'Reverse Reaganism' an Option for Ontario Economy

A day after Dalton McGuinty's Economic Development Minister had some harsh words for the Ontario government's involvement in business development, the Premier responded with almost the exact opposite message.

According to McGuinty, capitalism is thriving in Ontario. This comment comes a mere day after his Economic Development Minister, Michael Bryant, gave a speech that touted Ontario's current government picking "winners and losers" in the current economy. Bryant's May 5th speech heralded a business-by-business approach to government investing, with the government choosing specific businesses to receive portions of the $2 billion reserved for subsidies. While throwing the term "reverse Reaganism" around in a speech to the high-profile Canadian Club of Toronto captured a lot of positive attention, other economists criticized the minister for ignoring the lessons of history. This prompted Dalton McGuinty to try and 'explain' what Bryant really meant:

I think what Mr. Bryant was trying to say is that the days of governments quietly presiding over the gradual evolution of the economy are behind us. If you take a look around the world, the strongest economies have governments playing an active role. Now, there's a smart way to assume that role and a dumb way to assume that role. The smart way is to find sectoral opportunities and find ways to nurture growth in those strong sectors.

McGuinty was quick to outline his intended strategy for handing out subsidies, citing green energy technology, digital communications, bio-pharmacy, life sciences, and the auto industry as important sectors to invest in, as opposed to the more direct company-by-company approach Bryant had mentioned. Helping the Premier was the factual criticism provided by the Fraser Institute, a right-wing think tank. According to their study, companies that receive direct subsidy investment rarely pay back the government, pointing out the example of Pratt & Whitney Canada Corp, an airplane engine manufacturer that repaid a mere 7.4 per cent of its $1.25 billion it received between 1982-2006. Meanwhile, a separate study found that only 52 per cent of government loans were paid back in the Western Economic Diversification department - a dismal record that would have virtually every private fund manager fired or jailed. More criticism was lashed out over Bryant's supposed plan, with others pointing out that many businesses can receive subsidies for political gains. McGuinty refuted that point in his speech, saying "It's more a case of us choosing particular sectors, which I think lend themselves to growing strength in Ontario." Opposition party leaders quickly responded to McGuinty's comments, pointing out that the struggling mining and forestry sectors in Northern Ontario are considered 'losers' by the current government, which has lead to ghost town situations in one-industry communities.