Canada handed out $22.1B in business subsidies since 1961

The federal government, through one department, has dished out to business $22.1 billion worth of what the Fraser Institute describes as “corporate welfare” over the past 50 years.

According to a new Fraser Institute report, Industry Canada and its predecessors gave $8.8 billion to companies as grants and $13.3 billion in loans.

According to Mark Milke, Fraser Institute senior fellow, most of the handouts occurred in the 1980s ($9 billion) compared to $1.8 billion in the 1970s, $5.4 billion in the 1990s, $5.5 billion in the 2000s, and $49.5 million in the 1960s, though he cautions only information available in electronic form was surveyed. Additional paper documentation would increase those figures.

The data, which excludes exclude all other federal departments and provincial/municipal subsidies to business, as well as the 2009 automotive bailout to General Motors and Chrysler, shows several aerospace companies among the top 25 recipients, which accounted for almost $11 billion of the total.

Montreal aerospace manufacturer Pratt & Whitney Canada Corp. received the most money at just under $3.3 billion spread over 75 payments between 1970 and 2012; Bombardier Inc. was second with more than $1.1 billion across 48 payouts since 1966 and de Havilland was third with $1.1 billion over a 24 year period.

Since the Conservative government assumed power in 2006, longstanding recipients of corporate welfare and some of Canada’s best-known companies have received or continued to receive taxpayer money: Toyota Canada Inc., aerospace company CAE Inc., aerospace company CMC Electronics, and the Ford Motor Company.

But smaller companies have also benefited. The report shows $66,194 in subsidies went to hot dog enterprises since 1961, $856,570 to ice cream shops, and $1.3 million to pizza businesses. Between 1982 and 2006, 379 separate contributions totalling $15 million were provided for use by gas stations or convenience stores.

“Politicians argue that business subsidies lead to economic growth and job creation, but international peer-reviewed research proves those claims are bunk,” Milke said.

He cites the World Trade Organization, which has noted that at best such industrial policy applied in East Asia resulted in a “minor” contribution to growth, but at worst, there may not be a demonstrable positive impact on the economy, employment and tax revenues because of the “substitution effect,” where one firm is helped or rescued at the expense of another where one firm is helped or rescued at the expense of another.

An example the rescue of General Motors and Chrysler in 2008/09, Milke said, which came at the expense of manufacturing and sales employment at their competitors: Ford, Toyota, Hyundai, Honda and others who did not receive the “benefit.”

“Importantly, the three Canadian companies with the most employees – Onex Corp., George Weston Ltd., and Loblaw Companies – have received no corporate welfare from Industry Canada,” Milke said. “Clearly, business subsidies are not necessary to increase employment, and politicians’ claims to the contrary are a weak argument to justify crony capitalism.”

The report is available at this link.