BC Ferries and the bitter tears of Adam Smith

Monopoly, besides, is a great enemy to good management – A. Smith

So we have the BC Ferries commissioner issuing a call for a major overhaul of BC Ferries. It’s a sharp repudiation of the entire approach of the BC Liberal Party to our ferry system (indeed the underlying ideology of our alleged free-market political party). As most users of ferries know, prices have risen significantly, service is not much better, and the finances opaque to the public. It’s not working, and the commissioner urges the abandonment of the user pay system. There are lots of juicy quotes here:

Fares since 2003 have gone up 47 per cent on the major routes, 78 per cent in the north and 80 per cent on minor routes.

and…

current fares impose “significant hardship” on ferry-dependent communities and were affecting the ability of people to visit family members and friends as frequently as they would like.

and my favourite:

Lindsay Meredith, a marketing professor at Simon Fraser University, said the Liberal government “ran into Economics 101.

“It’s basic, fundamental, down-and-dirty, easy-as-it-gets demand and supply. … Jack up your price and watch your demand plummet,” he said in an interview.

But there’s more forgotten Econ 101 than that. In fact it’s kind of fundamental – whom does BC Ferries compete with? Whose competition is forcing them into the ever greater efficiencies the “crucible of the market” is supposed to force? I’m not an expert on ferries or transportation systems, but even I – a liberal arts student! – have never understood this crazy system the BC Liberals have set up (in more than one area). Privatization without competition is monopoly and a private monopoly is worse, much worse, than a public one. At least in democratic states where the rule of law is well-established, which try as the Liberals may to undermine it, British Columbia has and retains.

I can’t vouch whether the European consumer is well served, but at least you have a choice of ferry companies when you take your car to or from the UK.

I am obviously left of centre, but I’m not rigid. There are, in my view, things currently being done by our government that the market would do better (if your goal is better value for your citizens). Are we really well served by our government-run liquor distribution system, for example?

But BC’s population isn’t large enough currently to support competing ferry companies. And while some routes might not make economic sense, economics is not the only consideration. There’s the social, and the strategic. If we abandon ferry routes on the grounds they aren’t economic we are also abandoning claims of sovereignty over those communities the ferries serve. Use it, or lose it as someone once said. That’s international law.

However, sovereignty has also been increasingly defined in terms of state responsibility. This includes a state’s exercise of control and authority over its territory

We’re not in immediate danger of losing the Gulf Islands, but if communities starting shrinking and failing one day someone will say they use the land if we don’t want it.

The BC Ferries experiment in “privatization” has failed.

It is thus that the single advantage which the monopoly procures to a single order of men is in many different ways hurtful to the general interest of the country. – A. Smith

UPDATE: Oh noes! A bond agency – who we all know always have our best interest at heart – doesn’t like what’s going on!

In a statement posted on its website, Dominion Bond Rating Services says adopting all of the changes proposed by BC Ferry Commissioner Gordon Macatee this week would erode a framework that has prevented political interference and made the corporation more efficient.

BWAHAHAHAHAHA

Advertisements