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I've heard this story before. Friend of mine runs a small manufacturing business in Canada. Got subsidized by a Canadian government program to import and install a big new modern machine for his shop floor from Germany. Goal of the gov program obviously being to create manufacturing jobs. And sure enough, 3 new and good union jobs required to operate the new thing, and because the new thing is so modern and highly automated, he was able to lay-off 20 other workers it took to run the older machines it replaced...



Was the explicit purpose of the grant to increase employment? Or simply make the business more competitive with advanced machinery? These agreements can be set up such that the grant need not be repaid only if the business creates X full time jobs over a period of Y years. If that condition isn't met, the grant is repayable.


This story is so common it has a name: the paradox of subsidies.




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