It's no secret the Alberta government literally lost billions of taxpayers' dollars in the 1980s and 90s through loans and loan guarantees to private companies. Thankfully, during the Klein revolution of the mid-1990s these corporate welfare programs were ended. Unfortunately, a few recent moves by the current Alberta government have raised the spectre of a return to these corporate welfare days.
Taxpayers will likely remember the names of some of the larger corporate welfare bums in Alberta from the 80s and early 90s, like NovAtel ($646-million), Gainers ($209-million) and MagCan ($164-million), but the list doesn't stop there.
Hundreds of millions of taxpayers' dollars were either invested in, loaned or guaranteed to companies like Millar Western, Al-Pac, Glacier Ammonia, Myrias Research, Peace River Fertilizers, Alert Disaster Control, Nanton Spring Water, Ski-Free Marine, Norstar Recreation Products and countless others.
Shortly after Premier Klein took office, the Alberta government suffered huge losses in order to rid taxpayers of these problem investments.
The message from the Klein government was clear: corporate welfare doesn't work, and governments have no business being in business. Since then, Alberta has been a shining example for the rest of Canada as to why it is always the best policy to avoid corporate welfare.
However, over the past year, there have been signs the government is sliding slowly back towards more taxpayer welfare for Alberta companies.
The first sign was the creation of the Alberta Enterprise Corporation. This new crown corporation will administer $100-million of taxpayers' money for venture capital. Essentially, the goal is to help start-up technology companies grow and expand in Alberta.
While governments using tax dollars for venture capital funds is not a new phenomenon in Canada, the results are not very positive for taxpayers.
A May 2008 report by three researchers in the Sauder School of Business at the University of British Columbia (Brander, Egan & Hellmann) showed that government sponsored venture capital funds tend to crowd-out private investors, have lower returns than private venture capital funds, and create less innovation.
The second sign of a slide back toward corporate welfare was the recent $2-billion investment into carbon capture and sequestration technology. While it can be argued that the investment is more about public relations than actually attempting to change world temperatures, it nonetheless is going to be a form of corporate welfare. Depending on your view, the cash will either let greenhouse gas emitting companies off the hook by having taxpayers pay to store their carbon under ground, or if the C02 is used in enhanced oil recovery, taxpayers are paying to help oil companies extract more oil from their wells.
The third and most recent sign of a corporate welfare slide is the potential for the City of Calgary and the Alberta government to build a new film studio in Calgary. The Alberta government has long thrown tax dollars at rich Hollywood producers to entice them to film their movies in Alberta, but building them a film studio with taxpayer money is completely over the top. But, depending on who you talk to, it's either a done deal or just a proposal. Either way it should be shot down.
Whether it is start-up technology companies, energy companies, or Hollywood movies, if they are good investments and there is money to be made, private investors will follow and government investment is not needed. If an investment opportunity is not good enough for private cash that should be a clear sign government shouldn't support it with taxpayer cash. Premier Klein's government understood this, and with any luck Premier Stelmach's government won't have to learn this the hard way.
- Scott Hennig, Alberta Director
shennig@taxpayer.com
