Bombardier, Cronyism, and You.
So, by now you have probably heard that the Government of Canada has decided to give Bombardier a loan to maintain its push for its C-Class jets. In return, the GOC gets its name on printed paper and the feel good fuzzies you get when you think you’ve done something right. Unfortunately, there are some losers in this, namely the Canadian taxpayer. Mr. and Mrs. Canadian taxpayer lose out big. They lose out big for a variety of reasons, and I will detail a few of them for you.
Bombardier will get $372.5 Million over four years (or $93.125 million/yr). Now, those loans are to be repaid as part of the deal, and let’s assume that they will be. According to Bombardier’s web page, their operating budget is $28 Billion annually. This means that the loan they are getting will only be approximately one-third of one percent of their overall operating budget each year over the next four years ((372.5/28,000)/4). So, it’s not really that much in terms of a contribution to them.
Why would they do this? Why would they give them such a small amount and make such a big deal over it? The obvious answer is political influence. The Canadian Government is buying political influence within either the political environment of Quebec or it is seeking to intervene in the global marketplace and provide whatever incentive it can possibly can to Canadian Aerospace competing against its global counterparts.
There may be legal challenges to this internationally, and those may come. However, this bothers me for a different reason. It bothers me for reasons of morality. Specifically, moral hazard.
It can be easy and a lot of fun to feel important and make a big splash with easy money that’s not yours. However, this leads to poor decisions. This is because of a few reasons, not the least of which is because First of all, you make investments in places that have the largest political and vote-grabbing splash and not where you can have the best business impact. You make investments that reflect personal and not national priorities.
For example, does the $372.5 Million really make that much of different to Bombardier’s operating budget and growth plans? It’s almost inconsequential.
I am not going to offer any alternatives here, except that money doesn’t need to be spent just because you have it (if in fact you actually do have it).
Government money should not be spent ‘incentivizing’ private industry.
Why should the government invest money (our money) in a way that disincentives private industry? Government will not see a profit from its lending. The company is not in need of a bailout. There’s nothing that benefits industry and its needs in any way. This is publicity and pure and simple, and even that, poorly.
There’s no way that Government money should be involved with private industry. Government should be creating a competitive marketplace where more actors (companies) can participate. What happens when government gets involved is that private industry and industrial methodology gets corrupted.
One of PM Trudeau’s campaign promises was to increase diversification of the economy. How does this do that? Simple, it doesn’t. By picking winners and losers in this economy, the PM is reducing our economy’s diversification, its ability to be diverse and its flexibility. If he were to fund another private company which competed with Bombardier, which he never would, I would agree with his actions on this basis, but of course, on this action, I cannot agree.
The issue with the government’s action on funding Bombardier, is the same issue with the government’s actions in Quebec generally, it funds corruption in Quebec’s economic and political arena. By essentially paying for Quebec’s economic cooperation, we are funding and encouraging their isolationism and irritability, their sense of favouritism.
Also, there is a lot of talk about how companies seek to privatize profits and publicise losses through government intervention. This is exactly how this happens. Companies receive government money through political collusion and drain the public purse for their own gain; not capitalism. This is government-powered theft; pure and simple, unfortunately.
The government is not even picking a winning horse. As you can see from the picture of the Bombardier’s share price over the past few years, it’s performance is poor. It is not incentivizing good performance, but instead poor performance. Not a smart decision, exactly.
What can we do? What can the regular voter and taxpayer do when government goes to give industry money? The simple answer is to inform one’s local representative about what you feel is right, pray that your elected officials would not waste the public purse, and live a life that reflects a strong Christian work ethic and saving. I know that sounds strange, but it’s true. The best way, the true way to live is to live a life that Christ has deemed good and fitting in all areas of your life and to champion such a life in the lives of others.
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