The most interesting thing about question period is often what’s not said.
Last week, for instance, the Official Opposition asked not a single question about the federal government’s decision to provide as much as $13 billion in subsidies over the next decade to Volkswagen to help get a massive battery plant up and running in St. Thomas, Ontario.
The Conservatives might plead that there were simply other matters — the public sector strike, the Pierre Elliott Trudeau Foundation — that required their attention. But their relative silence was conspicuous, especially given Pierre Poilievre’s history of deriding “corporate welfare.”
Not that Poilievre has been completely silent on the issue — after the details were announced, the Conservative leader asked the parliamentary budget officer to provide analysis of the deal. A month ago, when the basic outline of an agreement was first reported, Poilievre also posted a series of pointed questions to Twitter.
Trudeau seized on that tweet last week and practically dared the Conservative leader to oppose the deal. But at this point it doesn’t seem Poilievre is prepared to do much more than haggle over the price.
Poilievre’s relatively restrained response could be put down to simple politics. The Conservatives might be loathe to to condemn something that will provide employment to people in southwestern Ontario — in a riding held by a Conservative MP, no less. The enthusiastic involvement of Ontario’s Progressive Conservative government likely also makes it harder for Poilievre to criticize the deal.
But Poilievre’s approach to the Volkswagen deal is a lot like his muted reaction to the government’s introduction of tax credits for investment in clean energy. In last month’s budget, Finance Minister Chrystia Freeland laid out more than $16 billion in new supports for firms and investors — but Poilievre couldn’t summon an opinion.
Having already come out against other policies meant to reduce emissions — including carbon pricing and clean fuel regulations — Poilievre might have few options left beyond supporting the subsidization of clean technologies. The only hint of a climate plan to come from the Conservative leader so far is his insistence on “technology, not taxes.” And at a forum in January, Poilievre said his approach would include “incentivizing through financial instruments.”
But perhaps the relative lack of condemnation from the Conservative side reflects a new consensus on government support for industry — what might be broadly defined as “industrial policy.”
Industrial policy isn’t back because it never left
Though Freeland’s explicit embrace of industrial policy has furrowed some brows, it would also be a mistake to say that industrial policy is “back.” It never really went away, even if the term itself has fallen out of fashion.
“While the term industrial policy fell out of favour throughout most of the last three decades,” says a January 2021 report from the Brookfield Institute, “governments never stopped intervening heavily in the economy, in Canada and elsewhere. Whether through regional development agencies, sector strategies, or regional industrial benefits policies, Canadian governments have aimed to build competitive industries while avoiding geographic concentration of wealth and employment.”
By one estimate, the federal government committed $14 billion to business subsidies in 2015.
It would be difficult to tell the story of Canada without considering the role played by industrial policy — by everything from John A. Macdonald’s National Policy to the government support and involvement that helped kick-start the development of Alberta’s oilsands.
Even Stephen Harper’s Conservative government ended up committing billions of dollars to General Motors and Chrysler to keep the two auto giants afloat in the wake of the Great Recession.
“If you went back to the building of the [Canadian Pacific Railway], wasn’t that industrial policy? It’s waxed and waned over time, but I think [that] is more to do external conditions than with ideology,” said Paul Boothe, a professor at the Ivey Business School. He took part in the GM and Chrysler negotiations as the senior associate deputy minister at the federal department of industry.
The former Conservative government could fairly argue that it was compelled to act once the United States government decided to support the two companies. The same could be said of recent moves by Trudeau’s Liberal government in the wake of President Joe Biden’s Inflation Reduction Act — though Trudeau told an audience in New York on Friday that the deal ultimately came down to more than money.
But recent murmurs of renewed interest in industrial policy also predate the big developments of the last few months. A paper released by the Public Policy Forum in April 2020 — co-authored by former Conservative and Liberal policy advisers — called for a “challenge-driven industrial strategy for Canada.” A report from the Canadian Centre for Policy Alternatives called for a green industrial policy last October.
Climate change does seem like the sort of problem that might require a more active role for governments in directing, assisting and accelerating an industrial transition — especially because time is so short. But the first step might be simply acknowledging that “industrial policy” is not some far-out idea that died when C.D. Howe retired.
Picking ‘winners and losers’
“It is hard to argue there has been too little industrial policy in Canada,” the authors of the Brookfield report wrote. “But traditionally, Canadian efforts have been spread thin and have been uncoordinated. These efforts have lacked clarity about policy objectives — sometimes because no one wanted to admit that we were actually pursuing industrial policy in the first place.”
If everyone admits that industrial policy is happening, it should become easier to talk about about objectives, strategy, what makes smart policy and how to measure success.
The future might not look like a hundred more Volkswagen deals — the federal government probably couldn’t afford that. But it might mean accepting that public support for industry can produce value and the idea that governments shouldn’t be “picking winners and losers” was always overly simplistic.
Investing in individual firms will always entail risks because business involves risk, Boothe said. One way to assess value, he suggested, would be to estimate how much tax revenue would be created by a given project. Political and social objectives — and the actions of competitors — will also factor in, of course, just as they affect literally every other facet of public policy in a democracy.
But beyond the talk about “corporate welfare,” there is a smarter debate to be had about what good industrial policy looks like.