When the Saskatchewan government announced a $1.5 million subsidy to the bankrupt World Wide Pork in Moose Jaw, the news was received with open arms in many circles.

The employee union was happy because it gave them hope that 200 workers might continue to work in Moose Jaw at jobs they knew and liked. The government was happy because the deal essentially threw a lifeline to one of the biggest private employers in Moose Jaw. The Opposition Saskatchewan Party applauded the move saying it helped maintain jobs in the much-loved agri-food business.

But it is really a good move How long will taxpayers be asked to prop up World Wide Pork If they have a solid business plan, why did they need a handout from government to re-start the plant

World Wide Pork began laying off workers in May of 2005 after it fell behind on its bills to suppliers. Saskatchewan taxpayers were already on the hook for a $2 million loan to the struggling firm. The plant languished until the province chipped in another $1.5 million grant and converted the debt owed to taxpayers into equity. According to Agriculture Minister Mark Wartman, taxpayers now own six per cent of the newly-formed company.

There are many problems with this policy. Market decisions should be made by investors, and not by politicians and bureaucrats. The proper function of the private capital market is to direct investment to industries or firms that offer investors the best or most secure rate of return. The difference between a good and bad investment for an individual can have profound implications. There is no similar discipline for politicians or bureaucrats. Many of the key players in the Spudco fiasco are still comfortably employed in government, still making business decisions with tax dollars.

Business subsidies are inherently unfair as they create an uneven playing field by diverting money way from successful, tax-paying companies to less successful, politically-connected ones. For decades, Saskatchewan businesses have lived with the reality that, at any time, the government may choose to subsidize a competitor.

The government keeps telling us we have a labour shortage - particularly in the trades. Subsidies to money-losing ventures like pork plants and film companies draw workers away from profitable and productive industries. This is what economists call a "market distortion." Market distortions slow economic growth.

Business subsidies distract business owners from their core business and create a culture of dependency. The purpose of profitable business is to provide goods or services to customers. When handouts come into play business people morph into lobbyists and go from entrepreneurs to "grantrepreneurs." Some business owners become so reliant on government assistance they build expectations of handouts into financial plans (witness Bombardier).

The government argues business subsidies are part of an overall economic development "strategy," but rarely does subsidization improve the economy. For evidence of that you need to look no further than the Saskatchewan economy.

For decades the hallmarks of the Saskatchewan economy have been direct government investment in businesses and extraordinarily high taxes. The results have been clear. The Saskatchewan economy has lagged behind the Canadian growth average, and we continue to lose jobs to other jurisdictions.

The best economic policy keeps taxes relatively low and constant for all operators, and keeps government out of the business of being in business. With the recent reductions to business taxes, we're half way there. From here on in we must avoid the temptations to bail out businesses because, in the long run, that won't move Saskatchewan forward.