Where, or If, to Invest Public Money

The auto companies' request for help from taxpayers is an interesting question that immediately polarizes people. There are those that see it as a must-do, to save jobs and the manufacturing sector, and those on the must-not side, seeing it as throwing good money after bad.

As a consumer and taxpayer I am in the latter camp. My thinking is as follows. They tried to get my money by selling me their products and services. Having failed at that they now want to get my money via the government, who got it through taxation. That back door tactic does not sit well with me. However, apart from my personal feelings on the matter does their request have any broader economic appeal?

Government already invests our tax dollars. This is primarily via holdings of equities and other instruments as part of the national pension fund. Of course these holdings have melted down recently along with the overall market decline but that's a separate issue. There is always new money to invest as long as they take those CPP contributions out of paycheques. The feds also invest in new technology ventures. In all cases the objective is a positive return on investment.

Is investing in the auto sector a good bet? That is, is there a positive return for investors? Of course there is an immediate benefit for the companies' employees, investors, creditors and suppliers, but what about us, the prospective new investors? It depends on how the money is applied.

If the money goes into the existing businesses as they are currently structured and operating, I see it as a dreadful investment. It will only delay the day these companies really hit the skids. The money in this case is little more than a temporary replacement for EI, and perhaps a way for other investors and debtors to reduce their losses somewhat.

If the money goes into structurally segregated new automotive technology enterprises, that is a risky but more interesting bet. However it does nothing to help the existing businesses and all those dependent on them for their livings.

Standing back a bit further for a broader perspective, the better question to ask is, assuming we as taxpayers are willing to allow the government to invest more of our money in selected economic sectors to build future prosperity, is the auto sector, whether the existing one or new businesses, the right one? Here I am doubtful since there are some attractive competitive alternatives for our investment dollars. Two examples are alternative energy and software/internet ventures that could make a strong case to attract that same pool of funds.

On balance I am opposed to the government investing further in the auto sector. I say this knowing full well that there will be more tales of personal and social hardships as this sector continues its decline. I also believe that new opportunities can arise from the ashes of the old. It is just not a certain outcome.