Just two years ago, Ontario’s Liberal government gloated about its partnership with cereal giant Kellogg.

“Kellogg’s investment is a vote of confidence in the skills and knowledge of Ontario workers,” then premier Dalton McGuinty said as he toured the company’s a taxpayer-subsidized factory in Belleville.

The very existence of the Belleville plant, he crowed, demonstrated the wisdom of his willingness to subsidize profitable multinationals.

Today, Kellogg Co. is less popular. It may have built a plant that employs 100 in Belleville. But on Tuesday it said it is also closing one that employs 565 in London.

Coming on the heels of last month’s decision by H.J. Heinz to close its 740-worker Leamington plant, the Kellogg announcement has led many to question whether manufacturing can survive in Ontario.

In fact, as the Kellogg story shows, manufacturers can do quite well — particularly if governments are willing to subsidize them.

Ontario taxpayers have sunk millions into Kellogg, a company that made $2 billion in operating profits last year.

In 2007, the Liberal government gave the cereal giant $2.4 million to buy processing and packaging equipment.

A year later the government awarded Kellogg a $9.7 million low-interest loan — about 10 per cent of the total cost of the Belleville plant.

And until Tuesday, Queen’s Park was prepared to give Kellogg another grant, this one worth $4.5 million, to support its Belleville operation.

In effect, the Ontario government has been helping Kellogg build a state-of-the-art, non-union manufacturing plant in Belleville so that the company can abandon an older, unionized operation in London.

This is not smart.

But it is not atypical. As the economic slump persists, governments across North America vie with one another to attract manufacturing investment.

Some offer anti-union legislation aimed at keeping wages low. Others offer cash. Corporations are happy to take both.

The auto industry is the most obvious example. Governments dangle huge subsidies in front of car companies to attract investment.

Even Prime Minster Stephen Harper, who once denounced what he called corporate welfare, is on the game.

The companies take the money. Then they do as they wish.

In 2008, for instance, the Ontario and federal governments helped bail out General Motors. Yet when GM became profitable again, it repaid this generosity by announcing plans to close one of two Oshawa assembly lines. The company has also shifted some production from Ingersoll to Tennessee.

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Like Kellogg, the auto companies justify their apparent double-dealing by citing the need to boost profits.

Indeed, in market terms, their actions are perfectly rational.

Why not take whatever you can from governments when subsidies are on offer? And why not stiff those same governments if, later on, you can make more by operating elsewhere?

For governments, however, open-ended corporate subsidies are not as rational.

From Massey-Ferguson to Kellogg, Ontario governments have sunk money into companies that either couldn’t or wouldn’t maintain employment in the province.

What are the alternatives? One is to do nothing and let the free market work its destructive magic. As Ontario Premier Kathleen Wynne is finding out, and as Stephen Harper has already discovered, this is politically untenable.

The other is to insist on having government, or even workers themselves, play a role in managing publicly subsidized companies.

As the Liberal government discovered with its abortive green industry strategy (one that it formally abandoned Wednesday), involving the state in business is not easy. But it can be done.

One of the real accomplishments of Bob Rae’s New Democratic government was its 1992 bailout of near-bankrupt Algoma Steel in Sault Ste. Marie, a bailout that gave the company’s unionized workers majority ownership, seats on its board of directors and some control over the company’s future.

The worker-ownership part of Algoma is long gone. But the company, now owned by an Indian firm, still makes steel. And it does so in Sault Ste. Marie.