Words and woes of dirigisme: The perils of government central planning

Some years ago, the brilliant Quebec journalist Antoine Robitaille was keeping a notebook entitled Mots et maux de la politique (roughly Words and Woes of Politics). In it, he catalogued some of the more delectable slips of the tongue to escape the mouths of politicians in the province, in order to offer us something both humorous and dark, even tragic. I borrow his expression here because the current federal government’s lofty ambitions, proclaimed on the campaign trail, may soon unfold before us in a veritable tragicomic circus.

In recent weeks, a number of federal political commentators have started to wonder about the modus operandi of the Liberal government, as it is about to enter its tenth year in power. Some even go so far as to accuse the prime minister of harbouring centralized planning tendencies, but it seems more accurate to look to French politics in order to better understand his ambitions. We are more likely to be looking at a new form of interventionism imported from France and Quebec, all against a backdrop dripping with patriotism.

The French approach to economic interventionism, or “dirigisme,” reached its zenith between 1945 and 1970, during the period of reconstruction that followed the Second World War. The Monnet Plan, introduced in 1946, cast the government in the role of strategist in charge of guiding the major industrial sectors. Six pillars were chosen: coal, electricity, steel, cement, rail transport, and farm machinery. More on this later.

As dirigisme was taking off in France, Quebec was laying the groundwork for what would become “Quebec Inc.,” an economic model developed with active government support. It’s interesting to note that Prime Minister Mark Carney’s immediate entourage gives a prominent role to a certain Montreal political elite that is very familiar with the inner workings of Quebec Inc.: its economic sectors that were declared strategic by the government, and its sacred “champions” that were heavily subsidized.

You see, a dirigiste approach is easy to sell: certain sectors simply represent the future, and we cannot allow ourselves to miss out on such an opportunity. And since this approach is deployed with lots of photo shoots, giant cheques, and ribbon-cutting ceremonies for politicians, they can brag about the results even before any have materialized.

The woes of dirigisme are clear: a waste of public funds and a redirection of capital, both public and private, toward initiatives that excite politicians and public opinion, but that are more often than not doomed to fail miserably.

Of course, there are some relative success stories like the aerospace industry. But there are also initiatives like the Plan Nord (the North Plan—nicknamed the “Plan Mort” or Dead Plan), E-Commerce Place, Gaspesia Pulp & Paper, and just recently, Northvolt, which was supposed to be the flagship of Quebec’s battery sector. The list is long. There is a whole string of government initiatives in which taxpayer funds were sacrificed on the altar of the so-called enlightened industrial policy of our political leaders.

The woes of dirigisme are clear: a waste of public funds and a redirection of capital, both public and private, toward initiatives that excite politicians and public opinion, but that are more often than not doomed to fail miserably.

But that’s not all. In a pamphlet signed in 1850 that remains relevant today, French economist Frédéric Bastiat warned: There is that which is seen, and that which is not seen. The mirages put forward by our politicians are flashy, meant to burn themselves onto your retina. But to paraphrase another French writer—Antoine de Saint-Exupéry this time—what is essential is often invisible to the eye.

A central planner, no matter how brilliant, can neither know everything nor predict everything. For example, the Monnet Plan did not foresee that coal would quickly be replaced by oil, making investments in the former as futile as they were ruinous. Both the coal and the steel sectors collapsed, but not before substantial sums were gobbled up attempting to resuscitate them. Not to mention the rigidities inherent in a dirigiste approach, which inexorably slow down progress and adaptation, true anchor points for our capitalist systems.

Then there are words. The Liberal government is already speaking like a government with clearly interventionist aims. At a press conference, Prime Minister Carney emphasized the importance of industrial policy. We also know that he wants to select projects of national interest based on the mood of the moment, rather than using objective criteria that would apply to all.

Even the proposed solution to the housing crisis exudes Ottawa Knows Best, with the creation of a government agency in charge of funding the construction of the kind of housing chosen by the federal government… prefab housing, no less. After all, the government says it’s the wave of the future.

And how will we do this? While spending less, but also while spending more. Indeed, a recent La Presse headline said the next budget would be marked by austerity and investment. It might as well be black and white, hot and cold, everything and its opposite! If, like me, you are at a loss for words, you can either wait for the budget plan to be tabled for the audi alteram partem, or else you can deduce this: There will be some heavy subsidies doled out to companies and sectors chosen by the government.

In a word: dirigisme.

Daniel Dufort is President and CEO of the MEI. The views reflected in this opinion piece are his own.