Bailing Out The Losers

 Do not think about, write about or deal with  human behavior without determining the effects of incentives.

    The Canadian government is carefully looking at a deal for Burger King to take over Tim Horton’s, a national chain of coffee shops. Why should the government be concerned with coffee shops, one might ask? Coffee shops!

    Today, we see the foolishness of saving dying industries.

National Post – (Latest Edition)

No more auto bailouts

As the National Post’s Andrew Coyne reminded us last week, Canadian governments spent $13.7-billion bailing out General Motors and Chrysler during the 2008 financial crisis. Of that, about $5.4-billion has been recouped. Canadian governments also own about $4-billion worth of GM shares. The rest of the money, along with numerous loans extended before the financial crisis, will likely never be recovered.

At least the two companies survived the meltdown. But the massive amount of money Canadian taxpayers spent bought us no good will from the automakers. As a condition of the bailout, GM agreed to continue producing 16% of its vehicles in Canada until 2016. That date is fast approaching, and on Wednesday, auto-industry analyst Joe McCabe warned that he expects GM to significantly scale back its operations in Oshawa and Ingersoll, Ont., in the coming years.

Meanwhile, a report from the Canadian Automotive Partnership Council, which is made up of auto-industry stakeholders, argues that Canada needs to become a more attractive investment environment if it hopes to retain many of the jobs provided by the industry.

While many of the report’s recommendations are sensible — such as increasing private sector investment, reducing redundant regulations and pursuing freer trade — it also calls for Canada to compete with other countries’ “investment supports” by offering “meaningful, tangible and effective support measures.” In other words, to offer further subsidies to Canada’s automotive industry. This must be avoided at all costs.

Numerous academic studies have shown that jobs created as a result of government subsidies often come at the expense of jobs in other sectors. Other studies have found that even when net jobs are created, the cost of the subsidies is much higher than the benefits accrued. According to an analysis by researchers at the University of Ottawa, the 2008 bailout cost taxpayers $500,000 for every job saved. This is hardly worth it.


    The money to save these “good” jobs came from people whose jobs were not nearly as good.

The money would be much better spent retraining auto workers who lose their jobs, to help them find employment in more productive industries that don’t rely on blackmailing taxpayers every few years.


    Lots of money to “save” jobs which either don’t exist or soon won’t.

Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Days of Songs and Mirrors: A Jacobite in the ‘45.”
Cui Bono–Cherchez les Contingencies


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