Having it both ways

In the stampede to the public trough, the deserving are often elbowed aside by those who decry the very existence of the trough.

We speak, of course, of some of Canada’s businessmen. Wind them up and hear their lamentations about excessive regulation, huge deficits and bloated government.

Fortunately, some of these distinguished citizens have recently demonstrated with persistence and clarity why such lamentations should be taken with more than a grain of salt.

Consider Jim Smith, president and chief executive officer of Domtar. Very categorical he sounded last August about Ottawa’s deficit. He and his friends at the Business Council on National Issues suggested that Ottawa slash spending by between $5-billion and $10-billion a year, per year, until 1988, using most of the savings for deficit reduction. ”Further expansion in the deficit . . . will be detrimental to the Canadian economy,” they declared.

As for industrial incentives, well, Mr. Smith and Co. couldn’t find anything positive to say. ”here is little evidence to suggest that government grants are needed to support viable industries and investment activity,” declared the BCNI task force of which Mr. Smith was a member.

Yet here we are in April, and guess who’s at the trough? The friendly deficit-slasher and scourge of industrial subsidies himself, Jim Smith.

Last month, Mr. Smith’s company announced it needed $200-million from the federal and Quebec governments. Without the money, Domtar could not proceed with a $1.2- billion modernization of its plant at Windsor, Quebec. Without modernization, the plant would fail and 700 jobs would be lost.

This galling prospect galvanized groups in Quebec to jump all over Sinclair Stevens, the minister in charge of industrial grants. Mr. Stevens had vetoed aid to Domtar because the company boasted a healthy balance sheet, possessed excellent financial backing and could probably finance the remaining 18 per cent of the deal it demanded of government.

Prime Minister Brian Mulroney, however, bids above all else to secure his party’s position in Quebec, an elementary observation presumably not lost on Domtar. Reducing Mr. Stevens’ credibility to a pulp, Mr. Mulroney reopened the dossier. The result – a $159- million, 10-year loan whose interest will be absorbed by Ottawa and Quebec. The estimated cost to the federal treasury is $38-million.

This deal certainly beats giving Domtar the $117-million it originally demanded of Ottawa. But the deal means that money cannot be used for other industrial projects whose backers may legitimately have needed federal help. It will also encourage other paper producers to seek federal subsidies, a ripple effect seldom considered by the groups demanding immediate help.

In fairness to Mr. Smith, his company has not been alone in clamoring for federal assistance. The car industry wants continued quotas on Japanese imports, the Canadian Commercial Bank was recently bailed out, the textile and footwear industries are screaming for continued protection, Petrosar’s new owner, Polysar, will soon seek federal money, Rolland (a Domtar competitor) may want federal help, and the list runs on.

If businessmen – and their tubthumpers on the financial pages of the nation’s newspapers – admitted they might need government help and dropped the deficit-slashing stuff, or if they preached deficit reduction but stayed clear of the trough, it might do wonders for their credibility.

As things now stand, free enterprise for the big corporations with political clout seems to mean the right to succeed in the good times and to demand and receive government help in the bad.




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