The Cardus Daily

Condemnations, contradictions, and rich ironies

The talk about last month’s move of the Electro-Motive Diesel plant from London (Ontario) to the United States reveals much about the way we treat economics in Ontario and in Canada.

Some see the plant’s closure as just another example of blood-sucking foreign companies who come into Canada, ignore our unions, buy our plants, and leave the workers, the provinces, and the country to clean up the mess. Ken Lewenza, the head of the union representing the workers at the EMD plant, suggests that the closure “open[s] a door for multinational corporations to feel confident they can do whatever they want, to destroy communities and the lives of people and get away with it.”

Okay, but others suggest that EMD simply did what any company would—and should do—go where they can make the most money. Mike Moffat, a voice of reason and sanity in a discussion sorely lacking both, suggests that, for Canadian manufacturing, this is the new reality.

A commodities boom has driven the Canadian dollar from a 62¢ U.S. low up to parity, vaporizing any labour cost advantage we previously enjoyed over the U.S. and changing the structure of the economy; at the margin, a Canadian worker adds far more to our economy by extracting resources than by building cars.

Moving the plant to the U.S. simply made bottom-line sense, especially once Mitch Daniels, the Republican governor of Indiana, passed right-to-work legislation and offered a $30 million dollar incentive to EMD to move its plant there

So what does this discourse reveal about our perspective on economics? What’s gone missing in the discussion are two points.

First, the solution offered by Ken Lewenza to the decline of manufacturing in Ontario—a solution shared by many in the labour movement—is precisely what leads to the decline of manufacturing in Ontario: government intervention. Lewenza says, “If the government does not intervene, it sends a strong message to every multinational they can treat . . . workers in the same way.” Yet the very intervention they want in Canada—increased incentives for manufacturers, employment guarantees, and other protectionist measures—is exactly what took place in the U.S. and is at least partially responsible for the closure of EMD London. In a richly ironic way, Mitch Daniels used public money to bribe a plant into moving to his state, and used legislation to prevent trade unions from exercising the powers they have in Canada. One wants to ask Ken Lewenza: Why is that type of political involvement in the market okay in Ontario, and yet so wrong in Indiana?

Which leads to the second item which could use further discussion. Why is it okay for states to do this at all? If there is an inherent logical problem in the union’s critique of EMD’s action, there are surely legitimate questions to ask of Indiana, especially insofar as it is governed by a free market-loving Republican like Mitch Daniels? It would appear that contradicting oneself through policy is not the sole domain of the left.

Yes, Canadian manufacturing is changing. But sadly, and perhaps more problematically, so is the relationship between governments and corporations. The increasing influence of corporate dollars on state revenues, and perhaps especially vice versa, is a genuine problem, one that does not bode well for the flourishing of trade, labour policies, and public governance critical to thriving communities.



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