The CBC and the voodoo of “economic spin-offs”
According to a Deloitte study commissioned by the CBC, the crown corporation generated $3.7 billion in economic spin-offs in 2010. More specifically, if the crown corporation had been a private business without federal subsidies, the Canadian economy would have lost $1.3 billion, again according to this study.
But it must be said that this kind of study is to economics what astrology is to astronomy. In Deloitte’s defence, as these things go, this particular study is very well done. The problem is that from the outset, it is founded on premises that are fundamentally unsound.
The first thing to notice about the CBC’s federal subsidy of $1.1 billion is that if this sum had remained in taxpayers’ wallets, they too would have generated “economic spin-offs” by investing and spending their own money. This simple fact, however, is never taken into account by this kind of study.
To be fair to the CBC, it is just repeating a platitude, which though mistaken is nonetheless widely disseminated. Indeed, just about everything and everyone under the sun brags about generating “economic spin-offs.” From the dairy industry to the nuclear industry, not to mention all sports and cultural activities, economic spin-offs are everywhere. If you believe all the claims of those who invoke some kind of “multiplier effect,” the Canadian economy should be 20 to 100 times bigger than it actually is.
But these evaluations rarely hold water. What are called the “economic spin-offs” of a project are usually just the result of a displacement of economic activity and do not represent real wealth creation. Robbing Paul to pay Peter does indeed benefit someone (in this case, Peter), but it creates no net benefit.
The more expensive, the better?
In the specific case of the CBC, the economic spin-offs stem in part from the crown corporation’s mandate. The Deloitte study states that the public broadcaster would operate with a smaller budget if it were a commercial enterprise, and would therefore spend less money in the Canadian economy. By this logic, between two companies offering the same product, it is the less efficient one that benefits society more since it spends a greater amount of money for the same production. Notice that this line of reasoning implies that productivity gains are actually bad for the Canadian economy!
The question, then, is whether the value of the CBC is to be measured by its expenses. To do so would be to treat the public broadcaster unfairly.
For one thing, in economics, value is not determined by costs, but rather by the judgments of consumers. Since consumers pay for the CBC in part through their taxes, we cannot know how much they would be willing to hand over voluntarily in exchange for its services.
In addition, the public broadcaster’s mission is not purely economic since it also has political and social objectives, which may be perfectly laudable depending on one’s point of view. For example, a French broadcast in Saskatchewan where the market is limited or the existence of numerous local stations may fulfill certain of the government’s objectives, but then the value is not economic.
Why not have three public broadcasters?
Indeed, if subsidizing the CBC produces such significant economic spin-offs, wouldn’t the government have every reason to borrow money to create two or even three public broadcasters? By pushing the argument in this way, it becomes evident that it simply does not hold water.
To be clear, my purpose is not to deny that the CBC has a certain value, nor is it to call for an end to its existence. For example, I personally love listening to the beautiful folk music from English Canada that airs on CBC radio. But to try to convince us that every dollar spent by taxpayers to support the CBC generates three dollars? What kind of fools do they take us for?
Michel Kelly-Gagnon est président et directeur général de l’Institut économique de Montréal.