For many years the advocates of deregulation and privatization of government services and public utilities have been getting their way in jurisdictions all over the western world. Last year the deregulation of electrical power in California failed spectacularly to provide lower rates and security of supply to that State's residents and industries, with the result that even Mike Harris, champion of privatization and deregulation in our own Ontario, postponed momentarily his government's agenda for dismantling and selling off Ontario Hydro.

Debates over the merits of private versus public enterprise, and regulation versus laissez-faire, are far older than many may imagine. Two hundred and fifty years ago the French Monarchy, which then claimed empire over the entire Great Lakes region, attempted to privatize a quasi-military monopoly of commerce with the First Nations in this vast territory. Near calamity followed a few years later.

What was the quasi-military monopoly and why was it established in the first place? The dominant reality for the sparsely-populated colony of New France before 1713 was an absolute dependency upon alliances with Aboriginal nations for security. Almost continuous warfare, among European powers and among First Nations, required the French to cater to Aboriginal expectations in their relationship. Since Aboriginal people made no distinction between military, trade and social relations, and expected to deal with those exercising the King's authority, military officers commanding a network of French interior posts became agents of military, commercial and some welfare services. They were accorded the monopoly of trade at their posts, in return they assumed most of the costs of maintaining the posts and small garrisons. The system was effective in excluding English traders from the Great Lakes area, keeping English imperial influence in check, and avoiding some royal expenditures on defense. It also provided a well-policed trade, including the regulation of the distribution of alcohol as a trade item.

Then, in 1742, the Crown "reformed" this system by replacing monopolist post commanders with private merchants who were required to bid for leases for the right of trade at most of the western posts. If the previous system worked, why change it? Politics played a role. The Intendant of the colony, who was responsible for the colony's finances and commercial health, had close ties with the merchant community and promoted a larger role for them in the western post trade. In this he was at loggerheads with the Governor General whose military officers had been enjoying the trade monopoly. But the Intendant also deeply believed that the Crown would enjoy increased revenues from the trade if it were leased to the highest bidder among private merchants. That consideration appealed to the Minister of Colonies in France whose budget was being slashed by a frugal Controller General of Finance.

Alas, this privatization was both ill-timed and ill-considered. It was implemented on the eve of an expected war with England, when the French could least afford to offend their Aboriginal allies, and when wartime conditions would quickly increase the cost of trade goods. Sure enough, there were complaints from Aboriginal consumers that merchants were charging more than the customary prices. French wartime shipping losses were so severe on the Atlantic that by 1747 the western posts were devoid of merchandise. Merchants stopped bidding on post leases. Some longstanding Aboriginal allies of the French actually defected, killed some French traders and besieged the posts of Detroit and Michilimackinac. Order was restored only with peace in Europe later that year. By then, the French Crown had reverted to managing post commerce as well as diplomacy through its military officers.

The case of the posts of Niagara and Frontenac (Kingston) on Lake Ontario is especially instructive. Before privatization in 1742, commerce at these posts had been conducted directly by the Crown from royal storehouses. It operated at a loss largely because of severe competition from the English and Iroquois at Oswego, where unlimited quantities of rum were sold. In 1742 Frontenac and Niagara were leased to Francois Chalet, a merchant. He certainly clamped down on smuggling and introduced many economies but he, like the Crown before him, lost money despite greatly expanding the liquor store at Niagara. Faith in the benefits of privatization blinded him and his ideological companions to the real risks of this competitive environment. The Crown resumed its subsidized trade at these posts.

What might we conclude? The political "reformers" obsessed with the bottom line rashly minimized the requirements of military security when rearranging commerce with Aboriginal nations. The wisdom of trusting the profit motive to provide, say, airport security or a reliable supply of electrical power, is an issue we have recently had occasion to ponder. This episode of failed deregulation and privatization in New France seems less distant in the context of current debate. What instruction might those engaged in the current debate take from long ago? Like our colonial ancestors, many participants today approach issues and evidence from deeply entrenched ideological perspectives that oversimplify complex circumstances and almost ensure that something important will be overlooked.