Politically motivated bailouts

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The Article

So far this year, the governments of Canada and Ontario have handed over $9.6 billion to the failing General Motors and Chrysler corporations. For the people of Ontario, that works out to more than $2,500 for every family of four.

In defence of these whopping corporate bailouts, Ontario Liberal Premier Dalton McGuinty insisted on Monday that he and his government colleagues had no choice: “The auto sector sustains thousands of current jobs for Ontario families and supports the pensions of many of our retirees,” he said. “That’s why we’re partnering with the federal and United States governments to put the industry on a more sustainable footing for the long term.”

There can be little doubt that without government support, GM and Chrysler would have closed down all their operations in Canada. As a result, many related car dealerships, auto supply firms and other companies would also have gone out of business. Ontario government officials peg the total job loss in the province at 85,000.

But is that a compelling argument for the bailouts? In April, there were 5,283,200 full-time workers in Ontario, down 184,500 from a year earlier. Yet the governments of Canada and Ontario offered no corporate bailouts to prevent any of these job losses. Why should the workers whose jobs depend on GM and Chrysler qualify for special treatment?

Bloc Quebecois leader Gilles Duceppe is at a loss for an answer. Speaking in the House of Commons on Monday, he pointed out that over the past two years, 50,000 jobs have been lost in the forestry sector in Canada, with half of those job losses in Quebec. Yet in this year’s federal budget, the Harper government has provided only $270 million for corporate handouts to the forestry industry.

Regardless, the federal Liberals and New Democrats support the Conservative government’s record auto-sector bailouts. And the reason is clear: Unlike the Bloc Quebecois, the Conservatives, Liberals and New Democrats are all vying to win or retain seats in Ontario that include hundreds of voters who are employed in the auto industry.

This overriding political consideration also explains the abandonment by Prime Minister Stephen Harper of his promise to do away with corporate bailouts during the 2004 election campaign. At that time, he pointed out: “It doesn’t matter how many millions or hundreds of millions of dollars a Liberal-NDP coalition will be willing to give the auto industry to win an election … their reckless use of taxpayers’ dollars will make us less competitive.”

Quite so. Who would have thought that within five years, a Harper Conservative government would squander billions of dollars in corporate welfare on GM and Chrysler, alone?

Note also that as a condition for receiving $10.5 billion in additional handouts from the governments of Ontario and Canada, GM Canada has agreed to make an immediate payment of $4 billion toward the $7-billion shortfall in the company’s insolvent, gold-plated pension plan. How can that be? Are not all companies in Ontario required by law to keep their defined-benefit pension plans solvent?

Not exactly. During the recession of 1992, the Ontario New Democratic Party government of former premier Bob Rae helped sustain GM Canada, by granting the company an exemption from the full-funding requirement for its pension plan. With the support of the Canadian Autoworkers Union (CAW), that exemption has remained in effect ever since.

Even when GM Canada was racking up profits over the past 15 years, both management and union agreed to improve promised pension benefits rather than return the plan to solvency. For the Harper and McGuinty governments now to shore up that insolvent plan at a cost to taxpayers of $4 billion is entirely unjustifiable, especially inasmuch as three-quarters of private-sector workers have no pension plan.

Clearly, while it’s politics, not considerations of economics, equity or justice, that has dictated the billions of dollars in auto-sector bailouts, will taxpayers get at least some of that money back?

Harper says he is not counting on it. Neither should anyone else. 

Rory Leishman
Latest posts by Rory Leishman (see all)

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