As the former auditor general for Newfoundland and Labrador, Sen. Elizabeth Marshall has an eye for financial detail. More importantly, she can spot its absence.

At a Senate hearing last month, Marshall grilled Finance Minister Chrystia Freeland on her plan to deposit $2 billion in the Canada Growth Fund, a key component of the Trudeau government’s new industrial policy. Marshall’s problem: the Canada Growth Fund doesn’t actually exist.

“There is no legislation that tells us anything about this yet-to-be-created corporation,” Marshall lectured Freeland. “There is nothing to tell us about the financial controls to be exercised over the $2 billion. And nothing to indicate what the governance structure will be.”

Freeland’s response? “We need to move really, really fast,” she said, citing the US$369 billion in business subsidies to be handed out by U.S. President Joe Biden’s Inflation Reduction Act. Given this competition, fiddly little details like creating a proper governance structure to oversee the disbursement of billions in taxpayers’ money must take a backseat. “Canada has to move faster than we have hitherto,” added Freeland.

Welcome to Canada’s new industrial policy — handing out money faster than ever.

The Canada Growth Fund (CGF) and another yet-to-be-created organization called the Canadian Innovation and Investment Agency (CIIA) lie at the centre of the federal government’s new industrial policy. The CGF is meant to provide $15 billion in subsidies, equity investments and other support payments to encourage companies to participate in “the green transition.”

The CIIA is similarly supposed to boost spending on R&D through the judicious application of public funds, but without the carbon-free requirement. (It may instead distribute its money to “businesses with an equity/diversity focus,” as a consultation report advises.) Both will see government agencies try to “pick winners.”

Currently, the main component of federal innovation policy is the long-standing Scientific Research and Experimental Development (SR&ED) program, which provides federal tax credits to firms doing research with a commercial focus. While SR&ED has been criticized for favouring smaller firms despite the fact larger firms produce proportionately more R&D, it is at least broadly distributed and based on established criteria outside the influence of bureaucrats and politicians.

Now the Trudeau government is reviewing SR&ED and shifting its attention to direct government intervention. This means more ad hoc decisions about which specific firms in which favoured sectors will benefit from public largesse. And in ways that put taxpayers at much greater risk.

Among the CGF’s tools will be “contracts for difference,” which guarantee a certain price for products or commodities, such as hydrogen, in order to ensure a project is profitable for a particular firm. It can also arrange “offtake contracts” in which it agrees to purchase all of a firm’s production if it can’t find any actual buyers. All this is supposed to “incentivize companies to take risks.”

In reality, the financial risks will be transferred to the government and taxpayers will assume all the financial burden when things go wrong.

When a government says it is incentivizing risk-taking, observes Don Boudreaux, an economist at George Mason University in Fairfax, Virginia, “What they are really doing is shielding the private sector from actual market risk. When you spend your own money, you spend it more carefully.” And, he points out, when it becomes clear a project is a money-loser, profit-minded entrepreneurs are quick to pull out and move on to the next opportunity.

“Politicians have non-monetary reputations to worry about,” says Boudreaux, who writes widely on industrial policy, in an interview. “Rather than admit that something is a failure, they are more likely to say the problem is ‘we haven’t spent enough money yet.’”

While acknowledging that “industrial policy is certainly enjoying a resurgence,” Boudreaux suggests the current revival is due to collective amnesia. “People seem to have forgotten the disastrous record of these policies in the first place, and the overall failure of central planning.”

For anyone needing a refresher, there’s no shortage of past examples, from bankrupt U.S. solar panel manufacturer Solyndra to France’s abortive attempt at creating a “Google-killer” search engine called Quaero. For Canadians, the most painful recent example is Bombardier’s star-crossed C Series jet that sucked up billions in federal and provincial loans and equity investments before being sold for a song to competitor Airbus, where it’s now known as the A220.

All such examples were initially presented as innovative, technologically-advanced ideas that simply required targeted public assistance to get off the ground. All looked like winners. Until they didn’t.

The sensible alternative to governments trying to pick winners isn’t likely to win much political support these days. But it’s still worth repeating. “We should give entrepreneurial ability and creativity as wide a scope as possible,” says Boudreaux. “That means freeing up markets, encouraging private-sector innovation and allowing people to spend — and lose — their own money.” Only through genuine competition is it possible to discover the most promising industries, sectors or ideas of the future.

Sure, sure, Freeland might say. But all that takes time. And the credit for success lies elsewhere. For politicians determined to take urgent action, nothing satisfies like a quick round of winner picking. Betting with other people’s money just adds to the thrill.

Peter Shawn Taylor is senior features editor of C2C Journal, where a longer version of this article first appeared.