Bailout Mania North of the Border

Bailout mania certainly has caught on in 2008. Economic troubles for certain businesses? Then let’s get the taxpayer – including, by the way, entrepreneurs, small businesses and individual investors – to fork over some bailout bucks.

But it’s not just going on in the U.S.

Writing in Canada’s Financial Post, Terence Corcoran takes a group of manufacturers to task for seeking taxpayer handouts from the government.

Corcoran reminds us that some business owners forget their free market principles when things get tough. He quotes Adam Smith, the father of free market economics, observing: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” And then there was Karl Marx’s take: "The Capitalists will sell us the rope with which we will hang them."

Corcoran then goes on to a letter from the Canadian Manufacturing Coalition to Prime Minister Stephen Harper in which the group “asks for, among other things, government guarantees on corporate loans and lines of credit.”

A bit later, Corcoran sums up the problem with this entire scenario:

In the very same letter, the coalition also repeats most of the standard manufacturing sector policy points, including this: "Simplify and streamline regulatory compliance, and ensure that new regulations are thoroughly vetted to assess their real impact on our international competitiveness."

From what we know of government, however, it is hard to imagine how Ottawa could possibly bring in a system of business loan guarantees without bringing in a massive load of regulations. And, since the coalition raised the subject, has the coalition "thoroughly vetted" the impact of government loan guarantees on, say, the banks, competition, international trade law, the role of government in the economy, the risks of picking winners, the bureaucracy needed to oversee a massive restructuring of corporate lending?

Excellent points. These businesses cannot have it both ways. Either it’s government handouts and government regulation, in which case taxpayers and the economy are in trouble. Or, it’s reduce government regulation and taxes on business, and let the market work.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council