Corporate Welfare Is Bad For National Unity

Corporate welfare teaches companies, and regions, that what’s important is about getting your “fair cut” of “free” money

Corporate Welfare Is Bad For National 

Unity

(This column originally appeared on the Huffington Post Blog on May 4th, 2016)

Bombardier is on bit a roll these days. Large deals with Air Canada and Delta Air Lines for its marquee CSeries planes have boosted confidence in the company. Yet, despite this good news (and the CSeries top exec’s statement last month that a bailout is “very clearly not required”) the debate over a federal bailout for Bombardier rages on.

While much of the focus is rightly on the economic merits (or more accurately, demerits) of corporate welfare, political considerations are inevitably part of the equation. And on this front, two parallel narratives – neither of which bode well for national unity – have emerged.

Outside of Quebec, and particularly in western Canada, there is concern that the Trudeau government will cave into demands to hand over money to a company that has perpetually struggled to survive in the marketplace without taxpayer support. This would come in an economic context that saw over 100,000 jobs lost in Alberta in the last year (where an equivalent bailout was neither proposed nor demanded) and growing hostility towards the company in Toronto, which is seething at Bombardier’s repeated failure to deliver streetcars (which, it should be noted, are made by an entirely separate division).

Within Quebec, the narrative is that the Trudeau government is beholden to Bay Street in Toronto, and sees a clear double standard insofar as the federal government (under Stephen Harper) helped bail out General Motors and Chrysler in 2009. Quebec Premier Phillippe Couillard has even noted that Ottawa “lost billions” bankrolling the auto bailout (taxpayers lost $3.7 billion to be exact). But rather than as an argument against repeating such an expensive mistake, Couillard cites it as an argument in favour: if Ottawa was willing to waste billions of federal tax dollars in Ontario, surely it’s only fair to waste billions in Quebec as well.

All of this leaves the Trudeau government between a rock and a hard place. They cannot please both camps. But a critical mistake would be to view this decision as a one-off rather than as setting a precedent that will impact Ottawa’s ability to respond to similar demands in the future. The question the prime minister and his Innovation Minister, Navdeep Bains, should be asking themselves is: what kind of precedent do we want to set?

Saying yes to Bombardier would signal that it’s business as usual in Ottawa: corporate welfare will continue as it always has, and businesses will know that by dispatching the right lobbyists and telegraphing the right threats (“those are some nice high-paying jobs you’ve got there. It’d be a real shame if something were to happen to them!”) they can extract cash from Ottawa. Bombardier will be happy for a short while, but as has been the case for the last half century, they will be back for more (and more, and more, and more.) In short, by saying yes to Bombardier, they set themselves up for countless similar scenarios in the future.

Alternatively, they could just say no, and send a dramatically different signal: that this kind of fiscal and economic insanity ends here and now. True, Bombardier and the Quebec government won’t be happy. But it will deprive future corporate beggars from coast-to-coast (are there ever any shortage of them?) of a precedent, much like the auto bailout that Quebec and Bombardier are now relying on as justification for their own demands.

Perhaps the most understated evil of corporate welfare in Canada is its ability to exacerbate regional tensions. Governments have limited money to dispense; choices must inevitably be made about which projects in which part of the country receive what amounts and on what conditions. When this happens, discussion of whether such corporate handouts are even a good idea becomes overshadowed by questions of regional fairness. This is why Premier Couillard can openly admit the auto bailout was an expensive waste, while simultaneously arguing, with a straight face, that Bombardier deserves the same.

Corporate welfare teaches companies, and regions, that what’s important is about getting your “fair cut” of “free” money. And when your cut isn’t perceived as fair, it can turn a wasteful policy into a corrosive, emotional weapon to be used by those with regional grievances.

It is already too late to prevent the Bombardier bailout question from becoming regionally divisive. But the government could at least prevent it from happening again by rejecting the company’s request today. If they do, they’ll be sparing themselves a dozen similar regional headaches in the future – and saving Canadian taxpayers billions of dollars.

Aaron Wudrick, Federal Director