The politics of choosing winners

A time-honoured slogan of financial conservatives around the developed world is that “Governments should never pick winners with taxpayers’ money!”

It is, not surprisingly, observed more in the breach than in reality, even by fiscal hawks. Was the more than $13 billion that the Harper government lavished on the auto sector not the definition of “picking winners?”

But in reality, should not the appropriate question really be: “Can you ensure that you do not waste taxpayers’ money on corporations that you know are likely to fail?”

This is the sharp divide that is making decisions on aid to corporate Canada so hard and so slow. Some conservative pundits attacked the government for making “sustainability” a checkbox to qualify for the assistance package they released last week.

How improbable would it have been for Ottawa to not link improving sustainability performance for access to public cash? Conservatives denounced it as a plot against the oil and gas sector.

However, while it is true that the oil and gas sector have undertaken and will implement very significant emission reduction strategies, they remain huge emitters. So huge that Canada was smacked this week by both the World Economic Forum and the Norwegians’ sovereign wealth fund as climate laggards. We were ranked at 28 among developed countries.

So what should the rules be for access to taxpayer support? First should be a financial sustainability test. In previous crises, finance and economic development departments did tests of who was among the walking dead, and who could make it with an injection of liquidity at the right moment.

Alberta knows who its oil sector zombies are, B.C. knows who the weakest in the forestry and mining sectors are, and Quebec knows the weak and the flailing among Quebec Inc. players better than any other government. So keep the stress test results confidential, don’t further damage the enfeebled, but do apply financial survival tests before anyone gets a dollar.

The second question should surely be, “Who matters most?” Size does not determine strategic value. A bankrupt retail chain leaving thousands of employees joblessis a tragedy for the families involved. For the future of the economy, not so much. A failure to offer a financial bridge to the future for a small start-up whose success will deliver transformative change in health care, or technology, or climate change would be a tragedy for the next generation.

Finally, the sustainability of the scale and breadth of an assistance program to the public is a crucial question. We are spending money at a rate not seen except in wartime production rampups. The rate and volumes are turning out to be far faster and higher than even left-wing economists would have dreamed possible in the past. But fiscal trees do not grow to the sky.

This imposes on government decision makers a final test: “Can we slowly close the cash tap, without casting whole regions and sectors into chaos, before we get to a level of indebtedness that we know imperils the entire economy and the currency.”

One of the difficult elements of corporate and social assistance programs is that they are easy to launch, but they are very painful to dial back, let alone shut down. They always grow in scale and cost.

So the essential questions are probably these: Is your program ensured, to the extent possible, against backing losers? Does it help sustainability in climate terms, and that of a region or sector of strategic importance in economic terms?

Can it be maintained long enough to ensure we get to the far side of this crisis without bankrupting the government or crushing the currency.

Then there are the social justice tests that many Canadians will also demand. That’s an essential discussion, but sadly for progressives those choices will not come before these broad sustainability tests. Former U.K. Conservative finance minister Nigel Lawson famously declared, “To govern is to choose.” In a crisis, those choices come fraught with great risk. Robin V. Sears is a principal at Earnscliffe Strategy Group and was an NDP strategist for 20 years. He is a freelance contributing columnist for the Star. Follow him on Twitter: @robinvsears