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Tuesday, November 19, 2019
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Don’t expect Ford to derail the corporate welfare gravy train

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THIS WEEK

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A self-styled red-tape cutter, Doug Ford should be equally eager to cut corporate welfare in the province. Given the long history of governments eager to hand over money for little or no public benefit, however, it’s best not to hold your breath.

Chances are his handouts will reflect Tory considerations, just as we had 15 years of Liberal-friendly largesse. Case in point, Ford used the public’s rage against electrical prices to replace Liberal cronies with Conservative cronies in the hydro system.

We can also expect the gravy train to continue for the automotive sector, with many more handouts in the vein of $220 million doled out earlier this year to Toyota despite the company’s $29-billion profit. Companies keep asking because governments keep agreeing to hand over taxpayers’ money, despite repeated reports that the effects go untracked and what data there are show few if any benefits.

Handouts are a long-time staple for the auto industry, part of the larger climate of corporate welfare. It’s why Canadian governments have turned over more than $200 billion to companies in the past few decades, with no indication that it’s done any good.

Oh, the companies have pocketed the cash and some pandering politicians have helped their cronies and got their pictures taken at ribbon-cuttings, but the rest of us are simply out a whole lot of money.

Advocates of perpetual handouts to businesses – often large and profitable businesses– say such deals create and/or protect jobs. Besides, they’ll say, every other government does the same thing, so we need to dole out cash to even the playing field.

Problem is, companies know this, and end up playing one jurisdiction off of another. Worse still, the benefits touted don’t materialize.

“Maybe the entire practice of corporate welfare is itself corrupt. After all, the financial accountability office in Ontario reported that the province doesn’t even try to assess whether business tax breaks and subsidies do any good. If they had, they might have reached the same conclusions as James T. Bennett in his book Corporate Welfare: Crony Capitalism That Enriches the Rich,” writes Lee Harding of the Frontier Centre for Public Policy in a recent opinion piece.

“Any government that claims to support the middle class betrays itself when it taxes and and drives its people into debt, only to hand the money to those who are unworthy and better off.”

The history of corporate welfare is replete with unpaid loans, bankruptcies, undelivered jobs and shuttered factories despite assurances to the contrary. For a sad example of all of the above, check out Ontario’s steel industry, particularly what happened in Hamilton. The automotive sector, too, has seen plants close and jobs disappear even as governments have poured in billions of dollars.

Given that all levels of government and a variety of ministries and departments are involved, it’s hard to get a handle on just how much money is doled out as corporate welfare. It’s made worse by the fact that officials try to hide what they’re doing: what we do know through the research almost always comes through Access to Information requests. Documents redacted as a matter of course, with the transfer of your money to wealthy corporations treated in the same way as military secrets.

Still, some estimates put the national corporate welfare bill at some $16 billion a year, or almost double the cost of social welfare costs. And without any documentable benefits.

In that light, it makes sense to scrap all subsidies to business. That’s not going to happen, however, as such programs are another vote-buying scheme for politicians. Political life is a perpetual election cycle, and the one thing politicians relish is the doling out of money – grants, loans, subsidies – and the photo ops that accompany such announcements. Staples throughout the year, they’re especially prevalent during the summer barbecue circuit. With legislatures on a break, funding announcements are a way for members to keep themselves in the spotlight, reminding constituents they’ve still got representatives at work.

Will the money ever come with airtight guarantees for long-term employment, investment and eventual full return to tax coffers? Not likely. Instead, it will be just another gimme in the never-ending cycle of privatized profits and socialized costs, the real modus operandi of corporatism.

What would make the this and other welfare payments more palatable is a realistic cost-benefit analysis: if an investment makes sense – i.e. pays back every dollar to the taxpayers directly, and then some – then it should be considered. If not, then take a pass. That applies to everything from massive, decades-long support for the likes of Bombardier and Pratt and Whitney to ersatz economic development efforts in Woolwich and the region. In almost every case, the decisions are bad ones, which, as we know, is pretty much business as usual for politicians and bureaucrats.

“It was an NDP leader, David Lewis, who coined the term corporate welfare bums in 1972. Unfortunately, in the past 30 years, too many corporations have been drawn into this trap by the available plethora of government loans, grants, and subsidies.”

Those words came not from Lewis’ successors or free-enterprisers of the Frontier Centre mould, but from then-opposition leader Stephen Harper in a 2004 speech to the Toronto Board of Trade, part of a pledge to tackle corporate welfare. We know how that’s played out in the past decade.

Political gain and an eagerness to channel public money into private hands aside – and that’s a big cultural change to reverse, as milking taxpayers is the norm – ending corporate welfare wouldn’t be that difficult. As it stands, reports show most of the country’s largest companies don’t take financial assistance.

Broader research tells us the any benefits of corporate welfare are, at best, fleeting and rarely successful in attracting high-skilled, high-paying jobs. The money disappears down a sinkhole, with little lasting effect. But as long as politicians are allowed to control the money, they’ll keep on wasting it to benefit only themselves and a few well-heeled friends.

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