Prime Minister Justin Trudeau arrives to make an announcement on a Volkswagen electric vehicle battery plant at the Elgin County Railway Museum in St. Thomas, Ont., on April 21.Tara Walton/The Canadian Press
David Moscrop is a writer and political commentator. He is the author of Too Dumb for Democracy and a new Substack newsletter.
There’s an old joke about corporatocracy that goes something like this: “Canada is a handful of companies in a trench coat.” If that one doesn’t have you howling in your seat, there’s an addendum: “That we subsidize.” Is it funny yet?
The latest iteration of the joke pertains to multinational automakers Volkswagen and Stellantis. In recent weeks, the latter threatened to pack up shop on its EV battery plant in Windsor, Ont. – and halted construction to drive home the point. That after the federal government and Ontario promised more than $13-billion in capital and tax credits to Volkswagen for a larger factory. As a result, both levels of government scrambled to strike a deal with Stellantis, which was revealed last week to be worth $15-billion.
The reason for this largesse? Thousands of jobs are at stake, says Stellantis, not to mention a thick plank of Ottawa’s EV and industrial strategy, which threatens to rot away without a heavy coat of cash shellac. But surely if governments are going to sink billions of dollars into for-profit companies there must be more of an upside to it for them? And us? Perhaps equity and some control over the corporation? Ah, another joke.
Neither Canada nor Ontario is set to take any equity from the Volkswagen or Stellantis deals, despite each corporation enjoying revenues in the hundreds of billions. We are clearly not getting our money’s worth.
But it doesn’t have to be that way. Our governments can stand firm and demand equity stakes in the projects. And if that doesn’t work out, our politicians should and can find other uses for $13-billion and $15-billion, ones that better deliver on jobs and industrial strategy.
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Keldon Bester, the director of the Canadian Anti-Monopoly Project and a fellow at the Centre for International Governance Innovation, says that while the terms of such deals depend on circumstance, governments have taken on equity in exchange for subsidies and investments in the past.
“We did it with Air Canada during COVID and with the automakers in 2008,” Mr. Bester said. That happens, he said, “when companies don’t have leverage.”
In this case, they certainly do.
Governments and their citizens are getting rolled by big corporations that can move easily enough across borders, threatening to take their capital – and jobs – with them.
In the United States, President Joe Biden’s Inflation Reduction Act, signed in August, 2022, will funnel more than $400-billion in subsidies to companies over the next decade. Canada can’t extract equity or other forms of control or return on its investments in Volkswagen or Stellantis because the subsidy market is competitive across borders, which means the companies get to set the terms. Governments are weak – or at least disinclined to assert whatever power they have.
But countries, weak or strong, have the capacity to band together and become stronger. The U.S. and Canada could say to these companies that they expect an equity stake for their contributions – and them’s the breaks. Take it or leave it.
More importantly, Canada could go one step further and say that if a company cannot operate without government investment, then there’s clearly a market failure and the state will undertake the operation itself. After all, we have the land, labour, capital and resources to do it ourselves.
State-owned enterprises get a bad rap in North America, but they have been central to economic and social life across national and sub-national jurisdictions for many years. The Canadian government owns and operates the Trans Mountain pipeline, for instance, which formerly belonged to a private company. Are the Stellantis and Volkswagen projects, with their billions in subsidies, really shining examples of the merits of free-market enterprise?
As we face down climate change and an uncertain future, state-owned companies may indeed become even more important. If governments must pay one way or another, why not choose the option that provides more control and the possibility of a healthy return on investment, too? Perhaps then those of us who all too often see public money invested to generate private profits may have a shot at a square deal.