ERRATUM Due to a typographical error page 102 is missing from this thesis. CORPORATE POWER AND ECONOMIC POLICY MAKING IN BRITISH COLUNBIA, 1972-75: THE CASE OF THE MINING INDUSTRY Raymond W. Payne B .A., McGill University, 1971 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE .REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS in the Department of Political Science 0 Raymond W. Payne 1979 SIMON FRASER UNIVERSITY February 1979 All rights reserved. This work may not be reproduced in whole or in part, by photocopy or other means, without permission of the author. Name: Raymond William Payne Degree: Master of Arts Title of Thesis: Corporate Power and Economic Policy Making in British Columbia, 1972-75: The Case of the Mining Industry. Examining Committee: Chairperson: Jacques Benjamin Martin Robin Senior Supervisor Audrey Doerr Doug Beck External Examiner Professor Department of Economics & Commerce Simon Fraser University Date Approved : PARI\A_L COPYHiGMT LICENSE I hereby grant to Simon Fraser University the right to lend my thesis, project or extended essay (the title of which is shown below) to users of the Simon Fraser University Library, and to make partial or single copies only for such users or in response to a request from the library of any other university, or other educational institution, on its own behalf or for one of its users. I further agree that permission for multiple copying of this work for scholarly purposes may be granted by me or the Dean of Graduate Studies. It is understood that copying or publication of this work for financial gain shall not be allowed without my written permission. Title of Thesis/Project/Extended Essay Corporate Power and Economic Policy Making in British Columbia, 1972-75: -- The Case of the Mining Industry. Author: '(signature) Raymond William Payne April 12, 1979 (date) iii ABSTRACT When the New Democratic Party assumed power in British columbia for the first time in 1972, one of its priorities was to make major changes in the province's economic system. With reference to the N.D.P.'s 1972 party platform, this thesis identifies three principal aspects of these proposed changes; Doeffect a wide-ranging redistribution of the wealth generated by the provincial economy,@ encourage economic growth through diversification of the economy away from its reliance on the ,-* export of primary products, and qg increase the role of govern- ment regulation over the productive process, especially in the area of environmental control. The fact that much of British Columbia's economy, especially in the resource field; is owned by a small number of large, privately owned corporations meant that one of the major problems faced by the new government would be the opposition posed by these groups. After exploring briefly the general approach of the N.D.P. government toward economic policy, this thesis turns its attention to mining, the province's second largest industry. Chapter 2 outlines the recent growth of mining in British Columbia and gives a basic overview of its economic position . in the province, while chapter 3 provides an examination of government involvement in the mining industry prior to 1972, both in British Columbia and at the federal level. Chapters iv 4,5, and 6 are concerned with a detailed account of how the New Democratic Party transformed the basic elements of its party platform into concrete policies, and the way in which the mining industry was able to use its strategic economic position to exercise power in the political arena. These chapters use a wide variety of sources including newspaper accounts, government documents and personal interviews in order to trace these two processes as accurately as possible. After a brief account of the impact of the 1975 Social Credit victory on provincial mineral policy in chapter 7, the thesis concludes with a detailed analysis of the N.D.P.'s mineral policies from three broad perspectives. These are the success of the large mining companies in pursuing their goals in a variety of different political situations, the limitations facing the government in implementing its policies and the inherent drawbacks of the N.D.P.'s mineral policies themselves. The overriding theme is that economic policy making has a political element,which in the process of actual policy making, is just as important as the economic. to Brigitte vi CONTENTS List of Tables vii List of Figures viii Preface ix 1. Introduction 1 2. M2tal Mining in British Columbia: The Anatomy of An Industry 3. Government and the Mining Industry 4. The N. D. P. --Early Policy Iniatives 5. The Mineral Royalties Act 6. Compromise and Defeat 7. Aftermath 8. Conclus ion Appendixes Bibliography vii TABUS Value of British Columbia's Plajor Non-fuel Minerals, 1960 Sources of Financing: British Columbia Mining Industry 'Base Profit' as a Percentage of Industry Revenue: Selected Industrial Sectors 'Base Profit' as a Percentage of Shareho1der':i Equity 48 Purchases of Supplies and Services by the British Columbia Mining Industry Taxable Income as a Percentage of Book Profit--1969 Returns to Equity 1962-73 Taxes Paid as a Percentage of 'Base Profit' 116 Actual and Planned Capital Expenditures as Outlined by the Mining Association of B. C. Survival Probabilites at Various Levels of Inve s tmen t Increase in the Profits of Selected Mining Companies, 1972-1973 199 Direct Provincial Revenue form the Mineral and Petroleum Industries Effects of the Mineral Royalties Act as Outlined by the Mining Association of B.C. 210 Capital Expenditures, Share Volume, and Exploration Employment in British Columbia. 218 Summary of J.B. Evans' Analysis of Bill 31 233 Summary of Mining Tax Rates Presented by the Mining Association of B.C. 264 Values at Different Levels of a Fully Integrated Copper Industry viii FIGURES 1. Ownership Links : Noranda-Placer Complex 2. Interlocking Directorships: Noranda-Placer Complex Studies of economic policy making on the provincial level are rare, and those undertaken from a political per- spective, rarer still. This paucity of literature is regretable since many writers have pointed to a fundamental shift in the center of economic decision making in Canada from the federal to the provincial level, especially since the Second World War. This shift has accompanied the rapid growth of the natural resource industries during this period. petroleum, minerals, hydro-electricity and forestry are now crucial to Canada's economic future, and much of the respons- ibility for their development resides at the provincial level. The following work is an attempt to throw some light on the economic policy making process in British Columbia. Because of the complexity of the subject matter and the wide scope of the material that must be dealt with, this study adopts a fairly narrow focus. The area dealt with is mining, but it should be noted that even within this area, the subject matter is limited. A detailed consideration of the petroleum industry and the recently revived coal industry is not attempted. Although these industries both come under the jurisdiction of the Department of Mines and Petroleum Resources, they are covered by different sets of legislation, and an adequate treatment of them would have required an even more lengthy work than the one that follows. The limited focus adopted here has both advantages and disadvantages. The major advantage is that the numerous forces, both economic and political, that combined to shape British columbia's mineral policies in the 1970s can be analyzed in some detail. The attempt to cover too broad an area, especially in the complex field of resource policy can lead to superficial results. On the other hand, the ability to generalize from a fairly narrow case study is limited. This is particularly true when the small amount of secondary literature available makes both regional and inter-industry comparisons extremely difficult. Hopefully, this lack of published material will soon be rectified and political scientists can begin the task of analyzing resource politics in Canada from a broader geographical and theoretical perspective. I would like to thank a number of individuals and institutions whose aid was invaluable. Dr. Martin Robin and Dr. Audrey Doerr's advice and encouragement were much appreciated, as was the support provided by the Political Science Department of Simon Fraser University in many areas. Without the financial support of the Simon Fraser Open Graduate Scholarship a work of this magnitude and scope would have been- impossible. I would also like to thank Monty Alton, Hart Horn, Gary Lauk and Leo Nimsick for their kind assistance in the course of my research. Finally, I am greatly indebted to Brigitte Leonhardt whose encouragement and dedication to this poject made it all possible. The responsibility for the results is, of course, entirely my own. CHAPTER 1 INTRODUCTION In August, 1972, an upset victory brought the New Democratic Party to power in British Columbia. The victory marked the first time that the N.D.P. had formed the government in a wealthier or 'have' province of ~anada,'and thus marked something of a milestone in Canadian politics. At least that was how it was perceived at the time. The ascension of the New Democratic Party to power in Canada's westernmost province was also viewed as something of a test;.& one that could conceivably make or break the party's future prospects as a serious contender for power in Canada as a whole.h Could the new governnent make fundamental changes to the province's economic system and the prevailing distribution of wealth without causing serious disruptions in the largely privately owned productive system? The challenge was one that the new Premier, David Barrett, explicitly accepted for his new government. In an interview with the Financial Post, the journalistic mainstay of the Canadian economic establishment, he asserted that " I , recognize this is our biggest challenge in the larger sense .