The true lessons of California

Toronto Star - January 30, 2001
by Stuart Laidlaw — Member of the Star's editorial board

By flickering candlelight, California is showing the rest of North America what electricity deregulation looks like and exposing the limited role the market is capable of playing in providing essential services.

When the lights went out in California, it was hailed as a timely lesson for Ontario as it sputters toward an open market in electricity. Proponents reassured us that the twin forces of deregulation and privatization are still in our best interest - as long as we don't repeat California's mistakes.

A cap on prices was blamed. Demand outstripped supply, we were told. The same thing couldn't happen here, we were reassured.

But through all these excuses, deregulation's flaws shone through.

The lessons of California cannot be limited to just the power industry - or deregulation. What brought that state to its knees is not just a bungled deregulation process - now being copied in Ontario and across North America - but blind faith in the market to provide for people's basic needs.

As market forces are increasingly hailed as the answer to problems plaguing our cherished public institutions, it is worth considering whether the real lesson of California ought to be a complete rethinking of the neo-conservative ideology that things run better when left to the invisible hand of the market.

Here in Canada, provincial governments toy with letting private institutions into our hospitals and schools. Premier Mike Harris is even musing about letting private companies run our waterworks while an inquiry into seven deaths in Walkerton has yet to consider the role of private labs in that town's tainted water tragedy. The < a href="http://toronto.ontariotenants.ca/city-toronto.phtml" STYLE="text-decoration: none" title="City of Toronto">City of Toronto has looked into privatizing everything from garbage collection to daycare.

Surely we should take our time with all this, and consider whether private enterprise is really up to the task. The evidence would suggest that it's is not its core efficiency.

From the U.S. we get ample evidence that the private sector is very bad indeed at providing other essential services besides electricity. Take health care. An appalling 40 million Americans go without medical coverage in the richest country in the world. Likewise, the country's privately run post-secondary education system leaves millions of Americans outside its gates for want of the money to pay their way in.

And yet, Canadians are told that a greater role for the private sector in such services will improve things here.

In California, the failure of private enterprise in the public sector has been dramatic. When the lights go out on 500,000 people at once, it's impossible to ignore. When many of those people are not used to going without anything, you can be sure we'll all hear about it.

But the lessons are the same.

Just as privately run health care and education have excluded millions from getting access to the services, so too has a privately run electrical service.

The argument that a price cap is to blame for California's problems falls flat. The cap was put in place because legislators recognized that their electors would not accept being exposed to the full vagaries of the open market. Where the cap has not applied in California, electricity prices have more than tripled. Neither response is a ringing endorsement of deregulation.

Deregulation is needed, we have been told, to save us from the excesses of Ontario Hydro, described by its critics as more of a construction company than a power utility as it took on huge debts to build new power plants. Private enterprise, we are told, would be more prudent about such matters. In California, it seems, that prudence has meant that no power plants have been built at all - with the result being such a massive shortage of power that the utilities had to turn the lights out.

That can't happen here, we are told, because we have more than enough electricity to meet our needs, thanks to Ontario Hydro's massive building programs.

So, was that building program a bad thing, or a good thing? The proponents of deregulation can't seem to make up their minds.

One thing is certain. Both we and the Californians are saddled with power companies crippled by huge debts that one way or another consumers will have to pay.

The difference, of course, is that our lights haven't gone out.

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