[LINK] "A failed policy is running on fumes"

[rfmcdonald]

The Globe and Mail's Qubec writer Konrad Yakabuski has an article in his paper's business section in which he points out that Québec, despite doing its very best to develop an automobile branch-plant industry like Ontario's, didn't, and that it may be all the better that this endeavour failed.

There was a time when Quebec suffered from a corrosive case of Ontario-envy. The 1965 Canada-U.S. auto pact, enshrining free trade in cars and a decades-long bull run for Ontario's car plants, generated fanciful conspiracy theories about a federal plot to impoverish Quebec. The chronic five-percentage-point gap in the unemployment rates between each province was chalked up to a single factor: car-making capacity.

No wonder successive Quebec governments sought desperately to make the province a kind of Ontario-lite. There was an interest-free $220-million loan ($375-million in current dollars) extended to General Motors in 1987 to keep just one plant in Quebec. There were massive subsidies offered and/or paid to Hyundai and Toyota to build assembly plants in the province.

[. . . ]

General Motors shuttered its Quebec plant in 2002 – with that loan still outstanding.

Today, the old GM site is home to Faubourg Boisbriand, a sprawling residential-commercial real estate development that already generates more in municipal taxes than the auto plant ever could. And the unemployment rate in bustling Boisbriand roughly matches the Quebec average, which is now almost a full percentage point lower than Ontario's.

This tale of economic transformation should make Ottawa and Ontario sufficiently leery about extending more aid to GM and Chrysler. But it also explains why they, along with Washington, have no choice but to prop up the car makers for a while longer.

Ontario, like Michigan, has allowed itself to remain so dependent on the auto industry that it has little or nothing lying in wait to replace it. In rhyming off the Ontario auto industry's statistics – 150,000 direct jobs, 340,000 indirect ones, 14 per cent of Canada's manufacturing output and 23 per cent of its manufacturing exports – federal Industry Minister Tony Clement may have thought he was making a case yesterday for saving car plants. But those statistics are also an indictment of sorts.

When any industry so dominates the economy of a single region as the auto assembly sector has in Southern Ontario, it has a levelling effect, draining labour and capital from every other sector. In the growth phase, this creates a virtuous circle, as evidenced by the Ontario of the 1960s. But when that sector begins an irreversible decline, as the Big Three most certainly have, the circle becomes a vicious one.

Yakabuski argues that Ontario, by locking up so many human, financial, and other resources in an automotive sector that was bound to eventually become a sunset industry to be outsourced to more cost-effective manufacturers elsewhere in the world, has made a botch of things. How bad? We'll see. The prospect of Ontario being a have-not province certainly beckoned strongly enough before the recent economic crisis.