Deal turns Ontario into Third World province

Source: Ottawa Citizen
Saturday, January 23, 2010
By Randall Denley , The Ottawa Citizen


The deal had a familiar shape. One partner was a successful international consortium with deep pockets and manufacturing expertise, the other a backward jurisdiction so hungry for jobs that it had to pay the big company what amounts to a bribe to do the deal. The whole thing was arranged directly with the jurisdiction’s leader without the bother of competition. It’s the kind of deal one might expect in the Third World, except that it was Ontario on the Third World side of the equation.


The $7-billion “green energy” deal that Premier Dalton McGuinty made this week with South Korean corporation Samsung was a stark reminder of what a basket case this province has become and how short-sighted our leadership is.


Ontario’s manufacturing economy has collapsed in large part because it is a branch-plant operation driven not by innovation or entrepreneurship, but by government “incentives” for foreign-owned automakers. For McGuinty, the lesson from our economic decline is not that we need to foster innovation, entrepreneurship and homegrown Ontario companies. Instead, the lesson is to give new incentives to other foreign-owned companies that will come here if the deal is sweet enough.


According to the official rhetoric, Ontario is an extremely attractive place to do business. We think that our education system, our health care, our skilled workers, our decreasing business taxes and our proximity to the U.S. market give us great advantages. On top of that, Ontario has a Green Energy Act, which pays producers of wind power four times the market rate for electricity and solar power producers nearly 15 times the going rate.


None of that, however, was enough to persuade industrial giant Samsung and its partners to invest 10 cents in Ontario. That’s where McGuinty’s $437-million incentive comes in. That’s what we’re paying to get 1,440 manufacturing jobs. There is nothing like a subsidy of $303,000 a job to make a company say, “You know, Ontario is a darn good place to invest.”


McGuinty chose to attribute Samsung’s decision to the brilliance of his Green Energy Act, which he called the best of its kind in North America. It’s a bit like a millionaire walking into a cathouse and thinking the girls like him because he’s the best-looking fella in the room.


There are numerous Ontario companies trying to get a foothold in the green energy business. If the government had cut a similar deal to support made-in-Ontario innovation, it could perhaps have been justified. Instead, it is slamming the door on these Ontario companies right in their own backyard.


Companies are lined up to produce the costly new power, but there is a shortage of transmission capacity. In addition to the big subsidy, Samsung gets to be first in line to use the province’s wires for the wind and solar power it will create as part of the deal. That will shut out our own companies.


It is interesting to note Samsung has developed into a world industrial power partly because the South Koreans had the foresight to protect their companies from foreign competition back in the 1960s. That was when McGuinty’s predecessors were ecstatic because they were wooing American auto assembly plants. Even in that field, South Korea has clobbered us, developing Hyundai into an internationally-competitive company.


Ontario governments like to crow about how great this province is. The Samsung deal reflects a much different reality, a tacit admission that the best we are capable of is assembling things under careful supervision from foreign companies.


One of the partners in the big deal is South Korea’s state-owned electrical utility. What have they got to offer that Ontario’s own


hydro generation utility does not? One of the Samsung plants will assemble towers for wind turbines. Are we not smart enough to build towers?


McGuinty defended the Samsung deal by saying it was really no different than earlier incentives offered to Toyota or to French electronic game company Ubisoft. Quite so. This is our standard stupidity with an attractive greenwashing.


The Samsung deal’s success will turn on Americans’ willingness to pay the same kind of huge premiums for green power that Ontario offers. McGuinty hopes that the industry will expand and attract American customers “through some organic process.” How’s that for a business plan?


In a global economy, the winners are the countries that develop companies of international scale, companies that create high-value jobs at home and produce big taxes that support their national governments. The also-rans can buy a slice of the second-tier action if they are willing to offer big enough incentives. It’s much like colonialism, but the countries with the money don’t have to go to the bother of running the colonies directly.


All that said, Dalton loves the deal because it makes it look like he’s doing something. If other foreign companies want to line up to take Ontarians’ dollars, our premier is “all ears,” he says. No doubt, but it’s what’s between the ears that’s the problem.


Contact Randall Denley

at 613-596-3756 or by e-mail,

rdenley@thecitizen.canwest.com
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