The Métropolitain

Towards a new quiet economic revolution

By Prof. Thomas Velk on June 10, 2010

The fundamental notion that lay at the heart of the economic Quiet Revolution in Quebec was that central state planning, management and control would pay off in effective delivery of vital services at affordable prices  to privileged and vulnerable alike and give society an appropriate return as well. This actually succeeded, in large part,  in two and possibly three sectors that are keys to Quebec’s future: hydro power, finance and (to a lesser degree) education.  We followed, somewhat, the model of America’s Alexander Hamilton, who, knowing full well the benefits of free trade and private markets, nonetheless advocated a protective tariff for domestic industry, a home-grown big banking system and strong guarantees for full payment of public debt.  He thereby protected the infant America from becoming –despite its battlefield victory --  an economic vassal to older, richer, England.  The English would otherwise have been the default supplier of manufactured goods, and managing banker for nation-building public and private projects.  

America’s wisdom was to set its markets free from government “protection” once the country grew to economic adulthood.   Quebec’s aims were not dissimilar.   Local economic independence required, so the Quiet Revolutionaries believed, a strong domestic economic base.  We have it.  We amalgamated electricity producers into a single unit, and, in order to finance social pensions, we created the multi-billion dollar Caisse Depot, an investment bank with a reasonable record of market-based success.   We modernized our middle-level education system, placing what the rest of the world knows as a junior college between high school and University.  We can build on the past if we are wise enough to change direction (as Post-Hamilton America did), focus on the export potential of these innovations, and give our now- grown-up economic institutions back to their true owners, the individual taxpayers of Quebec.

Not so much because the Quiet Revolution’s planners foresaw it, but because of American economic growth and the shortage of secure, moderately-priced energy supplies, our exported Hydro power and other fundamental commodities go to an international seller’s market, capable of absorbing all we can give it and much more.   Many sellers of basic goods – food is an example – have good, guaranteed markets, but alas for them, to sell more the price must fall so far that total earnings actually decline.  So a seller of 100 dozen eggs might get two dollars a dozen, for total revenue of $200.   But to sell 110 dozen, the price must fall to $1.75 per dozen, a gross revenue of just $192.50.  And the extra cost of producing another 10 dozen is not yet factored in.  However, our Hydo exports do not suffer this problem.   We can sell into a rising or, at worst, constant price market, never fearing our extra sales will significantly reduce price or total revenue.   So Hydro can and should grow much bigger and serve an international market.  Our finances are already internationalized, but could be more so.   We borrow (unfortunately, far too much – another topic) from the rest of the world, and we invest outside Quebec’s borders (not enough), since our seven-million person market does not offer enough diversity to protect the asset values needed to guarantee the future of our social programs or our private investment targets.

Education is, more than ever, an exportable product we can sell, if anything, at higher prices than now charged.   The McGill campus is as international as is the UN’s Council Chamber.   Despite, not because of, government intervention in  governing and  financing education, Quebec’s schools do a fine job of teaching our students’.   Our Junior Colleges (and for sales maximization, let’s call them that) could grow and prosper if they were to serve an international market.  Americans, in particular, are at wit’s end trying to get their kids to learn enough to compete in tomorrow’s brain market.   Their middle-level education system does not serve them well – ours could be their salvation.

So the next step in Quebec’s economic revolution is to immerse these three sectors into the world market.   To acquire enough capital, and to lift the dead hand of government management, they could be privatized, by giving normal ownership stock market shares – in Hydro and the Caisse particularly -- to every Quebec taxpaying household.  Those entities are ours; built with our money, and grown to economic adulthood at citizen cost.   There is no reason why we should not directly own and control them.  The shares could be held, or sold, or inherited, just as with any stock share.   Private Director’s boards would form, and direct events, just as with ordinary firms.   Growth, profits and export sales would be the goals.  Needed build-up money capital would accumulate naturally, given the profit potentials.  

Quebec’s  past has given us the opportunity to create an individualist future.   It would be a new quiet revolution.