Seamanship Quotation

“In political activity, then, men sail a boundless and bottomless sea; there is neither harbour for shelter nor floor for anchorage, neither starting-place nor appointed destination.”
— from Michael Oakeshott's
Political Education” (1951)

Friday, October 26, 2012

Chinese SOEs: Stephen Harper could lose Alberta and his credibility

Stephen Harper hasn’t depended on public servants or public policy executives in Canada’s commercial banks to govern credibly as a market conservative. Doing Canada’s part to fight a global recession didn’t require reshaping his core beliefs: that governments should be more efficient but shouldn’t then try to run businesses, and that businesses best serve all of us when they compete in robust markets.

However, the enthusiasm of Chinese state-owned enterprises (SOE) to buy oil and resource companies in small market economies has put Harper in an especially dangerous corner.

It will be mighty difficult for his government to reject or approve China’s state-owned CNOOC’s Ltd.’s bid for Nexen Inc., a private Alberta-based oil company. Harper’s fated to look reckless amongst those who see China’s good opinion—and money—as the performance-enhancing drug that will free Canada from a mediocre future with the US or just a phony amongst market conservatives—and a majority of Albertans.

Unsurprisingly, he’s turned to wordsmiths in government to justify what’s almost impossible: allowing the equity sale of a growing share of what Harper’s called Canada’s economic growth engine to a superpower state-owned enterprise. Simply, they’re assigned to try to find a convincing way to say that state capitalism can be a positive force in free markets—even better in Canada than it is now in France and China, for instance.

The political fallout of accepting the $15-billion bid by CNOOC, however, will not be limited to those who are impressed by government framework statements. A survey of Alberta opinion by the China Institute at the University of Alberta produced rather awkward news:

“However, the poll said 64 per cent of Albertans opposed Chinese investment in Alberta in the form of full ownership, with 15 per cent saying it's acceptable and 21 per cent neither agreeing nor disagreeing.

In the same vein, 53 per cent of Albertans opposed investments in Alberta's oil and gas sector by Chinese state-owned companies, while 24 per cent supported it and 23 per cent were on the fence, according to the poll. Albertans were largely split on allowing Chinese investment in Alberta in the form of partial ownership, with 37 per cent supporting it, 36 per cent opposing it, while 27 per cent neither agreed nor disagreed.”

This shouldn’t surprise Harper. Albertans and Western Canadians generally are passionately attached to local self-government and are wary about outside big government influence, Canadian or otherwise.

Along with grass-root skepticism in his political base, Harper will also have to contend with growing opposition to SOEs amongst conservative opinion leaders. The National Post, English-speaking Canada’s Wall Street Journal for literate conservatives, has decided to raise hell. Today, on its front page, it ran a comment by Terence Corcoran entitled “Fascism by another name: state ownership makes mockery of markets.

Corcoran nails the problem for Harper’s wordsmiths:

“If Canadians have sound economic and political reasons for rejecting Canadian SOEs, how can we embrace foreign SOEs?”

Choosing to think that Chinese state capitalists will evolve to be even more “commercially oriented” than the mediocre state capitalists who operate in Canada and elsewhere in the West, needless to say, will be born of fear, not of any realistic hope that China will de-politicize its government businessesfear, that is, of offending China, and fear that Canada can’t prosper without their equity. 

These concerns may prevail. However, Harper’s vision of Canada as a selfreliant energy superpower should then be put in storage for another costume party, out there in the distant future.

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