Monday, 23 April 2012

Keeping the profit

The drought in South East England prompted calls for Wales to further exploit our water resources by selling water to England at a profit.  Whilst fracking is, to say the least, a controversial process, the possibility that Wales might be rich in shale gas has led some to predict a bonanza for Wales.  And the fact that Wales has an enormous potential for renewable energy has led others to argue that we should exploit that potential to sell electricity across the border.
The three things are connected in two ways.  The first is the obvious one; they are all to do with the fact that Wales has valuable natural resources, which we can choose to exploit if we wish.  But the second is that much of the debate has effectively skirted round the question of how we ensure that the benefit of any such exploitation stays in Wales.
Of course any decision to exploit any of those (or indeed other) resources is likely to bring some benefit in terms of local jobs and services – but, as the wind industry in particular has demonstrated, such benefits can end up being a tiny proportion of the total profit generated by the activity.  The bulk of that profit can all too easily be diverted elsewhere.
It certainly isn’t as simple as having control over the relevant planning decisions, as some seem to think.  In itself, merely having the ability to say yeah or nay does nothing to ensure that we gain the benefit. 
Nor is it enough to argue for control of the Crown Estate.  That’s a worthy enough aim, but it isn’t the same thing as owning the underlying assets and the companies exploiting them.  Receiving some royalty payments is better than nothing, but it doesn’t touch the big issue of who gets the profits.
And it is that question – who gets the profit – which is the key one.  For as long as the exploitation of Wales’ natural resources is left to the vagaries of the market, the traditional capitalist approach, there is always the potential for the companies doing the exploiting to be owned and controlled elsewhere.  And thus, of course, for the profits to be siphoned out of Wales, mirroring the exploitation of the past.
Nationalization and state ownership have become dirty words in the UK.  It seems that successive UK governments are quite happy for the German state to own and operate a significant chunk of the UK’s railways, and for the French state to own and operate an equally significant slice of the UK electricity industry, it’s only ownership by the British state which is unacceptable.
But if we really want to ensure that we benefit from the exploitation of our natural resources, we need to look at the ownership and control both of the resources themselves and the companies exploiting them.  We need to ensure that we own them, in short.
Last week, Argentina aroused the wrath of many countries by taking ownership of its own oil resources and nationalising the company.  The government of that country recognised the key strategic value of those resources to its economy and decided that the best way to protect them was to own them.  Why should things be different in Wales?
Those who call for Wales to sell water, or electricity, or gas without facing up to that question of ownership need to explain need to explain how else they intend to ensure that the benefits don’t simply flow elsewhere.


Boncath said...


The point you are making is so very important for Wales as there is an almost total stranglehold on us having any control over our lives.
It is said that the arson campaign produced the Assembly and Gwynfors threat to starve himself to death produced S4C and Radio Cymru
In real terms we have not really progessed
The Assembly is hamstrung by the Barnett formula -- abscence of any ability to raise our own finances and the financial incompetence of the Westminster government
Likewise the bi lingual split of Wales into English and Welsh camps for broadcasting was inherently devisive
Arson campaign--starvation--????
what is on its way??

Spirit of BME said...

1. YPF in Argentina is a basket case, not because it’s a bad company, but because several governments have controlled the retail price of petroleum products and that makes international investment unattractive and high risk to the markets .The current wells are running down and that is why the Malvinas basin is important for Argentina. Venezuela is in the same type of downward spiral.
If there are any profits in this nationalisation (and it’s doubtful) it will be short lived but the government needs cash to prevent social unrest, the question is, and can the tax payers afford the losses?
2. The reason why profits have left Wales is because HM Revenue and Customs so wish it. The remedy is simple but as long as the voters in Wales support the English regime it will continue.

Siônnyn said...

John - as usual, you have nailed it. However, becasue the 'nationalisation' idea is so tainted in Britain, and will take decades to detoxify, I like the Plaid idea of nationalisation by Proxy - the Glas Cymru model (only without all the inherited debt). Local Community ownership of installations (so far only Wind, but why not water and hydro electric?) is also attractive. What is plain is the neo-liberal model has failed catastrophically, and while the English parties are clinging desperately to the corpse, trying desperately to breathe life back into it, we need to think of alternatives if we are not to be dragged further down, or back into the middle ages.

Welsh Ramblings said...

Spirit of BME are you claiming that Argentina should remove price controls and fuel subsidies in order to please foreign investors? The Kirchners have in fact steered Argentina out of the wildnerness. Before their rule Argentina was in a state of social chaos and the economy literally collapsed. Venezuela was in a similar state of misery and poverty before Chavez's election. All of Latin American history shows that what is important is what the people decide, not the wishes of foreign investors. The President will have to stand or fall by her decisions at the elections. There are no elections for foreign investors!

Welsh Ramblings said...

Siônnyn, I agree with your point but nationalisation isn't toxic at all. Opinion polls on rail and the utilities show that the public's preferred option is nationalisation. There is the fact that the old nationalised enterprises were mismanaged, but that hasn't really contributed to public opinion.

The reason "arms-length ownership", social ownership and non-profit models are held up isn't because nationalisation is tainted but because it is largely illegal or at least impractical under European law.