Yahoo Finance Matthew Lau: On auto subsidies, Ontario's Doug Ford out-NDPs the NDP
Premier Doug Ford’s addiction to taxpayer handouts for the auto sector has become so outrageous Ontario taxpayers may want to ask themselves whether they shouldn’t just vote NDP in the next election. It might be cheaper. Witness how, barely a month after announcing $500 million in “direct incentives” to Volkswagen, plus “hundreds of millions of dollars more” for surrounding infrastructure — this on top of the federal government’s breathtaking $13 billion — Ford committed billions of dollars to Stellantis, the auto giant whose brands include Chrysler, Dodge, Fiat, Jeep, Maserati, and Ram. The total cost of the taxpayer handout to Stellantis has not been finalized but is expected to be in the same neighbourhood as the Volkswagen subsidy and possibly as high as $19 billion, this time with the Ontario government covering a full third of the bill.
And that wasn’t all. Bookended between the Volkswagen announcement in April and the Stellantis announcement in June were other examples of (admittedly smaller) dollar amounts expended in similarly unaccountable fashion. On May 24th, the government announced over $4.7 million for projects by the Automotive Parts Manufacturers’ Association and the Automotive Industries Association of Canada. And less than a week later, it gave away almost $6 million more for 14 additional projects with the goal of “building the auto manufacturing workforce of the future.”
While its various cabinet ministers busily announced the handouts in Ontario, the government was also working diligently abroad, in search of further opportunities to give even more of taxpayers’ money away to auto companies. A government news release on May 26 said it had just concluded an investment and trade mission to Germany and Poland “to promote the province’s growing automotive sector and to explore new opportunities for investment and job creation.” The initiative was led by the province’s minister of economic development, job creation and trade, whose cabinet position is premised on the idea that government economic development, government job creation, and government-managed trade are desirable things. They are not.
According to the government news release, the mission to give away taxpayers’ money included meetings with Volkswagen, Mercedes-Benz and global auto parts suppliers ElringKlinger and Eberspaecher Group, which both do business in Ontario. During these meetings government representatives promoted Ontario as an attractive place for business investment and discussed with Volkswagen leaders “future opportunities with the company.” How much more taxpayers’ money it committed to give away in discussions with Volkswagen and other companies about “new opportunities for investment,” the government’s news release did not say. Instead, it concluded by claiming the province is “a prime location for businesses worldwide to invest and grow.”
But a province in which multiple levels of government must subsidize business investments with billions of taxpayers’ dollars is self-evidently not a prime location for most businesses. Government support for business invariably means only select businesses benefit, while everybody else is left holding the bag. The costs of corporate welfare always outweigh the benefits as government takes capital away from economically productive hands to give it to those who are politically favoured, thus destroying economic value. Even more value is destroyed as the government handouts encourage rent-seeking over productive activity. Every dollar governments make available as corporate welfare means it pays businesses to spend up to a dollar chasing the handouts instead of producing goods and services consumers demand.
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That is why government “encouragement” to businesses, Henry Hazlitt observed in his famous 1946 book Economics in One Lesson, is “sometimes as much to be feared as government hostility” — or maybe even more, given how outrageous and expensive the Ontario government’s “encouragement” has become. And the cost of government “encouragement” will rise over time. A main consequence of the billions for Volkswagen and Stellantis is that companies increasingly will demand political favours to remain in Ontario, while businesses that don’t play the subsidy game, not to mention taxpayers, who must pay for all this, get run over. An NDP government hostile to business might therefore be cheaper for taxpayers than Doug Ford’s business “encouragement.” On the other hand, running over taxpayers is part of the NDP brand, and when it comes to auto sector subsidies the NDP is usually all in favour as long as the money goes to unionized shops. Is anyone sensible running for the Ontario Liberal Party leadership?
Matthew Lau is a Toronto writer.
