VANCOUVER, BC-Canadian governments provided businesses with
more than $202 billion in bailouts, loans, and subsidies
between 1994 and 2007, according to a new study released today
by the Fraser Institute, one of Canada's leading economic think
That works out to $15,126 per taxpayer over that 13-year
period or $1,244 per taxpayer in 2007 alone.
"Unfortunately for Canadian taxpayers, our governments have
a long history of spending public money on corporate welfare in
attempts to pick winners and losers among various business
sectors," said Mark Milke, author of the report
Corporate Welfare Breaks the $200 Billion Mark; An Update on 13
years of Business Subsidies in Canada
"With governments of all levels providing subsidies and
bailouts to a variety of businesses in the past year in the
name of stimulating the economy, the corporate welfare tab yet
to come will no doubt be significantly higher for all
first wrote on corporate welfare
for the Fraser Institute in 2007 and again in 2008. This
updated study contains another year of additional data and a
discussion of the impact of the massive taxpayer-financed
bailouts for General Motors and Chrysler.
The cost of bailouts and subsidies for the auto
Corporate welfare to the automotive sector increased
substantially in 2009 as Canadian governments poured money into
General Motors and Chrysler to help the companies stave off
bankruptcy. Based on announcements in the past year and
previously released data, Milke estimates the federal and
Ontario governments committed $16.5 billion to the automotive
sector between 2003 and 2009, with $15.3 billion of that amount
coming in a two-month period between April 7, 2009 and early
"Bailouts for the automotive industry over this two-month
period will cost every Canadian taxpayer over $950," Milke
The report also points out that government support of
General Motors and Chrysler comes at a cost to other auto
manufacturers that didn't receive bailouts.
"Insofar as governments picked winners, they made losers out
of the shareholders and employees of Ford, Toyota, Honda,
Hyundai, Volkswagen, and others who also manufacture and sell
cars and trucks in North America," Milke said.
"The illusion of corporate welfare directed to the
automotive industry in 2009 was the illusion that jobs were
being saved. No, they were not. Instead of jobs being cut at
General Motors or Chrysler, they were simply cut elsewhere or
prevented from being created at other automotive companies that
would have increased production to meet market demand in the
absence of GM or Chrysler in the marketplace."
Milke's other findings include:
- In 2007 alone, Canada's federal, provincial, and local
governments spent $19.4 billion on corporate welfare, almost
double the 1995 figure of $10.4 billion;
- The cost to each taxpayer who paid income tax in 2007 was
$1,244, which was 28 per cent higher than the 1995 figure of
- Between 1994 and 2007, provincial governments spent
$110.3 billion on corporate welfare. The federal government
spent $66.6 billion and municipal governments spent $25.8
- The total corporate welfare bill (federal, provincial,
and municipal) has ranged from a low of $9.9 billion in 1996
to a high of almost $20.1 billion in 2005 and also $20.1
billion in 2006. In 2007, it was $19.4 billion.
- In 2007, Quebec disbursed the highest amount of public
money to corporations: over $6 billion. Ontario followed at
$2.1 billion, then Alberta at almost $1.2 billion, then
British Columbia at just over $1 billion.
Peer-reviewed research on business subsidies concludes that
corporate welfare may not have a demonstrable positive impact
upon the economy, employment, and tax revenues because of the
substitution effect. The substitution effect occurs when
employment and tax revenues are shifted to business at a
significant cost, and no new investment or employment is
created, on a net basis, when the national or international
economy is considered. For example, a subsidy meant to "create"
manufacturing jobs in Quebec may simply shift intended
investment from Ontario or British Columbia. A subsidy offered
to an automotive company in Michigan will tend to shift jobs
from Ontario or Kentucky.
"Government intervention only delays the day of reckoning
for teetering businesses and often at the expense of other
businesses and a healthy industry and economy," Milke said.
"If governments truly want to build a sound economy and
vibrant business sector, they should move away from corporate
handouts and provide Canadian taxpayers with broad-based tax
relief. Not only will this put more money in Canadians'
pockets, but tax reductions have also been proven to encourage
investment and economic growth."