Every now and then Premier Ralph Klein says something so out of sorts with his motto of “staying out of the business of business” that I have to wonder whether he truly believes or even understands it.
Klein’s most recent gaffe relates to the alleged price-gouging that has been going on in drought-ravaged parts of Alberta. But the premier’s disturbing statements date as far back as a memo leaked to the press several years ago.
The memo was dated Feb. 22, 1994 – about a year after
he was first elected premier – and in it Klein advises then-cabinet ministers Ken Kowalski and Jim Dinning about the renegotiation of West Edmonton Mall’s debt.
“An Alberta solution would be preferable relative to West Edmonton Mall,” his memo says. “We need to protect the Alberta Treasury Branch (ATB) loans and, at the same time, ensure that the potential of West Edmonton Mall can be maximized.”
Ten months later, Alberta Treasury Branch – then an arm of the Alberta government – increased its exposure to West Edmonton Mall liabilities from $75 million to more than $400 million, taking most of the burden off Gentra, a company based in Toronto.
Whether Klein was involved in that specific decision is immaterial. What is relevant is Klein’s position that West Edmonton Mall’s potential was any business of his government.
The mall was, and is, an independent business. It should live, die and renegotiate financing based only on business fundamentals, not whether or not its lender is based in Alberta. By Klein’s supposed philosophy, that is Alberta’s only interest. But that is not what his memo says.
When Klein refers to an “Alberta solution,” it sounds an awful lot like that infamous “Canadian solution” – the National Energy Program. And it seems similar to Chretien’s bent towards boosting his pet businesses, such as Bombardier.
Our premier might be forgiven for the early memo, were it an isolated incident. Later statements and actions have supported my theory that Klein does not really grasp the concept of free markets.
He toes the business-friendly line in public because he must, to stay alive politically. But it seems he does not really understand what a free market means. If he did, his government wouldn’t put caps on electricity prices as he did last year (we are now paying for them via rate riders).
His government would not have kicked Apollo Gas out of Alberta (see my column Jan. 3, 2002). Nor would he have shown any inclination to believe claims that farmers are being gouged in the hay market.
He should have aimed his comments about “fairness” more towards the complainers, not the alleged profiteers. (He says: “This is terrible. It’s now time to be neighbourly and fair and understand with compassion the plight of the farmers who are indeed suffering.”)
While there is indeed a serious drought in Alberta, it is impossible that this could open the door to “gouging”.
Some regions of southern Alberta and Eastern Canada are experiencing bumper crops. Drought is not unusual in farming, though the large scope of this latest one might be.
But farmers have recourse to insurance policies, government bailouts, and reserves of hay and money that they have stocked away for such an eventuality.
If farmers have failed to take – or risked not taking – these basic business precautions, then they have charity to fall back on.
It is interesting to note that although some ranchers are feeling gouged, I have not heard of beef producers offering to sell their meat cheap when beef prices skyrocket. But that will not stop them from getting help from benevolent Canadians.
In the end, any farmer who last year did not take the possibility of a pending drought into account is the last person who should be accusing his southern neighbours of bilking him.
Southern Alberta suffered drought conditions three years running, ending this year, and now it’s their turn to get their own back. If they can find customers for their hay at $150 a tonne, the more power to them, I say. And so should our premier.
Added to all this, we have forecasts coming out that drought will become ever more common on the Prairies – most recently from Natural Resources Canada.
If the forecasts are right, the farmers will have to learn to live with drought, or sell their now-unprofitable farms.
By definition, we can’t have an “emergency” every year for the next 100 years – the span of these doomsday predictions.
At a certain point, the complaints would be akin to farmers in Arizona complaining about the dryness.
I will admit that defining gouging can be thorny, but I did find some specific legal definitions online. New York State Attorney General Eliot Spitzer defines gouging as “taking unfair advantage of consumers during an abnormal disruption of the market, (by charging) unconscionably excessive prices” for vital commodities.
The language is similar in Dade County, Florida, which points to a “gross disparity between the actual price being charged and the price for the same commodity during the preceding 30-day period.”
Drought comes on slowly – to cause gross price distortions, a drought would have to be of cataclysmic proportions, affecting all of Canada for years on end.
By contrast, hotels doubling their room rates when air travel is banned (Sept. 11, 2001), or electricity rates increasing tenfold during California’s rolling blackouts are perfect examples of such profiteering.
But does Klein even want to think through this intellectual debate? Does he really understand what distinguishes gouging from business common sense?
On Aug. 8, the Office of the Premier issued a press release that tried to clarify his position on hay prices. It concluded that “market conditions will always prevail.”
If Klein hadn’t made the unfortunate statement the day before, I would have more confidence that this were true.
We need a premier who truly believes in and understands what his press releases say. Electricity markets, the farm industry and our long-term prosperity depend on it.
