There are days when we would like to slow them down with a solid dose of Ritalin, so our governments make us dizzy with their hyperactivity. But we have to admit that the current challenges still require energetic actions, which will not go smoothly.
The governments of Quebec of all stripes have always been interventionist. However, the current frenzy of the Legault cabinet recalls the first Lesage and Lévesque mandates; not so much for the creation of new institutions as for the intense use of existing levers.
The fight against COVID-19 is still in the headlines with the third round of vaccination, lightened health rules and the strengthening of our bloodless health system, with hirings and salary increases.
Further in the economic pages, we learn that the recovery was faster than expected, even if some sectors are still suffering. Quebec has regained its pre-crisis level of production and full employment, a first-class performance that astonishes the rest of the country.
However, the sense of urgency remains. No more going back to the old recipe of fiscal rectitude and conditions conducive to growth, such as competitive taxation and free trade treaties.
This consensus has been shattered and the pendulum is returning to the era of industrial policies, once denounced as expensive and ill-advised. The patient approach of industrial clusters is considered too timid.
Bottlenecks in the production of goods in China and American protectionism, which remains very much alive under the Biden administration, fuel economic nationalism, especially in the battlefield of electric cars.
Governments on both sides of the border are betting big on converting the auto industry, willing to generously fund the retooling of assembly plants and the construction of huge battery factories, not to mention the network of charging stations.
The hand of the state forces the invisible hand of the market
The Biden plan offers a subsidy of US $ 7,500 regardless of where the electric car is built and an additional US $ 4,500 if and only if it comes out of a unionized US factory. Finally, US $ 500 for the battery, provided that half of its content is American.
These subsidies constitute a serious threat to our industry and go against the free trade agreement. Canadian politicians and diplomats are back in Washington’s back rooms to avoid the worst.
Quebec instead relies on specialized electric vehicles such as vans, ambulances and school buses. But it is also in direct competition with Ontario for batteries, where the two provinces hold out the necessary mineral resources. Quebec prides itself on its clean and cheap energy, but Ontario has a lead with the proximity of assembly plants and its more abundant workforce.
Interventionism extends to other industries by helping companies digitize and modernize. The tax incentive of accelerated depreciation of investments is no longer enough. We are increasing the number of grants, “forgivable loans” and even injections of capital stock.
Investissement Québec and the BDC are taking SMEs by the hand to guide them in this process, where they are seriously behind schedule.
The labor shortage is increasing the pressure for process automation, which requires upgrading workers’ skills. Here again, Quebec is shaking up old practices with a slew of measures, including generous grants for training, particularly in information technology (IT) and engineering.
The government is also taking the actions that have long been called for to better integrate immigrant workers, although it persists in limiting their number and wants to impose on them the absurd requirement to learn French in six months.
Ultimately, Premier Legault aims to close the wealth gap with Ontario, a laudable objective in itself, although his accounting vision of high salaries is reductive, does not take into account the higher purchasing power in Quebec and the need to keep more modest jobs in services, such as restaurants and tourism.
Ottawa is not left out, ready to sign big checks to unlock production process decarbonization projects, drawing from its $ 8 billion “Net Zero Accelerator” fund.
Of course, one can wonder about the need to engulf all these public funds when private capital has never been so abundant.
COP26 shed light on the hundreds of trillions – yes, 100,000,000,000,000 US $ – that investors and bankers are prepared to mobilize within 30 years to decarbonise the global economy.
But this great transition is not without commercial and technological risks. The state can take away from projects that would not be realized otherwise or too slowly. This is the argument revisited from the nascent industry, which must be protected until it is well established. The problem with this thesis is that the nascent industry often remains stuck to the udders of the state, like that of video games, which is eternally subsidized.
But governments often have little choice due to unhealthy competition to attract strategic investments.
With all this excitement, there will certainly be some costly blunders. It is to be hoped that governments will have the courage to admit their mistakes and correct their course for the future.