Opportunity Cost
Emphasis on sunk
Years ago, not long after the Liberals formed da guv’mint, Siobhan Coady said dey couldn’t stop Muskrat Falls ‘cause dey had too much money in ‘er. Gotta keep going, Coady said, or words to that effect.
Had they stopped at that point, taxpayers were only on the hook for $5.0 billion, which was the first bit of financing. Even if Emera sued they would never have gotten anything close to $10 billion and certainly nothing like $40 odd billion taxpayers will pay for the whole thing over 50 years.
On the surface, Coady’s argument was the sunk-cost fallacy in action. You keep doing something based on past investments not on the future benefit or projected cost. It’s a form of irrational thinking. Making a choice based on emotion instead of evidence. Huge part of megaprojects. People invest money and emotion and ego and all sorts of other things and cannot get out.
Reality was that Coady had already heard the briefings about all the government revenue built into the scheme, all of it from local taxpayers, and when the political crowd had no better idea and were afraid down to their shoes of trying something else, they stuck to the Muskrat Falls disaster. What sucked them in was not just the money already spent but about the hope that there would be some miracle to sort out the financial mess the Liberals inherited, lacked the brains or guts to sort out, and that Coady and her caucus made dramatically worse during their whole time in office. In fact, the government’s worst financial performance was on Coady’s watch as finance minister and as the right hand to Andrew Furey’s abysmal premiership.
Their crowning disaster was the Churchill Falls deal.
Churchill Falls was all about a financially and politically bankrupt gang of politicians in a desperate bind who gratefully accepted whatever shitty deal they got if there looked like there was cash in it.
And in a broad sense that emotional state - panic - coupled with other irrational states of mind - Furey’s ego, f’rinstance - that gave us the MOU is not any different from the motivations behind Muskrat Falls starting with Danny Williams. For Williams, it was as much ego as anything else and for his heirs - including Furey, John Hogan and Dwight Ball - it was about a boost to help them cling to power.
None of it really had to do with delivering electricity to Newfoundland and Labrador or providing a solid base for economic development since neither of those things ever factored into the decision of what to do. Williams’ goal was to build anything on the Lower Churchill just to build it and on Churchill Falls, Furey’s goal was all about anything other than not repeating 1969. In fact the CF agreement Andrew Furey signed merely continues the 1969 deals principles as adjusted after 1998-ish.
