2023-10-28 08:08:16
Quebec’s new battery sector is not only a response to the growing economic interventionism of foreign governments. It is also the latest example of a Quebec state that has never been afraid to put its hands in the economy to try to influence its course.
This is a debate as old as time within the community of economists. On the one hand, there are those who urge governments to take advantage of their extraordinary power of action to help the establishment and development of industries of the future that create wealth and good jobs. On the other hand, there are those who argue that, however well-intentioned, governments are unlikely to be able to predict who will be the future champions of the economy and that their major industrial policies generally do not contribute to than to complicate things even more by favoring some to the detriment of others with billions of public funds.
“I don’t think we will still have resolved this dilemma in 50 years. In Quebec, we have had as many examples of success as failures, says economist and professor emeritus of the National Institute of Scientific Research Mario Polèse. And then, we cannot ignore the international context. We can say, like any good little liberal economist, that subsidies are never a good idea. But the problem is that everyone is doing it these days and we don’t really have a choice in being in this bad movie. »
Back in vogue
It is true that countries have rarely talked so much regarding industrial policies following decades of extolling the virtues of economic laissez-faire. This stems, among other things, from the questioning of globalization with the rise in geopolitical tensions between developed countries and economies such as China and Russia. It also comes from the desire to regain some national sovereignty and industrial security following the COVID-19 pandemic.
It was the United States of Democratic President Joe Biden that launched the race to the highest bidders with hundreds of billions in subsidies and local purchasing rules in order, among other things, to develop green energy and promote the technology sector American while blocking China. Convinced by this approach, or simply not wanting to see their own businesses disadvantaged or encouraged to move to the United States, several governments, including in Canada, have in turn deployed similar policies.
The government of Quebec has taken the same route to help set up its new battery sector. His Minister of the Economy, Pierre Fitzgibbon, described last month as “naive” those who think that battery factory projects, such as those of Ford and GM-Posco in the new “Transition Valley energy”, or battery cells, like that of Northvolt in Montérégie, might be achieved without political and financial support from public authorities. “If there were no government subsidies, there would be zero in the battery sector in Canada. It would be in the United States. »
Claude Lavoie is one of these economists who is not convinced by these arguments. “If American taxpayers are ready to subsidize battery manufacturing, let them do it. They will cost us less and we will produce something else. Would it be so bad? Quebecers will not find themselves unemployed, there is full employment here. And why would what we produce instead be less valuable? » says the former senior federal civil servant and collaborator Globe and Mail.
Lessons from History
What we commonly call industrial policies have always been part of the decor, particularly in rich countries, observed this summer a study published in the United States by the National Bureau of Economic Research. This omnipresence is due in particular to the fact that there are many things that markets do not know how to do well on their own, particularly when it comes to creating new economic centers.
When examined properly, the study concluded, their effects can be not only positive, but also long-lasting. This would be more often true when these policies are not limited to costly and not always effective measures, such as subsidies and trade barriers, but instead support takes the form of, for example, targeted public services.
Quebec has been fertile ground for industrial policies since the Quiet Revolution, recalls Mario Polèse. This was due in particular to the fact that almost everything had to be built for the future Quebec inc. We remember, for example, the setbacks of state companies in steel (SIDBEC) or in oil and gas (SOQUIP), and the repeated failures in the automobile industry, whether with Peugeot -Renault (SOMA), with GM or with Hyundai.
But there have also been great successes. « Quebec’s biggest blow was, without a doubt, Hydro-Québec,” says the expert. More recently, we might also cite the example of the video game industry, where Montreal has risen, since the end of the 1990s, to the rank of world leaders, with nearly 15,000 workers and an annual contribution of 1.5 billion to the Quebec economy.
Except that aid to this sector is expensive, noted this winter a study from the Chair in Taxation and Public Finance (CFFP) at the University of Sherbrooke. That is to say 340 million in tax relief only in 2022, or 5% of all measures intended for businesses. What’s more, 75% of this aid benefits only 15 of the 200 companies in the sector, all subsidiaries of large foreign companies, including almost half of the money going to the multinational Ubisoft.
The world has also changed over the past 25 years, noted the CFFP. No one is worried regarding the employment prospects of workers in the sector anymore. Today, it would be appropriate to tighten the current rules so that they better serve Quebec businesses and functions with higher added value.
Between economics and politics
For its supporters, the government’s policy in favor of the battery sector should not be debated. Climate imperatives and the great technological shift represented by the rise of electric transportation constitute for them an economic opportunity not to be missed given the assets that Quebec already has (strategic minerals, clean energy, proximity to vehicle manufacturers, etc.). ). But they also require a level of financial effort and coordination of which only governments are capable.
It is true that this aid from governments in Quebec still largely takes the form of subsidies, but conditional on the achievement of certain objectives, particularly in terms of productivity, argues Louis J. Duhamel, a long-time expert and consultant in the manufacturing sector. Reflecting the central importance of the sector in Quebec exports and regional development, manufacturing development policies are making a comeback in Quebec.
The public assistance provided now tends to avoid trying to find which companies will be future champions, explains Mr. Duhamel. It is rather focused on the choice of sectors of the future and wants to promote the development of an ecosystem made up of companies, research centers, funds from public and private investors, local development organizations and mechanisms of consultation.
For Claude Lavoie, the Quebec government’s battery sector is unfortunately just another example of an especially “politically profitable” operation. “Everyone will be happy. Politicians are going to cut ribbons. We will be able to talk regarding the creation of good jobs in Bécancour and Montérégie. No one will see what else might have been done with these billions which will go to subsidies. »
Louis J. Duhamel does not share this opinion at all, but confirms that the battery sector will monopolize a lot of political and financial resources which will inevitably not be available for other sectors which nevertheless deserve its attention. He cites the example of the second and third transformation of aluminum. “We should be able to help both. »
Do French-speaking Quebecers still need a state as interventionist in the economy as during the Quiet Revolution? Maybe not, says Mario Polèse. However, it remains that Quebec is a small economy open to the world and that, to ensure the development of French-speakers there, the government will have to continue to take into account the international context and make trade-offs between all kinds of objectives that are not always reconcilable. .
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