Another Red Book promise kept. It's right there on page 44: "A Liberal government will hand out millions of dollars to hugely profitable but politically well-connected corporations, especially technologically sexy ones. Bonus points if they are located in Quebec." Well, I'm paraphrasing. Actually, what it says is that the federal government should "work with the private sector to identify strategic opportunities for the future." Far from letting private investors risk their own money based on their own judgment of the kinds of products people might like to buy in future, the document speaks enviously of the Japanese government, with its "elaborate vision of how Japan's industrial structure should develop." Europe, too, is praised, for its "elaborate vision." So the federal government's decision to plop another $87-million into the willing hands of Bombardier should not be seen strictly as a crude attempt to buy votes in Quebec. It fits snugly into the Liberal belief, suppressed until now in the name of deficit reduction, that the economy should be pushed and pulled into conformity with the government's preferred "vision" of the industrial future, preferably an elaborate one. And if there is anything that sets a politician's pulse racing, Liberal or Tory, it's building big, fast, expensive aircraft.

Mind you, a little politics helps, as Bombardier well knows. In the last 15 years, according to figures compiled by the Reform Party, the company has been on the receiving end of fully $1.2-billion in grants, loan guarantees, and "conditionally repayable contributions," whether directly or through its Canadair and De Havilland subsidiaries. And that's just the federal money.

If there is any sign of progress in this smutty affair, it is that the parties involved at least have come to feel they must be furtive about it. Grants are out: today the pork is distributed in the form of an interest-free loan. Let that be the first pretense to be discarded. It isn't only the forgone interest that makes this a disguised grant. It is the entire amount of the loan, so far as the money might have been more productively employed elsewhere.

How do we know it could have been? Let us suppose that Bombardier could not have raised the same funds from private sources. Why would that be?

Because the expected return on the investment, a new 70-seat regional jet, was not sufficient to cover the cost of capital: even to repay the government at zero interest, Bombardier will have to sell 400 of the planes. Of course, it's equally possible that Bombardier could have persuaded private investors to take the risk. In which case, the government is throwing taxpayer's money into a project that would have proceeded without it.

The logic is inescapable: either the project is economic, or it isn't. If it is, it doesn't need the money. If it isn't, all the more reason why it shouldn't get it.

Proponents of this sort of public-private partnership try to blur the issue by speaking airily of the "risks" involved. Industry Canada calls the Bombardier project an example of "risk and reward sharing." But of course the government shares the risks and rewards of every investment, through the corporate income tax: it takes 50 per cent of the profits, and absorbs, through tax write-offs, 50 per cent of the losses. The question is why the government should take on a greater share of the risk for some favoured industries, namely aerospace, and not others.

Bombardier thinks it has a good answer: because everybody else does it.

That much is true: other industrial countries also heavily subsidize their aerospace industries. The United States has directed billions of dollars to Boeing and McDonnell Douglas via the Pentagon, while the four European countries in the Airbus consortium have been more explicitly supportive.

"We have believed for years," said a Bombardier executive, "that our industry deserved a similar level of support." (Oh? And what did you believe before then?)

But the willingness of other countries to sell airplanes for less than they cost to make is not in itself an argument why Canada should join them. At best, any export subsidy is generally a zero-sum game: the extra return from diverting capital into the export industry is wholly offset by the lower returns in other industries.

The economist Paul Krugman made his name describing the circumstances in which such a "strategic trade" approach might pay off. But in so doing, he simply made clear how unlikely it is in the real world. If, that is, a country were able to use subsidies to capture for itself a world-wide monopoly in the industry in question, then the super-profits accruing to firms in that industry might make it worth the cost.

Bombardier is a great company. But does anybody really believe it's going to knock off Boeing?