Quebec-based Bombardier Inc. is back in the news, which means either that the company is being sued for unconscionable delivery delays, or that some government or other is forking out hundreds of millions in corporate welfare. In this case, it is the latter, as the Canadian federal government recently gave the troubled aerospace company $372.5 million's worth of "repayable contribution". This is, then, technically a loan (interest-free, of course) and, although the terms of the repayment have not been made public, it will probably be based on sales targets (which, if they are never realized, therefore makes the loan a de facto grant). The money is supposedly to help the company get its struggling C-series planes and its developing Global 7000 luxury business jets off the ground.
Forgive my cynicism about all this, but this is now the 85th taxpayer-financed government hand-out Bombardier has received since 1966, totalling about $4.1 billion. Just last year, the Quebec provincial government made it a present of $1.3 billion, and Quebec has even had the gall to chastise the federal government for the insufficiency of its latest contribution (it was initially looking for $1 billion). The company, which is still largely owned by the Bombardier-Beaudoin families, saw its share price rise by 2% on response to the loan, so at least someone is happy, I guess.
Not surprisingly, Brazil (headquarters of rival aircraft-maker Embraer) has filed a complaint with the World Trade Organization, arguing that the Canadian aid amounts to an illegal subsidy and a distortion to the global market for airplanes (although Brazil too has a history of illegally subsidizing its aerospace industry, and the two countries have had many spats on the issue over the years).
Of course, the government is trying to sell the loan as a means of creating "good middle-class jobs". But why is it that the aerospace industry in particular (along with the auto industry) is the recipient of such largesse from national governments? It is not only Bombardier and Embraer (which rank merely 15th and 19th respectively in the list of top aerospace companies) that are implicated: the world's two largest jet-makers by far, Boeing in the USA and Airbus in Europe, have also benefitted over the years from various government hand-outs, both transparent and hidden, and the two companies have been hauling each other into the World Trade Organization's courts for decades, accusing one another of receiving illegal and improper government subsidies.
The usual argument presented is that the aerospace industry is "too important to let it slip away", or words to that effect, with the emphasis usually being on jobs. But, in reality, the benefits of corporate subsidies tend to be felt only locally and are usually short-lived. After Bombardier received the $1.3 billion from the province of Quebec last year, it promptly turned round and laid off 7,000 employees. Typically, all that happens is that jobs are just redistributed from one community or industry to another, with no new jobs actually being created. Any new jobs that do arise are usually very expensive in terms of investment per job.
Another reason often mentioned in favour of hand-outs to companies like Bombardier is that Canada "needs to be in the aerospace business" - for reasons that I have never been able to fathom - and that the only way to ensure this in the current world economic climate is to subsidize it. This, it seems to me, is an even weaker argument.
So, why are we still doing this, year after year? You would need to ask the Canadian government - they presumably have a good answer. I'm sure I don't.
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