Bombardier loan creates major distortions in the economy: MEI
Wagers taxpayers’ money on ventures chosen for political rather than economic reasons.
Montreal Economic Institute
MONTREAL — The Montreal Economic Institute (MEI) says corporate subsidies like the $372.5-million federal government loan to Bombardier creates major distortions in the economy.
The loan, announced Feb. 8, will support the aerospace company’s C Series program and development of the Global 7000 business jet.
“Once again, the government is artificially favouring one company or economic sector, at the expense of other, more cost-effective projects,” said Mathieu Bédard, economist at the MEI http://www.iedm.org/e, who acknowledged Ottawa is showing “a certain degree of caution” in not giving Bombardier the billion dollars it requested.
The not-for-profit research and educational organization notes the Quebec government already gave the company US$1 billion in October 2015 for development and marketing of the C Series. Since 1966, when Bombardier collected its very first subsidy, the company has received more than $4 billion in public funds.
“It is taxpayers who involuntarily become investors,” said Bédard. “They are forced to wager their money on the more or less likely success of risky subsidized projects chosen by politicians and bureaucrats for political reasons rather than economic ones.”
He said loans and loan guarantees offered by governments include preferential rates and conditions not offered by private financial institutions, which means they consider the loan too risky.
“Taxpayers have been generous enough. It’s time to think about completely eliminating corporate subsidies so that the most successful and the most innovating would distinguish themselves, instead of those chosen by government,” said Bédard.