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Left to right: Ontario Premier Kathleen Wynne; Minister of Economic Development, Trade and Employment Dr. Eric Hoskins; Cisco president, development and sales, Rob Lloyd; and Cisco Canada president Nitin Kawale. (Handout via Cisco)
Left to right: Ontario Premier Kathleen Wynne; Minister of Economic Development, Trade and Employment Dr. Eric Hoskins; Cisco president, development and sales, Rob Lloyd; and Cisco Canada president Nitin Kawale. (Handout via Cisco)

Economics is a stage, and the politicians merely players Add to ...

Only a few hours after Kathleen Wynne announced what she considered to be very good news, in the form of a $4-billion investment in Ontario by Cisco Systems Inc., an economist came along to rain on her parade.

With its commitment of “up to $190-million,” Mike Moffatt wrote for the Canadian Business website on Friday, Ms. Wynne’s government will subsidize high-income jobs at a highly profitable company at the expense of the general population. What’s more, he argued, those jobs will come in a high-tech sector in which unemployment is low to begin with, so Cisco will just hire workers away from other employers – making the promise of up to 1,700 new jobs illusory.

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While it’s possible to quarrel with all this, not to mention Mr. Moffatt’s overheated conclusion that “this easily ranks as the worst public policy of 2013,” he made a compelling case against corporate welfare that by midday was getting nods from other corners of the commentariat.

And no wonder, since ideally governments shouldn’t have to throw money at companies that make billions of dollars in profits to entice them to make investments that will probably make them more money.

But if opponents of Ms. Wynne’s Liberals are inclined to seize on Mr. Moffatt’s criticism – and the provincial Progressive Conservatives are already echoing it – they should recognize that it’s more than just an indictment of the current government. Rather, it speaks to an unhealthy intersection of politics and economics in which actors from all sides play a role.

To listen to all sides of the legislature, one would get the impression that government is directly responsible for every job created or lost. Each month, it either praises itself or is pilloried for a minor uptick or downturn in the unemployment rate. And in between, decisions by individual businesses serve as barometers – perhaps more politically effective ones, because of the human stories that can be told when a couple of hundred jobs are created or taken away.

None of this makes much sense. Governments can do their part to create favourable business conditions, by striving for a skilled work force and competitive tax policy and a high quality of life and the ever-popular removal of “red tape.” But they can’t actively force businesses to invest, and especially at the subnational level they’re hostage to trends that transcend their borders. Where they do have levers, the effects often aren’t felt until years later.

Nevertheless, the recent closings of several manufacturing plants have been held up by the Liberals’ opponents as obvious evidence of their failed economic policy. Heinz may be pulling out of Leamington and Kellogg’s from London because of changing consumer demand, broader consolidation or any number of other factors. But for political purposes it’s because energy rates are too high, or labour policies outdated, or the government just didn’t make enough effort to keep them – any of which might have played a role, but none of which has been substantiated by much evidence yet.

People in power are not usually inclined to come out and argue they’re powerless, though, and they can’t afford just to pull levers – retraining of laid-off workers, for instance – that might not bear fruit until they’re out of office. So in search of a counter-narrative, their best play is to generate good news of the sort we saw on Friday, even if it doesn’t come cheap.

That’s neither new nor unique; perhaps the best argument for the Cisco support is that if Ontario hadn’t provided it, some other jurisdiction would have. But it’s accentuated in a province, hit harder than most in the past five years, that’s nervous about its economic future. The more that politicians refuse to accept their own limitations, or acknowledge those of one another, the more economists will have cause to lament their heavy-handedness.

Follow on Twitter: @aradwanski

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