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With new developments breaking daily in the SNC-Lavalin affair, the economic impact of the company’s decline (or demise) on Quebec is becoming increasingly obfuscated. This is a particularly sensitive issue in Ottawa, given that Quebec will likely determine the outcome of the federal election in October.

SNC-Lavalin is a global engineering and project-management company covering infrastructure, mining and energy, with operations in more than 50 countries and roughly 50,000 employees. The suggestion, indeed even the justification by some is that the alleged interventions by the PMO to save the company from criminal prosecution were to secure SNC-Lavalin’s future because of its pivotal role in the Quebec economy.

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This conflates the fate of an individual firm with the economic activity and employment related to the firm. This was a common mistake during the debates in 2008 and 2009 about the potential failure of U.S. banks. Vested interests argued that the failure of individual banks could lead to the implosion of the entire global financial system, while not understanding that other successful banks and new entrants would absorb the assets and employees of failing banks. The real winners from the bank bailout were the owners (shareholders) of failing banks, who avoided the costs of bank failure.