This article originally appeared in the National Post.
By Aaron Wudrick, April 21, 2023
To southwestern Ontario they came, from Queen’s Park and Parliament Hill and Wolfsburg, Germany, smiles from ear to ear. The happy occasion: the official announcement of the single largest transfer of public dollars to a private business in Canadian history. Praises were sung, good cheer abounded, and mutual-congratulations were in order, even between traditional political foes more used to trading barbs.
Such was the scene on Friday in St. Thomas, a small town just outside of London, Ont., where Canadians were finally told just how much a much-hyped historic “investment” was going to cost them: $13 billion. That’s billion, with a “B.” The recipient was German auto giant Volkswagen, who in exchange for such unprecedented largesse committed to building a $7 billion electric-vehicle battery plant, its first such venture in North America.
You read that right: Canadian governments are giving Volkswagen $13 billion to build a $7 billion plant. It’s the kind of bold leadership you can only get from sophisticated economic experts like Justin Trudeau and Doug Ford.
Of course, we shouldn’t oversimplify; it’s not like Volkswagen is just standing around with its hands out. No, this subsidy — sorry, investment — will lead to a projected 3,000 good-paying local jobs. And all for the modest taxpayer contribution of just $4.3 million per job! Clearly, it would be irresponsible to take a pass on this kind of incredible economic opportunity.
There was more in this vein, but anyone who has followed such announcements over the years will be familiar with their terrible arguments. It’s the economy of the future! Think of the spinoff effects! It was all so mind-numbingly depressing.
Yes, the size of the lolly was remarkable — at $13 billion, it is in a single deal more than triple the amount bilked out of public coffers by Bombardier, the poster-child of Canadian corporate welfare, over a half-century span. But there were also new alarming signs that corporate welfarism, having already wrought immense damage to Canada for so long, is about to get even worse.
First, consider the astonishing non-response from the opposition. In a political climate increasingly drifting towards nonstop David-and-Goliath populism, one would think that any government announcing it was mainlining $13 billion from public coffers to a profitable foreign corporation would be setting itself up as a juicy target of attack.
Incredibly, neither the gatekeeper-slaying federal Tories (who at least used to position themselves as against corporate welfare while in opposition before abandoning any such pretense once in office) nor the federal NDP (whose former leader David Lewis coined the term “corporate welfare bums”) bothered to raise the Volkswagen deal in Question Period on Thursday after the scale of largesse had been leaked to the media. If even politicians like Pierre Poilievre and Jagmeet Singh — who in their respective ways never stop telling us how they’re fighting for the little guy — can’t muster the outrage to speak out against such a massive raid of the public treasury, who will?
Second, there’s the religious-like groupthink that seems to have infected politicians of all stripes about the need for Canada to be a “player” in the green economy. This dogma leverages an old mindset (“for some sectors, we have to pay to play”) and elevates it to an existential crisis: if we don’t make electric car batteries in Canada, our economy is necessarily doomed. This effectively implies there can be no limit on the price governments should be willing to pay — and you can be sure that other corporate players are taking notice.
We saw shades of this in Trudeau’s remarks at the press conference in St. Thomas where he feigned astonishment that anyone might seriously question the wisdom of this “investment,” even going so far as to assert that it somehow reflected “confidence” in Canada.
Confidence, prime minister? Confidence is when your appeal is so strong that investors come to you — not when you have to crawl to them begging and bribing. A federal government that deploys subsidies as its primary economic tool is not showing “confidence” in the innovation or perseverance of Canadian business or workers. Quite the opposite: they are signalling fear. Fear that Canadians are too weak to compete on other grounds, and fear that Canadians will be doomed without their betters in Ottawa subsidizing jobs for them.
Worse still, by focusing on subsidies, governments are failing to lean into our real comparative advantages. No amount of government subsidy can substitute for our natural resource bounty. It is these advantages — not trying to outbid the Americans for factories that could be built anywhere — that should form the basis for our economic future.
Aaron Wudrick is a lawyer and the director of the domestic policy program at the Macdonald-Laurier Institute.
