Having taken the extraordinary step of dumping more than $1 billion in taxpayer dollars into a company that just posted an eye-watering $4.9 billion quarterly loss, Quebec Economy Minister Jacques Daoust is doubling down on this affront to Quebec taxpayers. Minister Daoust is asking that the incoming Liberal government in Ottawa pony up an additional $1.3 billion for Bombardier, courtesy of good taxpayers from St. John’s to Victoria.
Mr. Daoust clearly knows the right themes to hit in framing his demands to Ottawa. He shrewdly notes that the federal government helped prop up the Canadian subsidiaries of Chrysler and General Motors in 2009. Amazingly, he managed to keep a straight face when suggesting, like the auto bailout, government help for Bombardier would be “a profitable transaction for everybody.” Unfortunately for Mr. Daoust (and taxpayers) the auto bailouts ended up costing at least $3.5 billion.
Consider too the history of Bombardier. Over the last 50 years, Bombardier has received $2.2 billion in federal government assistance — of which Industry Canada advises only $543 million has been repaid (we’ll have to take their word for it, since the status of many repayable loans is never made publicly available). This is without even counting additional support received at the provincial or international level (the British government gave them a $298 million repayable loan in 2008). In short, if history is any guide, Bombardier is far more likely to be calling on taxpayers again shortly with its hands outstretched, than to actually mature into a bonafide competitive business.
It’s almost hard to blame Mr. Daoust, who is merely reciting bad but depressingly familiar arguments in support of government subsidies to private business. Any longstanding observer of politics in this country will have heard them so many times they can probably recite them by memory: it’s a “strategic” business; Bombardier employs a lot of people; and everybody else in the global industry is knee-deep in subsidies, so why not Canada too?
The definition of “strategic” is notoriously flexible, which is perhaps why it appears with such frequency in government press releases (usually paired in tandem with “investment,” which has similarly emerged as the preferred political euphemism for virtually all forms of what was once known as “spending”). A cynic might suggest the easiest way to determine whether a business in Canada counts as “strategic” is to ask: does it actually turn a profit? If the answer is no, it is often the case that you’ve stumbled into strategic territory.
Which brings us to the second common argument for government bailouts: size. Bombardier employs around 24,000 people in Canada; this pales in comparison to such giants as Onex Corp (233,000 employees) or Loblaws (139,000) which require no such government largesse. The most common rejoinder to such facts is to observe Bombardier jobs are “good paying” jobs, which is true: after all, it’s much easier to compensate your employees well when someone else (read: taxpayers of Canada) is footing the bill.
The final line of defence is all but a grudging admission of the economic folly of government subsidies: since every other country offers government help to their chosen corporate champions, we simply have no choice but to play the game if we want ours to keep up. This argument loses much of its attraction when one draws attention to that this logic has driven up corporate welfare worldwide, as each government ups the ante, setting off another insane round of bidding. And in a subsidy war with such economic giants as the United States, the European Union, or China, what on earth are Canada’s chances of coming out on top?
That there are compelling rebuttals to each of these dubious arguments is of course beside the point. What matters is that they have long sounded just reasonable enough to provide sufficient cover for governments at all levels and of all political stripes to justify giving untold billions of dollars to private companies. In the end, it really is entirely about politics, not economics: there is a sizeable constituency of people that feel that governments have both the obligation and ability to “rescue” failing businesses, in spite of powerful economic arguments against doing so.
Mr. Trudeau’s recent election victory has been widely attributed to a desire amongst the public for “real change.” Accordingly, he should apply this mantra to decline Mr. Daoust’s entreaties and force Bombardier off the dole once and for all — and in so doing, take a major step towards ending Canada’s sad addiction to incredibly wasteful corporate welfare spending.
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