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Late last week the prime minister announced the creation of a new industry strategy council, designed to “serve as an advisory board to assess the scope and depth of COVID-19’s impact on industries and inform government’s understanding of specific sectoral pressures.”
We have been hearing about sectoral pressures for a while now. It’s clear the entire economy has been hit, and hit hard. The job numbers Friday really underscored it all — 5.5 million Canadians have lost their jobs or at least half their working hours since February.
Particular sectors — tourism, airlines and the oil patch — have taken a particularly bad hit. No one can travel and — depending on when, or if, a vaccine arrives — they won’t be able to for a long time. Air Canada this week estimated its business would be impacted for three years.
Oil prices have dropped to historic lows because of the pandemic, but also as a result of a price war between Russia and Saudi Arabia. Demand is expected to remain depressed through the course of the pandemic to varying degrees and so is the price. Early estimates are that producers have put off at least $7 billion in capital spending so far.
Both sectors are asking Ottawa for help, for; “liquidity backstopped by the federal government.” That means money — In the form of a loan — but it still means money. And not a little bit — a lot. Early estimates on what companies in the oil sector will need start at $20 billion.
The prime minister has been asked frequently at his daily briefings about the possibility of a bail out. On Friday he acknowledged help for bigger corporations was being considered, but added a caveat.
“Even then our focus will be on the workers, on the supply chains that involve many, many small businesses across this country for many of these industries, and not on the corporate well-being of an industry or a sector.”
That statement acknowledges some of the political considerations behind this government being seen to help oil companies (and, to a lesser extent, airlines). Being a beacon of corporate welfare makes eroding the NDP’s support a bit harder; that said, in a pandemic all bets are off.
An announcement on help for hurting sectors could come as early as tomorrow. Cabinet spent the latter half of last week discussing it.
This wouldn’t be the first time Ottawa has had to bail out companies facing financial ruin. Back in the financial crisis of 2008—2009 the government stepped up both here, and south of the border, to help battered automobile manufacturers.
This crisis is different; a collapse of financial systems didn’t spur it, a pandemic did. The government shut almost everything down, understandably so. But — at least for those advocating for help — it means government bears an increased responsibility to help businesses hurt by that shutdown.
So will it? And if Ottawa does help airlines or oil companies, will there be strings attached?
WATCH: Alberta Premier Jason Kenney fire back at federal leaders opposed to oil bailout
As Paul Boothe, who led the federal team negotiating the restructuring of GM and Chrysler in 2008—2009 describes in this piece, there were strings attached back then. According to Boothe, the federal government surveyed restructuring plans, put representatives on the boards of the companies involved and limited things like management pay and perks.
Resoundingly, at least in my experience, when the issue comes up, Canadians want strings. They tell me there are far too many examples of big companies that received Ottawa’s help and ended up shutting down a plant, or laying off Canadian employees years after getting that help.
They may have met the conditions of their loans, technically, but Canadians aren’t focused on the technical arguments. If tax dollars are to be used to help a once-very profitable company, Canadians want a positive rate of return beyond the terms of the loan. They want the company to stay in Canada and keep Canadians employed.
I realize there are myriad things that affect that outcome. And in no way do I want to paint companies as big, bad predators. They employ millions of Canadians, I get that. But I am inundated with mail and messages from viewers who don’t want their investment to be for nothing.
All of that will have to weigh on the government’s decision: to bail out or not to bail out. With tens of thousands of jobs on the line, my guess is they will decide to help. The key question for Canadians will be what companies will have to do in return.
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