On May 10, the Trudeau government announced a $10 billion loan guarantee for the Trans Mountain Expansion (TMX), just three months after promising that “no more additional public money” will be spent on the project. If completed, the expansion will increase the pipeline system’s capacity from 300,000 to 890,000 barrels per day.
The announcement garnered outrage from Indigenous and environmental groups, who cited the pipeline’s likelihood to spill, the lack of consent from local Indigenous communities, and its dubious economic prospects. The halfway-completed expansion project is expected to cost taxpayers $21.4 billion and has already attracted numerous mass protests. This most recent subsidy was particularly insulting, considering that $10 billion could be spent relieving crises in Canada’s overstretched hospitals, schools, homeless shelters, and food banks.
Totally Not A Subsidy
The Department of Finance responded to critics of the subsidy by arguing that a loan guarantee “is a common practice which puts in place an insurance policy for the institutions that have invested in the project—it does not reflect any new public spending”. In this case, the government is allowing the Big Six banks to invest in the pipeline with the guarantee that taxpayers will bail them out in the very likely event that the pipeline never reaches profitability. In other words, the pipeline is being built for the sake of private profits, but it’s so economically unviable that Trudeau could only attract investors by promising to socialize the losses.
It begs the question: If the loan guarantee doesn’t actually cost the government anything, why can’t they put a guarantee on people’s mortgages and student loans? If Bay Street bankers can rest easy knowing that their investments are protected, why not workers? Why must the least able to pay be punished for the shoddy investments of the most able to pay, but not vice-versa? Such an absurd situation could only be possible in a capitalist system deep in crisis, where even the largest banks can’t take risks if there’s the slightest chance of failure.
History of cronyism
The loan guarantee is a subsidy, but it’s hardly the first time the Trudeau government transferred wealth from the poor to the rich to try to complete the TMX. In May 2018, the Trudeau government bought the failing pipeline for $4.5 billion, essentially bailing out its previous owner, Kinder Morgan. The bailout included two $1.5 million bonuses for Kinder Morgan executives, a reward for driving the pipeline into the ground. Since the acquisition, the government has dumped $9.3 billion more into the pipeline, including $1.75 billion in “bridge financing” last December. The pipeline is now expected to cost taxpayers a total of $21.4 billion, a 70 per cent increase from the previous estimate of $12.6 billion. With so many delays, the actual cost is likely to be even higher.
The Parliamentary Budget Office (PBO) predicted that the TMX will never reach profitability. However, even if it does, Canadian workers won’t feel the economic benefits, as the Trudeau government is planning to sell the pipeline back to private investors once it’s sufficiently “de-risked”. In other words, the government wants taxpayers to pay for the pipeline’s construction and stomach any unexpected costs, but only private companies will enjoy any potential profits.
It flies in the face of the capitalist notion that “profits are the reward for taking risks”. In this era of economic instability, banks aren’t willing to invest unless they’re absolutely certain they’ll make a return. Schemes like Trudeau’s loan guarantee become the only way to stimulate growth and keep the system intact. Cronyism therefore isn’t a glitch of capitalism; it’s an inevitable outgrowth of a capitalist system in crisis. Right-wing libertarians love to complain about the government “picking winners and losers”, but when the free market fails to create enough winners, the government has to either artificially prop up failing companies or risk a recession. Either way, the working class loses.
What are we even doing here?
Such a massive cost for such an unviable pipeline has got Canadians asking why the government is even pursuing this project in the first place. Indigenous resistance to the pipeline should’ve made it a non-starter from the get-go. The pipeline has already spilled 82 times and presents a number of other environmental risks such as toxic fumes and fires. A single spill can cause a slew of negative health effects for surrounding communities, from asthma to cancer. Trudeau promised to cut pollution and meet the targets set by the Paris Climate Accords, but the TMX is moving Canada in the opposite direction.
The project won’t even create many jobs, either. The highly-touted figure of “15,000 new jobs” has shown to be a fantasy, with the actual figure being closer to 3,000. Info is scarce about the jobs, but one can assume that most of them are temporary, with wages not keeping up with inflation.
Clearly, the Trudeau government’s decision to repeatedly subsidize the pipeline has nothing to do with workers, the environment, Indigenous people, or even Canada’s long-term economic health. Rather, it’s all about the short-term interests of a few giant corporations. The Big Six banks need to be able to tell their shareholders that they’ve secured completely risk-free investments. Indeed, the Toronto Stock Exchange was in a steep decline the day of Trudeau’s loan guarantee announcement, but managed to rebound and climb back by almost 800 points in the following week.
Expropriate the oil barons!
Trudeau behaved the way you’d expect any capitalist politician to behave in his situation: to serve the interests of the capitalist class at the expense of workers, Indigenous communities, and the planet. As Karl Marx and Friedrich Engels famously put it in the Communist Manifesto, “The executive of the modern state is nothing but a committee for managing the common affairs of the whole bourgeoisie”.
We can’t rely on the capitalist state to protect Indigenous rights or the environment. We can’t rely on them to spend taxpayers’ money on education, healthcare, housing, or food banks. We can only rely on them to serve their Bay Street friends who’d destroy the planet to make a buck. We need to strip them of that power by nationalizing the oil industry under workers’ control, with no more payouts to the bosses. Then, we can transition to building sustainable infrastructure like high-speed rail, while giving paid retraining to oil and gas workers.
Polls show that 84 per cent of Canadian oil and gas workers would be happy to change jobs if they were offered paid retraining, but that’s unlikely to happen under capitalism. The Canadian government is too tied to the oil barons, and renewable energy sources aren’t profitable enough. Only a socialist transformation of society can bring about a real green transition. The sake of workers, Indigenous communities, and the planet depend on it.