THE STATIST IMPULSE THE CASE OF PETRO-CANADA by BRIAN J. LAWSON B.A. (Hons.), Queen's University, 1977 A. THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF . MASTER OF ARTS in THE DEPARTMENT OF POLITICAL SCIENCE We -accept this,thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA 1981 © Brian J. Lawson, 1981 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of The University of British Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5 Date DE-6 (2/79) i Abstract The Statist Impulse: The Case of Petro-Canada seeks to find cause for the establishment and phenomenal growth of Canada's National Petroleum Corporation. The study argues that Petro-Canada is part and parcel of an historically constituted statist dynamic common to all advanced capitalist countries. Utilizing Marxist theory, the thesis contends that statism sen ves to resolve the problems or failures of capitalist economies, and is an essential prerequisite for the growth of capital. Such was the case with Petro-Canada. The international oil crisis of the early seventies, which resulted in so much economic disorder and concern about future energy security, caused governments to increasingly turn to state enterprise, in the hope of filling their national petroleum needs. The statist impulse was fur• thered by the fact that the private oil companies, particularly in the eyes of .the majority of governments, failed to respond to the crisis adequately or satisfactorily. After an examination of the western industrialized nations growing reliance on state capitalist forms for obtaining energy security, the thesis investigates Petro-Canada in more detail. The study develops the point that Canada's vigorous public enterprise tradition played no small role in the crown corporation's creation and success. It is then argued that although the NDP and nationalist wave of the late 1960's spawned the concept of a Petro-Canada, the Liberals and Federal state singlehandedly implemented the proposal. The Government wholeheartedly embraced Petro- Canada, not for the sake of the NDP, but for reasons having to do with state capitalism. Through Petro-Canada's subsequent participation in numerous joint ventures, the state has socialized part of the private i i oil industry's exploration and development risk so as to prod the petro• leum corporations into greater activity. But the crown corporation has also acted as a substitute for the petroleum giants in certain areas, such as crude importation, so as to protect energy dependent general capital. The study contends that from a position of outright hostility toward Petro-Canada, the private sector gradually accepted state inter• vention into petroleum because of the lucrative joint ventures. Accord• ingly, it is argued that the state acted autonomously in setting-up Petro-Canada, without the support of the Canadian bourgeoisie. Finally, the study looks at the Tory effort to dismantle Petro- Canada and concludes that statism, in the form of the National Petroleum Corporation, proved too potent a force for the Conservatives to tackle. The issue of 'privatization' politically isolated the Tories from the majority of Canadians and became such a contentious internal issue that it divided and paralyzed the Conservative Government. In the end, Petro-Canada helped defeat the Tories and symbolizes the victory of state-capitalism over anti-statism. Contents: Introduction Chapter 1.1 The State As Entrepreneur 1.2 The Question of State Autonomy Chapter 2.1 Oil and the State - The Growing Tide of National Petroleum Corporations 2.2 The Oil Shock, the Reaction of the Multinationals and the Chosen Instruments of Government Chapter 3 The Public Enterprise Tradition in Canada Chapter 4.1 From Oil Stability to Oil Crisis 4.2 The Rise and Impact of Economic Nationalism 4.3 The Storm Breaks Chapter 5.1 The Night Watchman Awakes 5.2 In Whose Interests? Chapter 6.1 Trying to Turn the Clock Back 6.2 Isolation and Disintegration Chapter 7 The Triumph of the Positive State Bibliography. -1- On December 6th 1973, two months after the eruption of the world oil crisis, the Prime Minister of Canada announced in the House of Commons a plan to establish a National Petroleum Corporation. At a press conference after his speech, a reporter "suggested to Mr. Trudeau that his statement went beyond the demands of the NDP. He quipped- 'We have gone beyond the Communist Manifesto'."^ Although Trudeau was being typically provocative in dealing with the press, his response holds an important grain of truth. The Liberal Party and federal state were quite capable of embracing statism, often beyond the expectations and demands of the NDP and socialist left. In doing so, Trudeau and his government did not suddenly become socialistic. This did not stop the Liberal Party from unleashing the state onto the petroleum industry in a serious way. To begin to understand this latest phase of statism for what it is- an effort by the capitalist state to cushion Canadian capitalism from the shock of a new and unstable world oil order- one must first comprehend the qualities of crude which have made the fate of the substance so decisive. It is not an understatement to say that oil is the lifeblood of the modern age. If the industrial revolution was made possible by coal, then the breathtaking ascent of post-war capitalism sprang from oil. An incredibly cheap substance for most of its history, crude has the added advantage of being a more flexible energy form than any of its predecessors. Thus, in less than a generation, these qualities enabled petroleum to penetrate every aspect of society. This is especially true of the industrialized powers, where all forms of production, not to mention -2- transportation and heating, converted to. oil. The transformation, moreover, was done extravagantly, as if oil would always remain cheap and plentiful. Like some growing addiction, day by day the destiny of industry and country became increasingly tied to this one strategic energy form. Few seemed to wonder whether oil might some day become expensive and scarce. Fewer still thought about the consequences of such a change and the possible depth of the aftershock. To a degree far in excess of most commodities, any change in oil prices or supply patterns would produce swift and decisive economic convulsions, wracking countries to the core. This is precisely what happened as a result of the 1973 oil crisis. This thesis argues that it is then up to the state, the only force capable of responding to such a massive upheaval, to alleviate and it is hoped resolve the crisis. Governments realized more and more that the fate of their entire fossil fueled economics, which are so oil dependent that a recession is induced whenever supplies of the vital substance become problematic, could no longer be left so extensively in the hands of the private petroleum corporations. In fact, the evidence suggests that statism was assured precisely because the oil multinationals failed the test of the new oil order. They often exacerbated the blows of the oil crisis, favoured even higher prices for crude, or responded insufficiently to petroleum shortages. With little faith left in the ability of the seven oil sisters to"deal with the crisis, the advanced capitalist states , with -the exception of the Ufi.i'ted States , increasingly interceded in an effort to obtain adequate oil as cheaply as possible. In Canada, the state responded with Petro-Canada. -3- The crown corporation's mandate and record suggests an important supplementary role vis a vis the private oil sector. As we shall see, Petro-Canada has effectively socialized a portion of private capital's exploratory risk and development costs. Yet the evidence also indicates that Canada's state petroleum firm is increasingly engaged in activity which cannot be coined supplementary. Petro-Canada's refining and importation of foreign oil are functions which the petroleum corporations would prefer to perform themselves. In these instances, Petro-Canada acts as a substitute or replacement for private capital. In the estimation of this analysis, Petro-Canada and the state deemed such limited substitution necessary so as to protect the overall interests of oil dependent general capital. Similarly, the state's socialization of risk not only benefitted the oil corporations, but the entire bourgeoisie and economy, through greater exploration and development of petroleum reserves. Statism is a very complex phenomenon. As far as this study is concerned, statism flows largely, though not exclusively, from government's having to ensure the general conditions of production or of social function• ing, which private business is incapable of furnishing. Statism has encompassed everything from the takeover of bankrupt enterprises to the creation of public broadcasting firms that replace enfeebled private ones, increasingly, the state provides a boost to capital through the socialization of private risk. The thesis argues that in the economic sphere,: the chief concern of the state is to maintain and further the private accumulation of capital. Moreover, this statist function is a powerful, historically constituted tendency in all capitalist countries. Furthermore, the study contends that Marxist theory best comprehends and articulates statism in -4- precisely these terms and as a result, will be drawn upon to enhance the analysis of Petro-Canada.