Minister Bains’ lackluster clusters

Aaron Wudrick
Canadian Taxpayers Federation

Last week, federal Innovation Minister Navdeep Bains announced new details about the federal government’s plan to grow Canada’s economy: hand out nearly a billion dollars in taxpayer money to a few businesses who are willing to ask for it.
To the minister’s credit, he had the good sense not to express it in such candid terms. In the rich tradition of rhetorical poli-babble, he chose far more exciting phrases such as “jumpstarting innovation” “meaningful economic activity” and “superclusters”.
But try as he might to apply lipstick to this pig, it’s still the same old swine underneath.
Governments handing out taxpayer money to favoured businesses is the oldest trick in the industrial-strategy playbook.
The minister himself admitted as much when pressed, suggesting his government was simply copying the approaches of other governments around the world.
Apparently the minister didn’t look hard enough. From biotechnology in Italy to a purpose-built Russian tech park, to billions wasted from Germany to Singapore, the number of failed attempts by governments to create industry clusters is long – and expensive.
No matter how hard they try, governments are not very good at predicting the next big economic trend.
But maybe Canada can learn from their mistakes?
Don’t bet on it: the Trudeau government hasn’t even learned from the mistakes of previous federal governments in Canada, which spent at least $12 billion over the last half-century on corporate welfare with zero evidence of job creation. Meanwhile, the Institute of Fiscal Studies and Democracy at the University of Ottawa estimates the federal government already has 147 different programs and tax measures aimed at innovation and skills development.
Consider too that the current government has made such dubious “investments” as handing over $372 million to Bombardier (after the company laid off 2,000 Canadian workers), as well as a $100 million taxpayer gift to highly-profitable Ford (which then announced it would be reducing up to 600 jobs).
Which part of this long, repetitive track record of failed government interventions should give us any confidence they’ll get things right this time?
In a sad coincidence, on the same day Bains unveiled his new billion-dollar handout initiative, Proctor & Gamble announced it would close its plant producing cleaning products in Brockville, Ontario by 2021, throwing 480 people out of work.
After showering Bombardier and Ford with money, it’s fair to ask why Proctor & Gamble didn’t get a similar handout. It’s hard to conclude that it has anything to do with economics, and everything to do with prestige. In the eyes of politicians, planes and cars mean sophisticated technology. But mops and fabric softener sheets? Sorry guys, we can’t help you. The handouts are for the sexy industries only.
This is the inevitable consequence of a failed approach to economic development that has governments picking winners and losers, instead of ensuring a business-friendly environment for all. Rather than let the market determine whether Bombardier, Ford or Proctor & Gamble should succeed or fail, the government ends up deciding. The result is that businesses that don’t tick enough boxes on an arbitrary checklist pay the price.
Minister Bains may have the best of intentions with his supercluster innovation plan. But if history is any guide, the cluster it will create will be far from the “super” kind he has in mind.

 

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