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That's all, Volks

26 Apr 2023 | News Roundup

We finally got the figure for that Volkswagen battery plant in St. Thomas, Ontario and it’s a nosebleed-inducing $13 billion, or possibly more. Since it’s in Canada, mere citizens may not see the details. But we also discovered, the same day, that the Canadian government is flubbing the straightforward task of planting two billion trees in a country that already has some 300 billion of them, and according to the Environment Commissioner every other climate-related job as well. So how can we believe that the Prime Minister knows exactly what he’s talking about when he claims the factory will create “up to 3,000 direct jobs and up to 30,000 indirect jobs”? Especially since the “up to” is a giveaway that these numbers are fantasy. On the allegation of “indirect jobs” we retort “Does that include the indirect jobs destroyed by the taxes needed to pay for this boondoggle?” But suppose he is right about the 3,000 jobs. At $13 billion, how much did each one cost? A mere $4.3 million per. We’d have saved money by picking 3,000 random Canadians and giving them a million each to stay home. Or better yet, go to Ottawa and govern us in place of the current lot.

In lambasting the Canadian government’s inability even to guess which regulations are doing what, the Environment Commissioner noted acidly that “We say this in the context of 30 years of them missing every target.” And this juxtaposition deserves our attention because it is surely not credible that people who cannot contrive to plant trees in a huge forest could guide the transition of an entire economy so precisely that the largest industrial subsidy in Canadian history can be guaranteed to bring real value for money. Yet nothing seems to dent their sublime self-confidence.

It is astounding the irresponsible way people like Canadian Prime Minister Justin Trudeau throw money around on pet projects while neglecting core responsibilities. Yet another major national security crisis has erupted because Trudeau apparently told NATO leaders privately that Canada would never meet its repeated promise to NATO to spend 2% of GDP on defence. It’s not the sort of information he’d share with mere citizens, any more than he’d put in his budget the actual amount we put into national security at the moment. But since it’s 1.29% of a GDP of around $2.86 trillion that means we spend about $37 billion, albeit badly, and to get to 2% we’d need to reach $57 billion. So that $13 billion would have covered two-thirds of the gap, for one year. Instead it’s whee cackle with the subsidies and say if China invades Taiwan we’ll send a card.

This administration excels at airy pronouncements. And at jetting about spewing carbon to save the world (“Building a future that is fair, equal, and peaceful, with clean air and clean water for everyone” on Trudeau’s latest aerial jaunt). But it stinks at meeting goals or doing actual real-world calculations. For instance, on them trees, “A 2019 cabinet promise to plant two billion trees within a decade is ‘unlikely to succeed,’ Environment Commissioner Jerry DeMarco said yesterday. A separate Budget Office report earlier concluded the program was on track to go 88 percent over budget.” So the one thing they are good at, fatuous overspending on questionable ventures, is not reassuring in this context.

Also, we just learned that one problem with the program is that since making the pledge two years ago, the feds haven’t even managed to sign deals with five of Canada’s 10 provinces to have them do the actual work at a dollar a tree. Undaunted by this latest display of practical incompetence, the PM gushed on Earth Day about his latest theoretical achievements:

“To build a clean, healthy future, we know we have to take action on climate change. Through our Emissions Reduction Plan, we are taking bold action to cut pollution and build a clean economy with good, middle-class jobs for Canadians. Our plan is already working, with companies from around the world making historic investments in Canada – a reliable supplier of clean energy and clean technology – and creating and securing thousands of good jobs across the country.”

An interesting way to describe total failure to meet your targets, and a government subsidy that dwarfs all the others in Canada annually combined and is the largest in our history. As Aaron Wudrick of the Macdonald-Laurier Institute groused about that “historic investment” by a company face-down in the government trough, “The final poke in the eye on this is the govt kept the figure a secret, then refused to reveal it to Parliament, then leaked it to a news outlet. The biggest corporate welfare giveaway of all time!” So how are we meant to believe this is one of those famous strategic investments we hear so much about when the handouts are gushing forth and so little about when the results are trickling in?

In response to PMO claims that the EV plant subsidy would pay for itself in five years and “That’s the math that matters”, Marc Lévesque, Former Chief Economist at the Public Sector Pension Investment Board, tweeted “I want to see the studies. I want to see the ‘math that matters’. I want to see the assumptions and the methodology. Why should we just take these self-serving claims at face value?” And it would be nice. But what could these computer programs even tell us except that if an untestable set of assumptions turns out to be true, then an untestable claim would be true as well? What could ever separate out the jobs created by the subsidy from jobs that would be created otherwise, and identify the jobs not created because of the combined tax/debt burden that $13 billion entailed?

Our complaint is not partisan. Ontario Premier Doug Ford, who is ostensibly a Progressive Conservative, burbled:

“This investment, the largest auto investment in our province’s history, is a big win for Ontario, the people of St. Thomas and surrounding areas. We’re thrilled to welcome Volkswagen and PowerCo SE to Ontario and thank them for their tremendous confidence in our province, our workers and our growing electric vehicle supply chain. Welcome to Team Ontario, Volkswagen!”

We can’t help thinking that, à la Sam Spade, what they actually had confidence in was the $13 billion. Any fool can make a profit if they get that kind of subsidy. Especially for a facility that’s only meant to cost $7 billion.

Here’s the economics that matters, and yes, it’s as old as Adam Smith and his famous point about the mercantilist argument by which “nations have been taught that their interest consisted in beggaring all their neighbours”. As Smith wrote in The Wealth of Nations back in 1776:

“they who first taught it were by no means such fools as they who believed it. In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest. The proposition is so very manifest that it seems ridiculous to take any pains to prove it.”

And yet here we are, a quarter millennium later, having to try again. So here we go. Even if these batteries are good things, not just generally but these specific ones made by that specific firm, we do not “win” by producing them expensively ourselves and then selling them cheap. If the justification for this subsidy was that without it the plant would have gone somewhere else, why not let others subsidise our batteries rather than us subsidise theirs? Letting, say, European taxpayers sink $13 billion into their production then selling them to us at a loss would have made Canadians richer by as much of the $13 billion as we could capture in discount batteries with which to whiz around without emissions. Whereas insisting on doing it ourselves means subsidizing battery consumers in other countries and calling it victory in a trade war.

P.S. In Canada’s weird kabuki politics NDP leader Jagmeet Singh, whose support is crucial to keeping the Trudeau Liberals in power, made an Earth Day statement rubbishing them for their failure to act on climate.

8 comments on “That's all, Volks”

  1. GEE, it can only be coincidence that this battery plant is located in an already relatively rich province which is heavy with votes.
    No one thought to reward the maritimes with a little economic boost. Oh yeah, they seem to vote Liberal even when booted into the gutter of inconsideration. Is that phrase apt. Sounds weird to me even if descriptive. I love it that NF & L are part of Canada but it is likely the worst deal they ever made. They are treated almost as bad as Alberta and without the economic clout to withstand it.

  2. Adam Smith also said, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick, or in some contrivance to raise prices." Now, some benighted folks regard Smith as the father of economics; whereas sophisticated thinkers like CDN consider him the father of tinfoil hat conspiracy theorists. Because we know a priori that everything labeled a conspiracy theory must be silly, right?
    Well, no. If people are capable of cooperation, then they are capable of conspiracies, since a conspiracy is simply a cooperative enterprise that is illegal or has harmful effects. Because conspiracies are illegal or have harmful effects, it is usually best to keep them secret. But secrecy is hard to achieve the more people you have to recruit into the conspiracy to make it work. There is a better way, namely to convince people that the goal isn't harmful after all, but beneficial. Hence labour unions, which are a conspiracy in restraint of trade in labour. Now all you have to do is recruit useful idiots to promote the illusion of virtue for the conspiracy: we are saving the planet by diverting untold wealth into the pockets of the "green" industry. No doubt it is easy to recruit lots of useful idiots, who will be true believers. Scratch the surface, and everyone else has ulterior motives - to gain votes, or power, or influence, or subsidies and other rents...

  3. It seems odd that VW would choose the jurisdiction with the highest electricity prices to build an immense factory in. Anyone want to wager that the Ford government also kicked in a secret cheap power guarantee to secure the deal? Over the lifetime of the plant, how much is the Ontario taxpayer going to end up paying to subsidize VW's power bill?

  4. "Why should we just take these self-serving claims at face value?"
    Because the Trudeau government has learned over the past three years that uttering self-serving claims works! He has been saying over and over again that he is "following the science" on covid - without presenting any of the science he claims to be following, even in court where the obligation is on the government to justify its mandates. Do people care? No. People are perfectly content to take this self-serving claim at face value. Why dig deeper? If you want to know more, you must be a conspiracy theorist. It is too difficult for low-information voters to do anything more than take self-serving claims at face value. This is why we have to reduce the scope of government in our lives, and increase the scope of the market and voluntary associations.

  5. As a Dutchman, I am happy that this monumental waste of money is not coming out of my pocket (yet, this time)
    So thank you, Canada, for taking one for the team. :p
    But at least you guys are doing something constructive with the money. We are spending 25 billion here to destroy our own farmers (literally) to fill their land with homes for refugees, solar panels and wind farms. This is to protect nature, or so they say.

  6. Governments now believe that, since somebody gets the money spent by government, whoever receives it will invest the money in something that pays salaries or mortgages, and is thus economically beneficial. They feel giving a million dollars to a tottering drunk on a downtown sidewalk will result in a million dollars being spent in the neighborhood very soon ….All good….no need to justify how they borrowed the money from the bank and it will be taken taken out of the neighborhood with future taxes …..but the tax increases probably won’t be noticed by the citizens in the newly stimulated economy…..

  7. Hey Canada, better get to work planting those trees since you’ve all voted to make wood the national heating and cooking fuel by 2030. After all, it’s carbon neutral. But please keep the smoke and soot north of the border…

  8. Too bad the basic economic knowledge about competitive advantage has been lost to the hysteria-pimping elected sociopaths of the west. As the Trudeau / Singh regime is working on eliminating Canada's most competitively advantageous industries, they are subsidizing VW to produce batteries for subsidized EVs which will no longer sell without a doubling of the grid capacities. Next, huge wind-power heated greenhouses to make Canada into a tropical fruit powerhouse for the 15 minute cities. $300/lb for Canadian grown bananas is a small price to pay for the new paradigm of insourcing.

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