Canada Privatization

Strategy, or escape from the privatization matrix (Canada Post, Part 2)

The endgame of the current rounds of cuts at Canada Post is some form of privatization. In the previous post, I argued that privatization proceeds differently depending on context. Many factors – I focused on whether a public service provider is exposed to competition and is profitable – can have an impact. The result of replacing public with private provision can be reached through a rapid sell-off, a slow attrition of services, or anything in between. Fortunately, the path to be taken by Canada Post is not yet drawn. Yet while privatization is not an inevitability, the window to effectively prevent it will not stay open for very long. Here are some thoughts on the privatization strategies possible at Canada Post and the anti-privatization strategies to fight them.

The lay of the land is not altogether unaccommodating for a campaign around Canada Post. Most Canadians are opposed to the current cuts. In addition, the Canadian Union of Postal Workers (CUPW) has shown itself time and again to be ready to stand up for public services, both at the Post and in solidarity with struggles elsewhere. The fightback against the current round of cuts has already started; David Bush has put together an excellent primer on individual actions and nascent campaigns.

On the other hand, a survey released last week reported that 47% of Canadians support the sale and privatization of Canada Post, compared to 38% who are opposed. Even if this merely reflects the success of the scare-mongering around mounting financial losses that is driving rationalizations of the present cutbacks, it only shows such tactics to be effective. Saving a public resource is all the more difficult in a climate where the right has managed to not only move the goalposts but shift the entire field a few blocks over.

Consider the current allegations that Canada Post is in a deepening financial crisis. Is this crisis manufactured? The nature of postal services is undeniably changing: lettermail volumes are falling as the ways in which people exchange information change drastically under pressure from information technology. Parcel volumes, however, have been steadily increasing and Canada Post has been quite good at capitalizing on this trend. Indeed, overall, Canada Post has remained a profitable enterprise for all but one of the past 15 years. Even this year, although Canada Post has registered losses in the first three quarters, could yet turn out to be profitable on the basis of a lucrative holiday season and a lack of significant expenditures. While the infrastructure that was developed to deliver lettermail would be unsustainable without the expanding market for parcel delivery, Canada Post is able to capitalize on this expanding market precisely because it has inherited and modernized a well-developed infrastructure.

For the sake of argument, for a minute, let us assume that the crisis is real. This opens up space for what I have labelled a “partners in crime” strategy in the lettermail sector, which is currently protected from competition. Under this strategy, portions of public services are contracted out to the private sector. The end of home delivery and cuts to the unionized workforce would thus be laying the groundwork for future lettermail delivery models based on public-private partnerships or other kinds of outsourcing. In the competitive parcel delivery sector, these same changes would be a hand up for private sector actors such as UPS and Fedex – the “starve” portion of a “starve’n’sell” strategy running alongside “partners in crime”. A strategy that, in the least, would increase the market share of private competitors and, in more developed form, would precipitate a sell off of parts of Canada Post’s valuable infrastructure. The private sector would then be happy to leave the remaining rump of unprofitable services for society to fund.

The more probable explanation, however, is that the current crisis is a classic case of the “create-a-crisis” privatization strategy. The end of home delivery, in particular, is a drastic reduction in service and opens up space for either the outright sale of Canada Post or for private competitors to take on a greater role. In the latter scenario, phasing out home delivery creates greater demand for courier-like services that continue to deliver important messages to doorsteps. Bound by neither the constraint of universal service nor equal pricing, private firms can tailor their services and pricing to remain profitable. Going further, the end of home delivery could also provide pressure to liberalize the postal market completely and make space for private competitors to provide regular lettermail services. The European experience has shown that the private sector is quick to capitalize on such opportunities, “cherry picking” profitable niches. Indeed, “cherry picking” may already be the case in the parcel sector with the same greater flexibility in both pricing and geographic reach available to private parcel deliverers.

All four of the privatization strategies I outlined in the last post are thus possible at Canada Post, and several strategies may work in concert. A key points is that a lack of profitability is in no way a prerequisite for privatization. Whether a public service provider is profitable has an impact on the choice of strategy, not on privatization itself. Privatization is a political choice, not an economic necessity.

Given that the crisis at Canada Post is likely a ruse, fightback should start by showing that this public service is economically viable – it cannot, however, end there. To resist privatization, it is not enough to show that the public service in question is a money-maker. Indeed, that a public service is profitable in fact makes it all the more attractive to the private sector.

While public services are instrumentally valuable for solving problems in the provision of public goods and coordination, these roles can be privatized, for example via increased labour repression, regulatory capture or the use of new technology, all of which are potentially possible at Canada Post. Public services are more than instrumentally valuable: they are a source of a vast, unrealized potential – potential for democratic decision-making, potential for collective management, potential for alternative value relations, potential for non-market interaction. If a public service is not profitable, then this potential has to be defended as valuable in its own right; if a public service is profitable, then this potential has to be defended from the market forces that seek to discard it, leaving only the profit-making core. Both tasks are difficult given contemporary economic rationality.

Here, the maxim that the best defence is offense is appropriate: expand Canada Post. Adding new, financially-sustainable services undermines in its small way the link between profitable and private that capital wants to make automatic. It also turns the potential to manufacture public funding crises on its head, manufacturing the possibilities for a larger public sector. New forms of secure electronic communication, new parcel services and any other options that increase the role, workforce and scope of services of Canada Post while leveraging its valuable infrastructure should be on the table. The best example of possible expansion is probably the broadest: postal banking (refreshingly being promoted by CUPW). It fits this bill exactly: not only is it a sustainable service, it is one that has the potential to be the seed of broader change. Imagine a banking system run as a public utility rather than a private profit machine – it could start Canada Post as much as elsewhere.

Expanding the public sphere does not guarantee that any of the unrealized, transformative potentials outlined briefly above will be fulfilled. This strategy does, however, at least move us in the right direction. There are times when we can play them at their own game and win – perhaps after enough wins we can start to slowly rewrite the rule book.

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