Forget Algoma, here’s the real economic story

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TERENCE CORCORAN

News that Ontario-based Algoma Steel will be laying off 1,000 workers from its plant in Sault Ste. Marie in March generated the usual grim interpretations. Appearing on CTV’s Power Play panel, former NDP leader Thomas Mulcair joined other panelists portraying the layoffs as part of the Trump-driven trade war that is killing Canadian industries. “There will be far more of these cases,” said Mulcair. “The entire economy could start to tank.”

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Even if more layoffs take place in some key industries, portraying the Algoma layoffs as representative of a Canadian economy in decline does not reflect underlying positive developments taking place across the nation. Despite the trade turmoil and other global economic transformations, Canada still ranks as a dynamic, mostly market-driven economy where entrepreneurial spirits continue to drive growth and progress.

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And never mind the headline-grabbing Stellantis auto job loss in Brampton, Ont. The automaker just announced the hiring of a third shift of 1,500 new jobs at its Dodge Charger assembly plant in Windsor, Ont.

Above all, though, forget about Algoma. The steelmaker has been a corporate basket case for decades, falling into receivership in 1932 and bankruptcies in 1992 and 2004 and creditor protection again in 2015-2018. According to a Frontier Centre for Public Policy analyst, Algoma has received $1.3 billion in bailouts and subsidies in recent decades.

It is also misleading to describe tariff wars as the cause of Algoma’s situation. The layoffs were planned before the Trump tariffs were imposed. The real reason for cutting 1,000 workers is the company’s plan to change the energy sources for the Sault Ste. Marie plant from coal to electricity.

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To make the energy transition, Algoma is receiving $400 million in loan guarantees from Ottawa and $100 million from an Ontario government green funding scheme. Without that government financial backing, said Algoma chief executive Michael Garcia the other day, “Make no mistake, Algoma Steel would have experienced an even darker day — months ago, most likely its last.” In other words, Algoma would be into another — and final — bankruptcy.

On the other hand, protecting private corporations from bankruptcy with $500 million in government-backed salvation loans is no way to run an economy. As William Watson noted in his column on Thursday, rent-seeking is a destructive process that ultimately undermines the market entrepreneurialism that drives growth and prosperity. Governments may claim to be the catalyst, but they are not — even when governments play a subsidizing role.

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A recent report on CBC television’s The National captured some of the ongoing entrepreneurial spirit that can deal with the ever-changing national and global economic environment. In a nine-minute segment The National’s Nick Purdon profiled three small companies — an ice cream maker, a snowplow manufacturer, and a producer of modular homes.

Chapman’s Ice Cream is a family company based in Markdale, Ont., with 900 employees and headed by chief operating officer Ashley Chapman. He recently announced a $200-million expansion that will expand the company’s production space by 35 per cent and add 200 new high-paying jobs. Chapman said the tariffs hit just when the company was planning its expansion. The tariffs made him nervous, he said, but he decided to go all in — albeit with the help of a loan of up to $27 million from the Ontario government.

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Arctic Snowplows, a manufacturer of snowplows with plants in Ontario and Quebec, was acquired by entrepreneur Jim Estill in January 2024, before the tariff war started. Unlike the media and others, Estill sees the current economic environment as an opportunity to bring economies of scale to the company’s operations. That was before the tariff alarms went off, but Estill was not alarmed. “Tariffs are a business person’s nightmare but an entrepreneur’s dream,” he told Purdon as they toured an Arctic Snowplow plant.

Great Lakes Modular Homes (GLM), based in Sault Ste. Marie, was formed in 2025 by Derek Nott, who is tracking the tariff turmoil and the shifting political and regulatory environment around housing. Along with other industries, Nott is counting on government regulations and financial backing to help GLM develop its modular home market.

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The obvious economic issue behind these and many other entrepreneurial activities is the constant appearance of government funding and the granting of regulatory preferences. Would Canada’s entrepreneurs be able to develop new businesses and expand old ones without government assistance?

State subsidies run contrary to free market fundamentals and are mostly wasteful — as demonstrated by the tens of billions of dollars Ottawa and the provinces have been throwing at electric vehicle and critical mineral production. Economist Claude Lavoie has described the thinking behind subsidies as a persistent myth: “Giving preferential treatment to a company (or a region) does not create jobs. Instead, it merely displaces economic activity (and the jobs that come with it).”

But let’s pause and think positive for a second. In a market economy, displacing jobs happens all the time as entrepreneurial corporations and executives introduce innovation and disruptive processes. Whether subsidized or not, creative destruction is at the heart of the free market.

Entrepreneurial activity, including everything from Chapman’s Ice Cream to transformative AI investments, will drive Canada’s economy forward — even if supported by wasteful handouts. The key is to scrap the subsidies and let the entrepreneurs do their thing — which is what many are (mostly) doing.

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