad Thing.
Being a clever man, Premier Bennett did this in a clever way. He found a way that would help ordinary people become investors and appreciate the many benefits of our modern market capitalist system – just like Mr. Kristof suggests should now happen in the USA.
Mr. Bennett’s Social Crediters took all the enterprises mistakenly nationalized by the New Democrats, rolled them into one big resource company and called it the British Columbia Resources Investment Corporation, which they pronounced “brick,” and they gave five shares to every adult in the province, which, come to think of it, was kind of like “social credit.” (Don’t worry about this – just remember that “social credit” had nothing whatsoever to do with “Social Credit” in British Columbia.)
Where were we? Oh yes, BCRIC, solid as a brick…
Knowing that the private sector always does a better job than the public sector, the Social Credits put some Big Businessmen in charge of this enterprise. You know, the kind of guys who take risks, who understand how markets work, who maybe even have MBAs! You get the picture. I can’t say I can recall the names of these fellows, or what became of them, but never mind that. I’m sure they’re not in debtors’ prison, thank goodness. The first thing these Big Businessmen did was offer to sell even more shares to the public for $6 each so that they could raise even more money with which to take even more risks and create even more wealth and stimulate even more markets.
Perhaps thinking that the B.C. government’s involvement made BCRIC shares a little like Canada Savings Bonds, members of the public – mostly small investors without a great deal of sophistication about how markets work or who works the markets – gave their money to these Big Businessmen whose names escape me to invest and create wealth for them.
Alas, almost unbelievably, the Big Businessmen – despite the fact they had beautiful suits, great haircuts, Rolex watches, snazzy foreign cars and lots of MBAs working for them – made some very bad miscalculations! They sank some of the money – quite a bit of it, as a matter of fact – in North Sea oil at a time petroleum prices were going down, down, down. (Rather like right now.) They dropped more money down a mineshaft that turned out not to have a bottom. Whoops! Sorry, folks! Small investors who had put thousands of their hard-earned dollars into the Brick saw their investments drop like the company’s namesake. Before long, their thousands were worth only a few pennies.
By then, of course, the company, with its nearly worthless shares, wasn’t called BCRIC any more. It had a convenient new inoffensively corporate name: Westar Group Ltd. No need to remind folks that this was Mr. Bennett’s brainchild!
In 1997, Westar was re-re-privatized. This sounds odd, of course, because the creation of BCRIC had been the result of the privatization of some companies that were owned for a time by the people of B.C. But what this means – in the language of the business world – is that the shares were taken private. That is, Westar ceased to be a public corporation, subject to public reporting rules, and became the private property of another Big Businessman, well known to the Bennetts, who didn’t have to tell anyone anything about what the hell he did with any of his assets.
What this really means, I think, is that the wealth that had been put into BCRIC by small investors was privatized. At any rate, the Big Businessman, whose name also eludes me just now, being a Captain of Industry and all, must have figured he was getting a good deal when the “compulsory buy-out” of Westar’s investors and his takeover of its assets were worked out.
Small-fry investors had 10 years to cash in their considerably devalued chips. The buy-out officially ended on June 30, 2007. After that, the shares – which had once traded for as much as $9 each – had no value at all. None. Zip. Zero. Zilch. Nada.
But the money that had paid for them, well, that went somewhere, didn’t it? Later, North Sea oil was worth plenty for a spell, and the stuff in mines was too. Yes, eventually God got back to His heaven and all was right with the world!
Now, my friends, seeing as we are on the edge of another precipice, not unlike the one we nearly fell over in the 1970s, this is what is called “a cautionary tale.”
But before I get to the cautionary part, let me declare my personal interest: My dear father, who died in Victoria, B.C., last May at the age of 91, was one of those small investors who bought BCRIC shares believing they were backed by the provincial government rather like the government of Canada backs Canada Savings Bonds.
I know this because, after his death, my sister opened his safe deposit box and found about $5,000 in BCRIC shares from that initial offering. They had never been cashed in during the 10-year buy-out period. We’ll never know why. Maybe Dad was embarrassed. Maybe he forgot. Maybe he never got around to it. Maybe it wasn’t worth the effort of a trip downtown.
Now you may believe it was foolish and naïve of people like my father to trust people like the Bennetts and the officials of the B.C. Government and the Big Businessmen they hired to run BCRIC. You may even feel that, under the circumstances, these ordinary folks deserved to be fleeced, for a fleecing it was. And perhaps they did. Sadly, they didn’t lack for company.
However, and this is the cautionary part: It’s the same people, with the same ideology, from the same political parties, and the same businesses who sold my dad those shares who are now telling you and me and all of us in the face of a worldwide recession that private is always better than public, that businessmen always know best, that we can’t afford public health care any more, and that the CPP needs to be replaced. Oh yes, and if we just give working folks a few shares of directly owned stock, we can build an “ownership society.”
And if you believe this? “This little chair will be waiting for one of you, and the rocking chair for another who likes to rock, and the big arm chair for another to curl up in…”