Corporate welfare comes with pepperoni
TheStar.com – opinion/commentary – Pizzerias and ice cream parlours get business subsidies.
Aug 07 2013. By: Carol Goar
If you’re planning to open a pizzeria, you’ll be pleased to know that Industry Canada is eager to help. It has subsidized 43 of them under its regional development program, costing taxpayers $1.3 million.
Ice cream parlours are also considered a worthy investment of public funds. Twenty-four of them got federal handouts worth $865,570.
The biggest winner in the regional subsidies sweepstakes: gas bars, especially those with convenience stores attached. Federal officials have doled out $15 million to 379 of them.
“Corporate welfare is rampant is Canada,” says economist Mark Milke, who dug up these details. Normally, the senior fellow at the Fraser Institute focuses on bigger stuff: multi-billion-dollar grants to aerospace companies, massive bailouts to automotive manufacturers, sizeable loans to prominent corporations. But in his latest publication,Corporate Welfare at Industry Canada since John Diefenbaker, Milke covers the whole gamut of handouts to private business, from the 75 subsidies showered on Pratt and Whitney to the tiny dollop of government largesse that went to the Buffalo Island Mini Mart and Gas Bar in Dillon, Sask.
The subject engrosses and infuriates him. He has written six studies on corporate welfare. “We have moved from a classically liberal state to a welfare state to what I would call the entitlement state,” he says. “More than a few Canadians think it is normal or defensible to subsidize one business at the expense of others or at the expense of taxpayers in general.”
The practice is deeply rooted. The earliest corporate subsidy was recorded in 1962. (There had been other forms of pork-barrelling — kickbacks, road paving contracts, public works favouritism — before that.) Industry Canada’s inaugural cheque worth $3.4 million went to Leigh Instruments, a now-defunct aviation firm in the Ottawa suburb of Kanata. Over the next half century, the department disbursed another $22 billion to businesses large and small.
Stephen Harper’s government has maintained that tradition. Like its predecessors, it insists that subsidies boost economic growth and foster job creation. There is no credible research backing up either proposition, Milke says. “A generous interpretation of the literature suggests subsidies may, in specific locations, produce some effect on local economic behaviour.”
Rather than ask readers to rely on second-hand academic data, Milke conducted his own test. He ranked Canada’s biggest companies by number of employees and compared that list to the largest recipients of government handouts. The mismatch was striking.
None of the three top job creators — Onex Corp., George Weston Ltd. and Loblaw Companies — had received a cent from Ottawa. In fact, only two of the top 10 — Magna International and the Royal Bank — got government subsidies. “The vast majority of companies, ranked by employee count, were able to generate significant employment without assistance from Industry Canada,” he concluded.
Although the scope of the study, stretching back half a century, is impressive and the cumulative totals are substantial, it is the smaller handouts that raise fundamental questions about fairness and the role of government:
- Why are taxpayers subsidizing pizza emporiums and ice-cream stands when there are thousands of these retail outlets financed by owners, who saved up the money to set up a business, remortgaged their homes or borrowed from a bank?
- What distinguished the businesses that got government funding from those that had to make it on their own? Was it location? Political connections? Skilful lobbying? Luck?
- How does one more pizzeria or ice cream store bolster the local economy? These establishments aren’t unique. They don’t attract tourists. They’re not big job creators.
“These smaller disbursements signal how successive governments have spent tax dollars not only on the smallest of businesses, but on the civil servants necessary to parse through such requests to deny or approve them,” Milke fumed, adding he hadn’t even tried to add up the cost of such staffing.
Unless the Calgary-based economist can change the course of history, Canadians will respond with a shrug. Politicians and pundits have been sounding the alarm in vain since former NDP leader David Lewis launched his crusade against “corporate welfare bums” 40 years ago.
Most don’t like seeing their taxes used this way. But it’s been going on for as long as they can remember. They doubt it will ever change.
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