Economic lifeline or slush fund?

The McGuinty Liberals say their proposed Southwestern Ontario Development Fund is the former. The opposition Tories say the latter, which is why they’ve blocked Bill 11,which pledges to spend up to $160 million over four years, half going to the local development fund, the other half directed at Eastern Ontario.

Both parties hope to score political points. The Liberals, first off, get to look like they’re doing something for Ontario’s less-than-stellar economy. And to take the credit for any new jobs that follow. The Progressive Conservatives say the province, already mired in deficits, shouldn’t be spending more on a mess they blame on the government. We just can’t afford to spend on such measures.

The Liberals, not surprisingly, claim we can’t afford not to.

In that spirit, Minister of Economic Development and Innovation Brad Duguid was dispatched this week to sell Ontarians on the idea, and to encourage them to contact their MPPs to press for the development fund.

Pointing to a similar project in Eastern Ontario, Duguid notes that $53 million in government support over three years generated more than $485 million in economic activity. A similar return of some $9 for every $1 invested would do wonders in southwestern Ontario, where manufacturing was hit hard by a surging Canadian dollar and the 2008 recession, he says.

“The time is right for more funds to generate investment.

“We know it works,” he adds of the development fund model.

With the push for Southwestern Ontario Development Fund, the Liberals clearly see the job issue as one where they can paint the Tories as the bad guys for blocking the move. They’re probably right, as most Ontarians expect the government to do something rather than relying on invisible market forces to deal with high unemployment rates.

The Tories are right, however, to warn of possible favouritism, with plums going to government ridings, as a study showed to be the case in Eastern Ontario, just like the disproportionate amount of Canada’s Action Plan money making its way to federal Conservative ridings.

Duguid argues, however, that politicians have to rise above partisan sniping with jobs and the economy on the line. That means cooperation from the opposition at Queen’s Park, and from Ottawa, where officials such as Finance Minister Jim Flaherty haven’t been overly helpful to Ontario.

“Job creation should not be a partisan issue,” he stresses.

Federal cooperation is certainly needed, as there are plenty of factors over which the province has no control, including the value of the loonie and its impact on exports. Indeed, there are many things Canada has no say about but which influence our economy nevertheless, including the uncertainty in Europe and the still-flagging U.S. economy on which Canada, and particularly Ontario, depends.

Globalization advocates have been successful in their concerted effort to strip away economic levers from government control, with politicians have been willing participants. And they’re listening now to the prescription for more of the same stuff that got us into this mess – free trade, deregulation – and austerity for those who can least afford it.

Ontario has certainly embraced lower corporate taxes as part of its strategy. The aim is to make the province more competitive and to attract investment, says Duguid.

Measures undertaken by the province have been helpful, he stresses, in boosting employment to higher levels than before the recession – an increase of 127 per cent in the number of jobs, versus only 44 per cent in the United States. Since the low point of the recession in May 2009, employment in the province has increased by almost 267,000 net new jobs, equal to nearly half of all the new jobs created in Canada.

“We’re doing something right in Ontario,” he says.

That is perhaps still open to debate, though doing something is a good first step. Doing something right would be ideal, but isn’t always the norm for governments, as we’ve seen. Ideally, governments – it will take more than one to solve a global problem – will draw on the sweeping regulatory changes needed to counter the ill effects of the globalization and an out-of-control financial services industry that are dragging down the economy. That will go much farther than the Southwestern Ontario Development Fund, but in the absence of movement on that front, we do need to focus on jobs that form the core of the economy here.