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Actually, Bombardier Is Not A 'Proven Winner'

03/15/2016 04:26 EDT | Updated 03/16/2017 05:12 EDT
Bloomberg via Getty Images
The logo of Bombardier Inc. sits on display at the Paris Air Show in Paris, France, on Wednesday, June 22, 2011. The 49th International Paris Air Show, the world's largest aviation and space industry show, takes place at Le Bourget airport June 20-26. Photographer: Fabrice Dimier/Bloomberg via Getty Images

Bombardier Inc. has had a tough go lately. Pundits and advocacy groups -- including the Canadian Taxpayers Federation -- have beenpokingaway at the aerospace company as a symbol of wasteful public subsidies to private business. The company's stock is down, hammered by poor quarterly results and a lack of orders of their new C-Series plane. Even the lone bright spot -- a fortuitously-timed order from Air Canada on February 17 -- was all but nullified by news a week later that Republic Airways, an American customer which had also placed a C-Series order, was filing for bankruptcy protection.

No doubt there was considerable relief in the Bombardier executive suite, then, to read such strong support from an ally: progressive economist Jim Stanford, whose March 9 defence of aerospace subsidies reads like a Coles Notes version of boilerplate arguments regularly trotted out in defence of corporate welfare.

Stanford invites us to reimagine Bombardier's demand for another taxpayer handout as an exciting opportunity for an "equity investment" (presumably so exciting that there are no interested private sector partners). He takes umbrage at the notion that a company which cannot survive without state largesse could possibly be considered an "economic loser." Instead, he suggests Bombardier's desperate cry for help is actually a sort of perverse corporate swagger: taxpayers are merely "being asked to support the continued success of a proven winner."

How can a company that bleeds billions of dollars be a "winner?" Some creativity is required, but Stanford is up to the task. In his view, focusing on the usual metrics for businesses -- such as "does the company make money?" or "can it actually sell the products it makes?" -- is evidence of a dangerous affliction he refers to as "market fundamentalism." He instead points to benefits such as the "good jobs" such companies offer; the "value added" and "innovation" created by the sector; and finally, to its "export intensity."

His first argument is simple: aerospace jobs tend to pay well, so they are therefore "good jobs." But this is as silly as saying a "good customer" is someone you pay to buy your products: yes they're buying a lot from you, but you now have to factor in the cost of paying them as well. Besides, if the only important measure of a "good job" is that employees receive hefty paychecks, why stop at aerospace? Governments could simply pay people $50 an hour to sell lemonade, with very similar "spinoff" and "economic impact" effects.

The same problem arises with the "value added" argument: any honest measure of "added" value must surely also include the additional cost of any public subsidy, in the same way that profit isn't just calculated by the sale price of a plane: it's the sale price less the cost to make it (Stanford may be forgiven here given the widespread misuse of the concept of "value-added.")

On innovation, Stanford's notes that tax dollars end up funding research and development. This sounds good until you consider that the results are privately owned, rather than available to the public. If certain types of research are true public goods, insofar as they are important to society as a whole, we should fund such research directly through public institutions like universities, rather than bankrolling a private business that reaps all the benefits. And for research which only has commercial value, why on earth should public funds be going to enrich Bombardier shareholders?

Finally, Stanford lauds aerospace as a "growth" industry during a time of overall economic malaise, noting that "total shipments have increased 60 per cent in the past five years." This argument loses much of its attraction when each plane costs more to make than for which it can be sold. As the old joke goes "we're losing money on every sale, but we can make it up on volume!"

Stripped down, Stanford's position is that private businesses should not be treated like private businesses; their fate should not be left to such vulgar mechanisms as "profit" and "loss" but to a sort of holistic assessment of what smart people, including Stanford, happen to feel is subjectively "important." One would think that spending public dollars on public services would be considered more important than padding corporate coffers. But perhaps that's a question Jim Stanford isn't comfortable answering.

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