Governments learned an important lesson in the aftermath of the 2008-09 recession: people want effective action when there’s an economic crisis, but they also expect it to be fair. Keeping companies alive is important, but bailouts must benefit people, not just corporations.
Twelve years later, the lesson hasn’t been lost on the Trudeau government as it struggles with the economic fallout from the COVID-19 pandemic. The loan program for big business announced on Monday is aimed at getting the hardest-hit industries through this crisis — while making sure the money is targeted at their workers, not just their bosses.
It may not be enough, or structured in the right way, to satisfy some of the sectors that have been most devastated by the shutdown — oil and gas, airlines, hotels and hospitality, to name some of the most obvious.
The new LEEFF (for Large Employer Emergency Financing Facility) program is not a bailout, as the prime minister stressed. It is, rather, designed to provide loans to big companies that are having trouble getting credit from private lenders, with the government acting as a “lender of last resort” until better times return.
Most significantly, it comes with what the government calls “strict conditions.” The details are still to be spelled out, but if they live up to their billing companies taking the federal dollar will have to agree to some highly invasive requirements.
They will have to guarantee to maintain jobs and investment; uphold existing labour contracts and pension obligations; abide by federal goals on the environment and sustainability; and limit executive compensation, dividend payouts, and share buy-back schemes.
Plus, companies will be screened for whether they’ve been paying their “fair share” of Canadian taxes. Those that have indulged in tax evasion (obviously) or even what Prime Minister Justin Trudeau called “aggressive tax avoidance” won’t qualify. To police that, he said, they’ll have to share their “complete financial structure” with the government.
The devil, of course, will be in the details, but on the face of it those are indeed strict conditions. As a result it’s likely many companies will prefer to tough it out rather than submit to such a financial X-ray. It will truly be a last resort.
Nonetheless, the government is quite right to insist on such conditions. The sacrifices demanded by the shutdown have already been so great, and the losses still to come promise to be so big, that the public is in no mood for programs that benefit the few at the expense of the many.
It will be difficult enough to maintain public trust, not to mention political support, even without a repeat of the 2008-09 scenario. If there’s evidence that those at the top are getting even richer while others suffer (and in some cases, die) there will be hell to pay. Any political leader who doesn’t get that will deserve whatever blowback comes his way.
The new program also underscores the scale of the problem Canada is likely to face once the lockdown eases.
In the first days of the crisis the concern was mostly for small and medium-sized businesses, like restaurants and shops, forced to shut their doors. Now the fear is for the survival of some of the biggest companies, those with annual revenues of $300 million or more.
It’s clear the government will be carrying the economy on its back for some time to come. More than 45 per cent of the labour force is already receiving some kind of federal support, as the GDP is set to fall by 20 per cent in the second quarter of the year. The Parliamentary Budget Officer now estimates Ottawa will run a deficit of just over $250 billion this year.
We’ve never seen numbers on this scale, and extending help to the biggest companies shows the government sees no quick end. All the more reason to make sure the pain is shared as fairly as possible.
https://www.thestar.com/opinion/editorials/2020/05/11/burden-of-the-crisis-must-be-shared-fairly.html
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