02/05/2019 09:15 EST | Updated 02/25/2019 08:56 EST

New Quebec Government, Same Failed Corporate Policies

The CAQ government is reaffirming it's in the business of picking favourites and throwing good money after bad

A security guard closes the gate of a parking lot of Teo Taxi in Montreal on Jan. 29, 2019. Montreal's Teo Taxi, which sought to take on Uber with a fleet of electric vehicles, has halted operations and laid off all its drivers.

One would have hoped a new administration would bring a change in policy regarding corporate welfare and the all-too-close relationship between large Quebec-based companies and the government. But, alas, it was not to be.

Last week, which saw the collapse of Quebec Liberal insider Alexandre Taillefer's Uber competitor, Teo Taxi — which cost the province tens of millions in lost investment dollars — also had the government voicing support for beleaguered engineering firm SNC Lavalin, which faces mounting legal and financial trouble.

The cheerleading for SNC was great news for major corporations in the province, referred to as "Quebec Inc.," with the new CAQ government reaffirming it is in the business of picking favourites and throwing good money after bad.

This came the same week SNC's former CEO was convicted in a $22.5 million fraud case. Yet rather than receiving jail time, he was given a suspended sentence and community service, and asked to donate $200,000 to charity. If only we could all be so lucky.

SNC is also embroiled in another fraud and corruption trial relating to almost $50 million in bribes paid to the regime of former Libyan dictator Muammar Gaddafi, and is being charged by the RCMP for defrauding Libyan investors of $130 million.

Fearing the possible acquisition of SNC as its stock price tumbles, the province's Economy Minister, Pierre Fitzgibbon, said that the government needs "be close to companies and understand what they're going through." Oblivious to any sense of irony, Mr. Fitzgibbon stated the desire to protect companies like SNC, viewing them as strategic for the economy, while making clear not to send the "wrong signals to the market."

Christinne Muschi / Reuters
Quebec Premier Francois Legault speaks to the press following the First Ministers' Meeting in Montreal on Dec. 7, 2018.

However, the "signals" politicians and the courts are sending are that companies close to the government can lose money, be incompetent and corrupt, receive relative legal impunity, and the state will support them regardless.

In Quebec, it seems to pay to have friends in high places.

Perhaps the most egregious example of this is aerospace firm, Bombardier, which has received billions in corporate welfare over its history and is naively viewed as one of the jewels of Quebec's economy. Like SNC, Bombardier is being investigated in Brazil, Russia, Sweden and other jurisdictions on corruption, price-fixing and fraud.

A few years ago, while laying off thousands of employees — which the billions in government support was supposed to help avoid — Bombardier executives substantially increased their salaries for their fine work. Canadian regulators are finally investigating these practices at the company.

To paraphrase political commentator, Andrew Coyne, Bombardier is not in the transportation industry, it is in the government subsidies industry.

It would be one thing if these enterprises were showing signs of success. Unfortunately, Quebec actually seems to prefer picking losers, with Teo Taxi bankrupt and both SNC and Bombardier stocks flat or down over the past 12 and 25 years, respectively.

If Quebec really wanted to support quality jobs, it would both reduce corporate welfare and corporate taxes.

I don't begrudge the corporations hoodwinking the province into subsidizing their endeavours. It's innovative, in its own way. Like modern versions of Mordecai Richler's Barney Panofsky manipulating the state's largesse to their advantage, they are carrying on an age-old provincial tradition. Few entrepreneurs, in their shoes, would reject the money to test new ideas and the adulation that comes with being a rented success story.

But Quebeckers were supposed to have expected more from newly elected CAQ Premier Francois Legault, a former business person who ostensibly embraced free-market principles and wants to wean Quebec off equalization payments. Sadly, however, this story plays out regardless of the party in power, with successive administrations doling out cash in the name of keeping head offices and high-paying jobs in the province.

Until the jobs are slashed, that is.

If Quebec really wanted to support quality jobs, it would both reduce corporate welfare and corporate taxes — currently among the highest in North America — thereby helping small and medium-sized businesses which are by far the largest employers in the province.

Instead, in the wake of the demise of Teo Taxi, the Premier casually floated his support for creating a Quebec version of online retail juggernaut, Amazon, by Alexander Taillefer, Teo's founder. That it would cost billions and almost certainly fail seemingly escaped the Premier, who one can only assume, in staying true to his pronouncements to protect Quebec companies, would help pick up the tab.

Clearly it was not enough for Quebec Inc. and its state benefactor to have lost in trying to take on one of the most valuable start-ups in the world, it would also like to challenge the most formidable e-commerce company as well.

Apparently wasting some government money is not good enough for Quebec's business and political elite. To reach the vaunted status of a Bombardier or an SNC, one needs to lose billions or start handing out the manila envelopes.

CORRECTION: An earlier version of this blog indicated that Bombardier was being investigated or charged in Brazil, Russia, Sweden and other jurisdictions on corruption, price-fixing and fraud. However, this was incorrect, the company was not charged in these jurisdictions: an employee of Bombardier was charged and acquitted.

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