The Canadian government’s promised CAD 13-16 billion Welfare grant to Volkswagen (VW) is outrageous! Is this the best use of funds? It’s an abuse of power, a waste of taxes, and it’s crucial it doesn’t happen for these reasons:
- Governments don’t create jobs, can’t pick projects likely to succeed, and it’s small, not large businesses that create most jobs.
- Politicians overlook the flaws of mining minerals for EV batteries and the impact on Indigenous Peoples.
- The opportunity cost (the alternative use of these welfare funds) is significant. Unmet needs exist in health care, infrastructure, and more funding to ease trades and truck drivers’ shortages.
It’s important to state at the outset that both liberal and conservative governments favor Corporate Welfare. Stephen Harper was a fan.
Let’s examine VW’s welfare gift and the government hoopla surrounding it.
The Corporate Welfare Scheme
- Federal Government: Initial capital investment of CAD 700 million, and CAD 13 billion in ongoing production subsidies. The parliamentary budget officer disagrees with the government’s estimate and says it will cost up to CAD 16.3 billion over the next ten years
- Ontario government: CAD 500 million for initial construction, and later tax breaks
- Access to Ontario’s “First Nation Partners'” land for mining, though partners haven’t consented yet.
Government’s platitudes about this corporate welfare focus on jobs and likely economic benefits. Contrast this with VW’s and Kapil Lakhotia, president of the London, Ontario, Economic Development Corporation’s (LEDC) views of the deal in these announcements that stress access to minerals for EV batteries.
- German carmakers Volkswagen and Mercedes-Benz struck battery materials cooperation agreements with mineral-rich Canada “intensifying efforts to secure access to lithium, nickel and cobalt.”
- Volkswagen AG confirmed it was looking for a Canadian plant, six months after signing a memorandum of understanding with the countryto secure access to key raw materials for batteries.
- Kapil Lakhotia, president of LEDC said, “VW chose St. Thomas because of its proximity to mineral supplies found in northern Ontario…”
Governments’ spin about benefits include 3,000 direct jobs and the elusive trickle-down effects in the economy. Canada’s Innovation Minister François-Philippe Champagne told reporters Canada will see the economic impact of the plant in its first five years. “Talk to any banker. He would say if you get your money in five years for a plant that’s going to be there for 100 years, that’s a pretty good deal for Canadians,” he said. As expected, the minister has not presented details to assess this arbitrary, asinine statement.
Not to be outdone, Prime Minister Trudeau added his spin: “This will develop the economy,” said Trudeau. “Everyone wanted this. [This is] money that’s going to come back in economic investments very quickly.”
Really, everyone? No, prime minister, not everyone.
Trudeau continued, “The new Volkswagen gigafactory will be worth CAD 200 billion to the Canadian economy over the coming decades.” Again, no details to support this campaign statement.
Besides this deal, the Canadian government doles out even more funds to buy EVs.
Small Businesses The Economy Growth Engine
Canadian Businesses Contribution to the Economy 2022
|Size of Businesses
|Percentage of Total Employment in the Economy
|Number of Employees Employed (Millions)
|Over 500 (L)
- In 2022, small businesses comprised 98.0% of all employer businesses in Canada and employed 10.7 million individuals, almost two-thirds (63.0%) of all employees.
- Of 48,325 Canadian establishments that exported goods in 2020, 97.5% were small businesses, accounting for 43% of the total value of Canadian exports. What an amazing base on which to build!
- Together with medium-sized businesses, small businesses contribute over 51% of the gross domestic product (GDP).
Trouble is on the horizon for small Businesses. They need help to ward off the Bank of Canada’s determined effort to push the economy into recession with its outmoded toolkit. Statistics Canada’s January-February 2023 survey showed small businesses expected hardship in the coming months. Rising costs, interest rates, and debt posed issues likely to hinder hiring and lower profits.
Government Myopia and Ignorance About Job Creation
Governments brag about creating jobs. They take pride in corporate welfare payments in targeted areas. But there is no evidence these payments bring sustained benefits. Why not eliminate taxes from small and medium-sized firms and expand support to ease truck driver and other skills’ shortages? This will allow these firms to flourish and grow the economy and employment. Reducing taxes on small and medium-sized businesses would be reasonable and eliminate the need for corporate welfare.
Then again, if the government believes it must “invest” in this ill-conceived deal, instead of a grant, why not take equity in the venture? I don’t recommend this approach, but it is better than a handout.
Opportunity Cost Of VW’s Welfare Deal
The opportunity cost of this corporate welfare deal is significant. These funds could have a major impact if managed well in our health care system. They could fund training of needed skills and contribute to repairing and upgrading infrastructure. Still, the best option is to use them first to eliminate all taxes on small and medium-sized businesses — a change crucial to increased employment and economic growth.
Climate Change is Real
Let’s look at each issue through a reality prism. The climate has changed and is changing. That’s it! Liberals and conservatives’ views are irrelevant. If you are an adult, you know the climate changed. I lived in Montreal in the 70s and British Columbia (BC) in the 80s. Revisiting these places often, I see the climate changing. When I lived in West Vancouver, BC, for three years in the mid 80s, I never needed a winter coat because of the mild winters. It snowed rarely and only minimally each time. Since then, I experienced snow storms many times, some more vicious than those in Montreal in the 70s.
Reject politicians who claim people start wild fires to justify climate change. Question their competence and judgement in other areas of the economy. Sure, we have different opinions on what’s causing the climate to change, and what to do about it. That’s normal, but we must stop accepting absurd positions political parties espouse. Reality is the climate has changed.
Corporate welfare is good politics that wastes taxpayers’ funds. Politicians use job creation to justify wasteful spending, and the public accepts their rhetoric. People become cult followers of politicians and embrace what they say rather than evaluating their policies. Folks with different views are the enemy of the cult. If you are liberal, you support every liberal policy, even the ludicrous, likewise for conservatives.
Politicians are inauthentic, lie often and with the court’s protection. They decide based on what will win elections, not on facts, principles or values. According to Chief Justice Roberts, politicians’ lying is like religious observance. Stop following their lead to demonize those with different views and start treating each person with the respect we want them to show us. Although climate change is real, the electric vehicle is not the universal remedy touted.
© 2023 Michel A Bell
Recommended Further Reading:
- Corporate Welfare is wasteful
- Corporate Welfare does not produce promised jobs
- BASF picks Canada to expand supplies for booming EV battery market
- Study Confirms Electric Vehicles Worse for Climate than Diesel Cars
- Electric vehicles are supposed to be green, but the truth is a bit murkier
- The Myth Around Electric Vehicles: Are They Really Eco-friendly?
- Electric vehicles need nickel but what is the human cost of mining it?
- How clean can the nickel industry become?
- Global trends and environmental issues in nickel mining
- Nickel Institute: All about Nickel mining
- Efficient Synchronous Extraction of Nickel, Copper, and Cobalt from Low–Nickel Matte by Sulfation Roasting
- The Impact of Nickel Mining on Soil Properties and Growth of Two Fast-Growing Tropical Trees Species
- Budget 2022 puts over CAD 9 billion into EV battery supply chain
- Corporate Welfare: How Exactly Does It Affect Americans