The title of this post is a categorical statement made by Sue Kelland Dyer in conversation with Randy Simms on VOCM Open Line in the context of a discussion on why we couldn't sell electrical power at market rates to Ontario. Instead, she says, industries are so desperate for power that we should use power as bait for the local situating of industry.
No evidence was offered; no case studies presented; no details were provided.
In fact, she demanded evidence for the contrary position.
The only suggestion she offered was this sweeping generalised unsubstantiated assertion that because "they" are begging for power then we must rope in these unspecified "they" to finance the lower Churchill projects within some indefinite timeline on the condition that they locate their industry here.
This is preferable, she says, to moving forward financing the project through power sales.
After all, she says, Quebec has three smelters. Why not us?
To be fair she is not the only person making this argument. More than a few local economic nationalists, most notably at this snake's nest of foolish circular and ill-considered positions of all kinds, parrot this position.
In the interest of clarifying the issue, may I suggest a quick review of this information proffered by the Montreal Economic Institute. A respected economic analysis think tank, the MEI points out that subsidies for Alcan aluminum smelters recently announced by the Quebec government are a loss to Quebec society.
They go on to outline in a report authored by Gérard Bélanger and Jean-Thomas Bernard, professors of economics at Laval University, that:
To create 740 jobs, the government is giving up $2.7 billion in revenues in exchange for a $2-billion investment by Alcan, the two researchers estimate. The total cost to the government of the subsidy to Alcan equals nearly $274,338 per job each year for 35 years.
That's worth repeating: $274,338 per job. Per year. For each of every of the next 35 years. For each of the 740 jobs "created".
So that's the answer to how and why Quebec gets all those smelters - they pay for them!
The rejoinder from the local economic nationalists will be a vague "economic spin-off" point. Let's put that one to bed right now. The report goes on to note that:
Finally, if you follow this debate long enough, you will hear somebody say, with all possible conviction, that exported electricity only creates jobs elsewhere but never here. This study addresses that argument too noting that:
So if you don't pour the money into subsidizing jobs, how could you effectively use that money instead? Again, this report has that covered noting that, to start:
Clearly it's not better.
No evidence was offered; no case studies presented; no details were provided.
In fact, she demanded evidence for the contrary position.
The only suggestion she offered was this sweeping generalised unsubstantiated assertion that because "they" are begging for power then we must rope in these unspecified "they" to finance the lower Churchill projects within some indefinite timeline on the condition that they locate their industry here.
This is preferable, she says, to moving forward financing the project through power sales.
After all, she says, Quebec has three smelters. Why not us?
To be fair she is not the only person making this argument. More than a few local economic nationalists, most notably at this snake's nest of foolish circular and ill-considered positions of all kinds, parrot this position.
In the interest of clarifying the issue, may I suggest a quick review of this information proffered by the Montreal Economic Institute. A respected economic analysis think tank, the MEI points out that subsidies for Alcan aluminum smelters recently announced by the Quebec government are a loss to Quebec society.
They go on to outline in a report authored by Gérard Bélanger and Jean-Thomas Bernard, professors of economics at Laval University, that:
... recent agreements in the aluminum sector and others under preparation fail to take account of basic economic logic and will harm Quebec’s economic development for decades to come unless the government follows a different path.That sounds bad and sounds like something to be avoided. What are they talking about? Well, in February, two orders in council from the Quebec government gave official stature to a hefty subsidy to Alcan as part of an aluminum smelter project in the Saguenay-Lac-Saint-Jean region.
To create 740 jobs, the government is giving up $2.7 billion in revenues in exchange for a $2-billion investment by Alcan, the two researchers estimate. The total cost to the government of the subsidy to Alcan equals nearly $274,338 per job each year for 35 years.
That's worth repeating: $274,338 per job. Per year. For each of every of the next 35 years. For each of the 740 jobs "created".
So that's the answer to how and why Quebec gets all those smelters - they pay for them!
The rejoinder from the local economic nationalists will be a vague "economic spin-off" point. Let's put that one to bed right now. The report goes on to note that:
The true cost of the electricity provided under this deal can be measured by its opportunity cost to the Quebec government. Opportunity cost is a term used by economists to denote the most advantageous alternative solution. What it means in this instance is the export price that could be obtained by selling our electricity on the market to our U.S. neighbours.So no more giveaways - let's pay industry to take the power away.
The reason used most often to justify government assistance is economic spin-offs. The justifications provided in this case by ministers Raymond Bachand and Pierre Corbeil come from calculations filled with double counting and neglectful of alternatives. An analysis of other solutions that could be considered shows that the government is giving up at least $2.7 billion.
This amount could have been used, for instance, to improve Quebec’s highway network, an investment that would generate far more in direct and indirect economic spin-offs than the $2 billion pledged by Alcan.
Finally, if you follow this debate long enough, you will hear somebody say, with all possible conviction, that exported electricity only creates jobs elsewhere but never here. This study addresses that argument too noting that:
It should be understood that all spending generates economic spinoffs, whether conducted by government (in health, education, income security or other areas) or by the private sector (assuming individuals and businesses end up with greater disposable income due to lower taxes).That pretty well covers it.
It is thus false to state that “exported electricity does not create jobs in Quebec” as argued by the Aluminum Association of Canada in an advertisement that ran in several newspapers.
So if you don't pour the money into subsidizing jobs, how could you effectively use that money instead? Again, this report has that covered noting that, to start:
The same amount could go, for example, toward improving Quebec’s highway network, generating far more direct and indirect economic spinoffs than Alcan’s $2 billion. A similar analysis could be applied to other public or private spending.So you have to ask: Why are we better off to hold up the development of the Lower Churchill project on the condition of attracting massive industry a la Quebec rather than simply selling the power at market rates?
Clearly it's not better.
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