GS Forum

The Generation
Screwed Blog

Want to balance the budget? Start by cutting corporate welfare
By Renaud Brossard - Generation Screwed Executive Director
corporate-welfare-5-6-2016.jpg

For a government supposedly hellbent on “helping the middle and those working hard to join it”, Justin Trudeau and Bill Morneau sure seem to have a broad definition of what the middle class represents in Canada. From multi-million-dollar deals to help massively profitable foreign multinationals like Toyota create only a handful of jobs, to hundreds of millions spent on Bombardier, allowing its executives to vote themselves massive bonuses, it seems that their vision of the middle-class goes so far as to include the 1%.

As much as it may seem hypocritical given their current narrative, they are not alone in bearing the blame. For decades, governments across the country have forked over billions upon billions in taxpayers’ money to various businesses, most often than not with little to no regard for the financial viability of such projects. But whereas we can’t change the past, this government has a chance to right this wrong.

According to the 2016-17 Public Accounts, the federal government spent over $3Bn last year alone in payments to industry. That doesn’t even include tax advantages and other types of aid given to specific businesses or industry groups! Sadly, there are no indications that this amount will go down this year.

Giving money in such a way is contrary to the Canadian value that is equality of opportunity. It is immoral to force the average Canadian, making just a bit over $50,000 last year, to send some of his tax dollars to help large corporations. It is just as bad to force competitors to help their competition get better, through the use of their tax dollars. Canadians expect their governments to give them services, to help the many, not to fork over billions to the few.

Corporate welfare apologists will often counter by saying just how many jobs are created by this, and that we should support our industry to avoid mass unemployment. While this might all seem like a good argument at first, the evidence to support its effectiveness is sparse at best. A recent paper from the University of Calgary’s School of Public Policy looked at corporate welfare across all jurisdiction in Canada and made some interesting finds. Nearly 60% of all funds spent on business subsidies across the country have questionable effects at best. This brings us to question the rationale used to keep funding programs that have a lesser success rate than a coin toss.

As for the crooked notion that some companies are too big to fail, it is flawed logic. Markets operate through a process of creative destruction, where industry change with time, and the death of certain companies creates fertile ground for the creation of new ones. A very good canadian example of this process has been observed in the Kitchener-Waterloo area following BlackBerry’s troubles. Back when this former tech-behemoth started seeing troubles, regional, provincial and federal governments were scared about the economic prospects of the region. They thought this would mean the end of the region’s tech industry and bring about widespread unemployment and would lead people to emigrate from the region. Not only did this not happen, but the region is now more prosperous than ever. Where one company shrank due to its failure to adapt to the market, a vibrant tech sector has sprung thanks to the genius and entrepreneurial spirit of its former employees. To a lesser extent, the same can be said of Ottawa’s western tech hub following Nortel’s closure. The key to keeping the local economy vibrant does not reside in propping up businesses that fail to adapt, but rather in making sure our policies create a fertile ground for new businesses to pop up.

And ultimately that is the issue with corporate welfare: it fails a moral test, as it goes against the principle of equality of opportunity, just as much as it fails a practical test, since a vast majority of it is questionable at best. If this government is truly committed to “helping the middle class and those working hard to join it”, it would only make sense for them to discontinue such a practice. Otherwise, that concept is nothing more than just another set of meaningless words uttered by a politician.

For more information:
Renaud Brossard - Generation Screwed Executive Director
phone: cell: email: rbrossard@generationscrewed.ca