According to Albert Einstein, the definition of insanity is “doing the same thing over and over again and expecting a different result.”
If this is true (and it seems a reasonable conclusion), then why are we bailing out Canada’s auto industry “over and over again?”
The Canadian government announced this week that it would toss a $4.2-billion lifeline into the bottomless money pit commonly known as the Big Three. General Motors is to get the bulk of money (about $3 billion), while Chrysler gets the rest. So far Ford has declined government assistance, while making it clear that may change in the future.
This is new territory for our current prime minister, who has long and publicly opposed corporate welfare (let alone welfare that drives our country into a huge deficit just to keep American companies afloat). But it’s business as usual for GM, Chrysler and Ford who, over the past five years, have collectively received almost $800 million from Canadian and Ontario taxpayers.
According to figures released by the Canadian Taxpayers Federation, GM has received $375 million in government loans since 2003. During that same time, Ford received about $285 million and Chrysler about $123 million. In each case, grants were given with the expectation that jobs would be created — but nothing of the sort ever materialized.
Hundreds of millions more were granted prior to 2003, with the only result being thousands of layoffs and companies that never became financially stable. If anything, it’s likely the subsidies prevented the emergence of positive innovations that were necessary for stability and would have been forced on companies if they had been left to their own devices. In sum, the influx of cash in recent years has only led the Big Three to the brink of bankruptcy and to a greatly diminished market share (that fell from 80 per cent in 1980 to 44 per cent today).
If hundreds of millions accomplished nothing, then current expectations that billions of dollars will somehow save the industry or make it more viable are clearly . . . insane.
Even more frustrating to taxpayers is that these “loans” aren’t much more than a direct transfer of cash with no strings attached. An interest free $175-million loan to GM in 2003 won’t be due until Dec. 31, 2055. As the taxpayers federation spokesperson says, “Do you know of a bank that offers an interest-free loan without a single payment due for two generations?”
No wonder Canadians are skeptical of the current handout. After all, it is their money. Efforts to keep the Big Three afloat are termed government loans or subsidies, but the reality is it’s money from our pockets that is repeatedly being poured into failing businesses — and without any expectation that the industry make radical changes.
An Ipsos Reid poll taken this week shows a majority of Canadians (58 per cent) oppose the bailout and that number rises to 69 per cent for Albertans. Not surprisingly, 52 per cent of Ontarians believe government should do what it can to prevent firms from going under.
More interesting than the numbers is the question asked. Canadians who opposed the bailout agreed with the statement that it is “unwise for the federal government to provide this assistance because it would set a precedent that means other industries should be supported, and it doesn’t guarantee the companies will stay alive for more than a few months.”
The concern about it being a temporary fix is already acknowledged by all parties. Windsor’s mayor has termed it “partial relief ” and admitted “we’re not even close to being out of the woods yet.” At Congressional hearings in the United States, a leading economist testified the full amount required to keep the industry from bankruptcy lies between $75 billion and $125 billion.
As for setting a precedent for other industries to expect massive bailout packages, the begging has already begun. The taxpayers federation says forestry, mining, aerospace and shipbuilding industries have all made demands to get their fair share or, as B.C. Premier Gordon Campbell has said, be treated equally. Let the insanity begin!
Ironically, it seems a more reasonable — and saner — option for saving the auto industry has come forth from an unlikely source. Late-night comedian Jay Leno says, “Instead of giving $25 billion to the car companies, give it to us, with the provision it can only be used to buy a Corvette. That way, they still get the money, everybody gets back to work and we all get a new car!”
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