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Subsidy, Thy Name is Capitalism
A multinational auto company is trying to extort money from the Canadian state. That's how the 'free' market works. Canada will cave.
In 2012, President Barack Obama caught hell while campaigning for re-election. “You didn’t build that,” he said in Roanoke, Virginia. He was talking about a social and political system that produces not just public, but also private outcomes—not just making private industry possible, but actively bringing companies to life. “If you've got a business, you didn't build that,” Obama said.
He was right. Republicans took it out of context, but what did anyone think was going to happen? The point is, Obama was right. No one builds anything without others, especially a business, which cannot exist without the public. Then, of course, the U.S. went on subsidizing private profits.
Public infrastructure and programing is the backbone of contemporary life. Take it away and the whole thing, all of this, crumbles like a mummy in a just-opened sarcophagus in an action-adventure movie. Poof, gone. The “free market” knows this and, indeed, relies on it to extract investments and subsidies from governments, playing states off one another across the globe in a race to the bottom. Then, they turn around and demand a smaller state, as if they don’t bank on—literally—a big state when it comes to corporate giveaways.
This week, multinational car maker Stellantis halted construction on an electric vehicle battery plant in Windsor, Ontario. The company threw a tantrum because the Canadian government would not meet its subsidy demands. Stellantis is holding jobs hostage, claiming it would create 2,500 of them, if the government played ball.
I’ve seen this movie before. “Nice future jobs ya got there, would be a shame if something happened to them.”
Ontario premier Doug Ford pointed out the feds (supported by hundreds of millions of dollars from Ontario) just gave Volkswagen a sweet deal to build a battery plant in St. Thomas, Ontario — with subsidies and grants that could run up to, even beyond, $13 billion. Ontario has also sunk money into the Stellantis venture. It’s no surprise that Stellantis is after a better deal given the haul that Volkswagen (remember this scandal?) made off with. What did any of us expect? If the Canadian government is going to throw open the lid on the dumpster, we’re going to get racoons.
Industry minister Francois-Philippe Champaign has said he’s confident the government will reach a deal with Stellantis. I’ll bet he is and I bet they will. The government will fold like a sheet of origami paper. What else can it do in a culture of corporate subsidy in which states are pitted against one another to overpay for private sector job creation? You know, the thing the private sector is meant to do on its own. Take risk, try to secure a reasonable return on capital expenditures. I think they call it investment, but what do I know?
The Trudeau government has gone all in on electric vehicle batteries: the mining of critical minerals and production of the batteries themselves. It’s part of their “green” economic transformation and central to their industrial policy. If they don’t play extortion ball with EV battery manufacturers, the companies will pull up stakes and go elsewhere—for instance, to the United States, a country all too ready and keen to lavish subsidies on the private sector (you know, because freedom and free enterprise). In that sense, Canada is stuck in a system it didn’t create on its own, but has enabled as far back as anyone can remember.
Canada will fund Stellantis because the political and economic value of the corporate giveaway is greater than the cost to the treasury—at least in their eyes. Maybe they’re right. We won’t know right away. But the fundamental underlying problem remains either way. Capitalism is built on extracting state investment and subsidy through public infrastructure, social programing, and corporate giveaways. The “free” market is underwritten by the public and we pay for private profits. The myth of the steely-eyed, risk-taking capitalist is nonsense in a world of multinationals who travel from country to country with a pistol and giant bag with a dollar sign marked on it.
In a world where states weren’t complicit in underwriting a capitalist shell game in which the public assumes risk while shareholders reap returns, the government would say ‘no’ to these bandits, or at least would demand equity and board positions in return for the investment. Or they would look at these corporate demands and conclude a market failure in which the state needs to step in to provide the good or service.
But they won’t do any of that because governments are caught up in a cycle of corporate extraction in which industry takes from the government and then turns around and demands lower wages, less state spending, and lower taxes. If they can get theirs, everyone else can go straight to hell. Just as long as some of the poor bastards can afford to purchase a state-subsidized electric vehicle, of course. Same as it ever was.
Government is scared that any public thing we do together is scary and immoral at best, and probably a gigantic failure waiting to happen, too. They don’t have the guts to try big public things, lest the free market and, naturally, the bond market get irritated. So, we’re held hostage time and time again while corporations extort us while lecturing on their value, importance, and fundamental necessity—as if they could do a damned thing without us.
I’d like to say that we’ll learn our lesson with Volkswagen and Stellantis, but we won’t. The state will continue to subsidize the market, the market will continue to restrain the state in all other ways, and we’ll push on inexorably towards the next fresh hell. Vroom Vroom.