Nortel and the Avro Arrow myth

Andrew Coyne on the weakest part of RIM’s case

Nortel and the Avro Arrow mythI’ll have lots to say about this Nortel nonsense in a bit, but for now let me just deal with the inevitable Avro Arrow analogy. Appearing before the Commons industry committee the other day, Research in Motion co-CEO Mike Lazaridis trotted out the well-worn Arrow story to pressure lawmakers into blocking Nortel’s deal to sell its wireless operations to the Swedish telecom giant Ericsson.

He told MPs that allowing Nortel’s next-generation wireless patents to go to a foreign-based company would be similar to Canada’s notorious decision to cancel development of the Avro Arrow aircraft in 1959….

Lazaridis noted that he has a model of the Canadian-designed Avro Arrow on his desk and that 2009 marks the 50th anniversary of its cancellation. “Fifty years later we consider the disposition of another beachhead built by Canadian ingenuity,” he remarked. “Let us learn from our history and not make the same mistake again.”

There are any number of things wrong with RIM’s case, but the first and worst is the notion that killing the Arrow was some sort of terrible mistake. Indeed, if the best RIM can do is cite the Arrow, darling of every nationalist drama queen and high-tech trainspotter who never bothered to actually inform themselves of the reasons for its demise, that tells you just how weak their case is — though it was enough to send the Toronto Star into one of its patented teenage swoons.

For those in need of a refresher course, let me point you to Michael Bliss’s classic history of Canadian business, Northern Enterprise, pgs. 474-477. I’m going to quote it at some length, because, well, it’s just so damning…

Born in war, with an original aim of making warplanes for the Pacific theatre, the A. V. Roe company of Canada made a bold but unsuccessful grab for peacetime leadership in aircraft design by producing one of the world first jet-propelled passenger planes, the C-102 Jetliner. The project was funded by [C. D.] Howe’s Department of Reconstruction and Supply. [However] no commercial airlines, including TCA [Trans Canada Airlines], which refused to bend to the minister’s pressure on this one, found the C-102 suitable to their needs. It was an impractical, premature leap onto a technological frontier, and was headed for the scrapheap anyway when the Korean War provided an excuse for concentration on military aircraft.

Avro had good luck with a conventional jet fighter, the CF-100 Canuck, which it designed and built for the RCAF, manufacturing almost seven hundred of them… The Canuck success led defence planners to commission Avro to design a successor, the project that became the CF-105, or Avro Arrow… Originally the Arrow was to use imported engines, fire-control systems and ground control systems. Gradually the military and the nationalists and the high-tech enthusiasts decided to have all these components manufactured in the country that could make anything, Canada….

By the time the Arrows flew [in 1958], it was clear that the project was a horrible mistake. Avro Canada was not an experienced aircraft manufacturer; the CF-100 was its only success and it had been plagued with design problems and delays… The firm’s frenetic expansion, highly self-conscious publicizing of its commitment to high technology (its ultimate space-age product was the Avrocar, a doughnut-shaped vertical take-off and landing craft that resembled nothing so much as a flying saucer…) and very heavy reliance on government contracts, camouflaged serious managerial weakness. The evidence suggests that A. V. Roe was a classic promotional company … built on wild optimism, taxpayers’ money, media gullibility and Canadians’ naive patriotism…

Costs of the Arrow went straight up in a decade of comparatively little inflation. By 1957 aircraft originally estimated at $1 million each would cost at least $8 million, probably much more. Arrow would cost six times as much as U.S.-designed interceptors. No one other than the RCAF wanted to buy the Arrow… The Arrow was consuming a huge proportion of Canada’s defence budget, and beginning to starve the other services for equipment. Even the Department of National Defence turned against it. Howe and the Liberal government decided to cancel the Arrow — after the 1957 election.

As it turned out, they never got the chance. It fell to the Diefenbaker Conservatives to kill the project in 1959. Controversial as that decision may have become in later years, at the time, as Bliss notes, it was not: “hardly anyone believed the program, which Canada simply could not afford, should be continued…. The Liberals’ only criticism of the Conservative decision was that they had not taken it sooner.”




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Nortel and the Avro Arrow myth

  1. I blame that appalling CBC mockumentary for giving the Avro Arrow myth new life.

  2. Here's a really well done master's thesis about the Avro procurement project and why it was cancelled: http://scaa.usask.ca/gallery/arrow/thesis/index.h

    I particularly like the wording from the Abstract:

    "The popular literature on the project has advanced a techno-nationalistic, conspiratorial viewpoint that the project should have been completed regardless of the financial burden or operational requirement. The Arrow programme's termination is invariably interpreted as an unjustifiable action by an inept Conservative government that was ignorant of defence policy and acting at the behest of the United States. The academic community, believing the lessons of the project to be largely self-evident, has not countered this belief with any studies of significant length or breadth of research."

    It is necessarily is more detailed than Bliss, but the two conclusions are similar.

    • From the "DIEFENBAKER CANADA CENTRE ARCHIVES" ? You're joking, right ?

      • No,

        "A Thesis Submitted to the
        College of Graduate Studies and Research
        in Partial Fulfilment of the Requirements
        for the Degree of Master of Arts
        in the Department of Political Studies,
        University of Saskatchewan,
        Saskatoon, Saskatchewan, Canada."

        Where it is located on the web may be a reflection of the host's bias, but not necessarily the author's. I don't see any indication that it was bought and paid for by the DCCA.

        • No, but the fact that a copy is on the Diefenbaker Canada Centre Archives does show that it is quite favourable to the position of those who are eager to defend his traitorous legacy. Bias is not unknown in academia.

          • Nor, apparently, is it unknown in posters to blogs.

          • Quite.

          • I think people should read things before condemning them. This student obviously put a lot of hard work into it, and a lot of original research. So what if the Diefenbaker Centre chose to post it on a website as part of an exhibition on the Arrow – seems like a reasonable thing to do. And he obviously knows what he is talking about – he is prominently mentioned on the Avro Arrow wikipedia page in the references.

          • Regardless, challenging its content rather than dismissing it on the basis of the company it keeps would be more convincing to someone, like me, interested in developing an opinion.

            By not doing so, you join company with those who seek to obscure or deceive by duplicitous means.

            Interesting article on how academic research is distorted through selective academic subterfuge can be found here – http://www.badscience.net/2009/08/how-myths-are-m… I try to be a skeptical, discerning reader of opinion and analysis, and to be careful about misplaced reliance on assertions and ad hominem critiques, but when so-called academic research can be subtly co-opted, what's a guy to do?

            I'm not saying that is what you are attempting, and you may well have read the article and dismissed it on its merits, but by using the guilt by association short cut, how can I separate you from other similar users of such shortcuts?

          • Believe what you wish. Diefenbaker, who sold himself as an ultra-pancanadian nationalist, and wouldn't have been elected otherwise, in fact totally sold Canada out to the Yankees for nothing in return (in fact we paid more) and in the process destroyed what could have been a great economic and strategic advantage to Canada. As Conservatives always do.

          • "As Conservatives always do."

            And…..you lose your audience. Your response confused me to this point; I was just encouraging you to be more substantive in your objection, and a little less ad homenic-y but then I discover that was a lost cause to begin with.

            I looked into altruism once, but couldn't see what was in it for me.

          • "As Conservatives always do."

            And…..you lose your audience. Your response confused to this point; I was just encouraging you to be more substantive in your objection, and a little less ad homenic-y but then I discover that was a lost cause to begin with.

            I looked into altruism once, but couldn't see what was in it for me.

          • I must say that I'm shocked, shocked I say, to discover that the Diefenbaker archives are at the University of Saskatchewan. An obvious conspiracy.

            What's next? Are you ging to try and convince me that the Kennedy archives are in Boston?

  3. And yet many of the engineers who helped build the Avro Arrow moved on to the U.S. to work on the NASA Apollo program following the Arrow's cancellation. The issue really is Canada's pathetic research and innovation record over the last few decades. Granted, the Arrow program was a classic example of how not to do it but it also exposes the gutless nature of our public and private sectors when it comes to investing in research and development. RIM is a happy exception to this rule.

  4. Can we let the Toronto Star's patent on teenage swoons fall into foreign hands?

    • LOL

  5. The patriotic pleas of Ball-silly and Lizarbrain have struck a chord with me. it is important that cutting edge technology be kept in Canada to give us the edge we need in the 21st century and beyond.

    Our course of action should be clear: nationalize Research In Motion post-haste.

  6. Coyne is suffering from hyper-rationality. Take a few more weeks off. Really, no one will notice.

  7. In Coyne's world, only Americans are allowed to be nationalistc. Among his own countrymen, he finds it unseemly and embarrassingly parochial, for which we deserve nothing but sniffs and sneers.

    • Very well put.

  8. Looking forward to your "lots to say about this Nortel nonsense in a bit".

    Btw, I'm sure if I had extrapolated the Gov'ts investment in Avro Arrow to today's dollars, or at a rate of return of 7.5% for tech investments, it'd be like some silly amount of Canada's national debt…. :)

    Great engineering feat. Too bad we can't celebrate the victores, but rather focus on the negatives. Still, this doesn't explain the destruction of the planes and blueprints. Why wipe out an important part of a nation's history, if ultimately falling short of its potential?

    • One thing is for sure, RIM is a victory. Palm has been wiped out, so has Sony (in the handheld space), along with dozens of other competitors, while RIM continues to battle Apple head-on.

      However, their nationalistic argument in this case was unquestionably just a self-serving false argument (can't blame em for trying).

      • (can't blame em for trying).

        Hopefully, this is not a trend away from what made RIM excellent to begin with. I'm beginning to wonder if all of the favourable press and coverage of NHL dreams is not affecting their focus. Not really sticking to their knitting.

    • It was a vision that produced a success. That is why it had to be killed and the planes cut for scrap and destroyed and the technical expertise scattered to the four winds. Success is not permitted in Canada. Particularly if you are a Conservative and the success in question was funded with public money.

  9. Good heavens Andrew, please name me a military project throughout history that DID come remotely close to budget. Of COURSE it went over budget- they always do! Heh heh, the nationalist in me says, "Well at least it was OUR over budget fighter plane helping to build OUR OWN military aerospace industry"

  10. I wonder how much money the stupid U.S. threw away on that dumb "go to the moon" thing. Heh, they're probably still paying for it, and all they have to show for it are some rocks and dust.
    http://www.thespaceplace.com/nasa/spinoffs.html

    Maybe the company wasn't the best or most efficient, but I laugh at Michael Bliss's comment, "Avro Canada was not an experienced aircraft manufacturer;" No, and we're not likely to ever have experienced new technology manufacturers if they have to start off right out of the gate with experience. That's the thing about new technologies. They're NEW.

    • I tip my Vodka and Tang in your general direction.

    • The thing is, in high tech high capital industries like aerospace, companies have to evolve into the top tiers gradually. For instance, a firm would begin by making a specialized component of an aircraft, like the avionics, or wings, or fire control system (or just making licensed copies). Gradually, as it built up operational experience and recognition, it would move into progressively larger roles and eventually become the primary contractor if everything went well. It takes decades of work and billions in investment to get to that stage. So, for a company like Avrow, to more or less skip all that and and try to make a high tech interceptor from the start was clearly ridiculous. It would be like if Bombardier announced tomorrow is was going to compete with Boeing and Airbus in the wide-body jet category or if Kia said it was going to compete with BMW.

      • Often referred to generically as an industry with a high barrier to entry.

    • New technologies are new, and only 1 of 10 startups succeed. The main reason they fail is inept management. That is always fatal. So you cannot make excuses for collosal failures just because they are "new". You need to allow the good ones to succeed and the bad ones to fail.

    • Excellent points, Jenn. And an excellent link. Thanks!

  11. (1) I think Lazaridis got the idea for this argument from a Macleans commenter two weeks ago.

    (2) Although the Avro Arrow had serious cost problems, that wasn't the reason given for scrapping it. The reason given was that Canada would never need fighters because we were going to use the Bomarc missile instead. This cost roughly $1.4 billion (for the two bases in Canada) and was scrapped a few years later because it was ineffective. Note that $1.4 billion would have paid for roughly 140 Arrows, roughly equal to the number of CF-18 fighters that were eventually purchased from the US for a total cost of more than $2 billion (if memory serves).

    So let's add this up: Canada scrapped a plan to buy 140 Arrows for approximately $1.4 billion, instead spending $1.4 billion on Bomarc missiles that didn't work, and then more than $2 billion on CF-18's. Total cost: at least $3.4 billion vs. $1.4 billion, and we gave the business to another country. They got the jobs, the profit, and the R&D. Classic.

    On top of this, the cadre of top engineers at Avro went to NASA and never came back. Brilliant. Canadian aerospace, once best in the world, never recovered and is practically non-existent today. Brilliant.

    The blow to Canadian forces morale was not inconsiderable either. Superb.

    Now, one can argue that the Nortel situation is not going to be a repeat of the Arrow. Perhaps. One can also argue that RIM is using Canadian patriotism for their own ends. Quite likely. One can also argue that Lazaridis is a none-too-original opportunist for using the Arrow argument straight off Macleans' comment pages. Almost certainly.

    But one cannot argue, with any show of understanding, that the Arrow cancellation with the associated total destruction of all the research, plans, and firings of teams of experts, was not a total blunder. If the Nortel situation bears any resemblance to that charlie-fox then it must be avoided.

  12. (1) I think Lazaridis got the idea for this argument from a Macleans commenter two weeks ago.

    (2) Although the Avro Arrow had serious cost problems, that wasn't the reason given for scrapping it. The reason given was that Canada would never need fighters because we were going to use the Bomarc missile instead. This cost roughly $1.4 billion (for the two bases in Canada) and was scrapped a few years later because it was ineffective. Note that $1.4 billion would have paid for roughly 140 Arrows, roughly equal to the number of CF-18 fighters that were eventually purchased from the US for a total cost of more than $2 billion (if memory serves).

    So let's add this up: Canada scrapped a plan to buy 140 Arrows for approximately $1.4 billion, instead spending $1.4 billion on Bomarc missiles that didn't work, and then more than $2 billion on CF-18's. Total cost: at least $3.4 billion vs. $1.4 billion for inferior aircraft that arrived later, and we gave the business to another country. They got the jobs, the profit, and the R&D. Classic.

    On top of this, the cadre of top engineers at Avro went to NASA and never came back. Brilliant. Canadian aerospace, once best in the world, never recovered and is practically non-existent today. Brilliant.

    The blow to Canadian forces morale was not inconsiderable either. Superb.

    Now, one can argue that the Nortel situation is not going to be a repeat of the Arrow. Perhaps. One can also argue that RIM is using Canadian patriotism for their own ends. Quite likely. One can also argue that Lazaridis is a none-too-original opportunist for using the Arrow argument straight off Macleans' comment pages. Almost certainly.

    But one cannot argue, with any show of understanding, that the Arrow cancellation with the associated total destruction of all the research, plans, and firings of teams of experts, was not a total blunder. If the Nortel situation bears any resemblance to that charlie-fox then it must be avoided.

    • 1) Where did you purchase the Avro model that according to Lazaridis sits on his desk?

    • Very nicely argued, Gaunilon. But Andrew never lets facts stand in the way of a good diatribe against anything which is a success of the state.

    • Sorry, meant to post this here, not below in response to another post:
      Canada's aerospace industry is hardly non-existant. Bombardier, Pratt & Whitney Canada, CAE, etc are major employers and leading edge aerospace companies. The method of cancellation of the Arrow as a shame, and the destruction of the existing airframes a purely political act. But even had the airplane turned out as its proponents hoped (and that would have depended on a number of factors, including the Orenda engines working as promised) it may have simply led to a dead-end. The plane itself had some design limitations – the undercarriage placement limiting the ability to carry additional weapons or fuel underwing, for example. But more importantly, Canada was not likely, in the atmosphere of the sixties, to have made the necessary committment to further military projects that would have allowed the industry to carry on into a second generation of military planes. The Arrow was a fascinating development of the fifties. Major investments would have been necessary to allow it, or a successor to be upgraded and produced in the seventies and eighties. It seems unlikely that a Pierre Trudeau would have allowed that to happen.

      • "Bombardier, Pratt & Whitney Canada, CAE, etc are major employers and leading edge aerospace companies."

        None of which have ever benefitted from public monies, right Mike ? Really.

        • I don't deny that, and I think investment by governments in aerospace is a good thing. It has paid off in the types of jobs that have benefitted Canada. It would be better, in principle, if aerospace companies could stand on their own, but since they don't, anywhere in the world, and the only way to keep them in business is through government aid, that's what has to be done.

          My point was simply to note that Gaunilon's statement that we have no aerospace industry is factually wrong. Canada has, despite the moaning about the Arrow, has a vibrant and thriving aerospace industry.

          (A.V. Roe, of course, was a foreign firm. That doesn't seem to bother the people who think it is a problem if a bankrupt company like Nortel is bought by foreigners)

          • Just a note here: I said "practically non-existent (or at least extremely tiny)" not "no aerospace industry". I think my statement was factually correct.

          • No, your statement was not even remotely factually accurate. The Canadian aerospace industry employs tens of thousands of people and is one of the largest and technologically advanced in the world. Describing it as tiny or practically non-existant is not just an exagerration, it is a statement that is not in touch with reality.

          • In the world, perhaps. But in the Mi>developed world, it is comparatively tiny. Yes we have more aerospace than Zimbabwe and Ecuador. But compared to the US, the UK, Russia and France (our erstwhile peers) we have very little. Even compared to Italy, Germany, and Sweden, we have very little.

            "Tiny" is a relative term. Ours is tiny compared to what it once was, namely a world leader.

          • In the world, perhaps. But in the developed world, it is comparatively tiny. Yes we have more aerospace than Zimbabwe and Ecuador. But compared to the US, the UK, Russia and France (our erstwhile peers) we have very little. Even compared to Italy, Germany, and Sweden, we have very little.

            "Tiny" is a relative term. Ours is tiny compared to what it once was, namely a world leader.

          • In the world, perhaps. But in the developed world, it is comparatively tiny. Yes we have more aerospace than Zimbabwe and Ecuador. But compared to the US, the UK, Russia and France (our erstwhile peers) we have very little. Even compared to Italy, Germany, and Sweden (formerly well below us), we have very little.

            "Tiny" is a relative term. Ours is tiny compared to what it once was, namely a world leader.

          • No, given the importance of Bombardier alone, our aerospace industry is not "tiny". In commercial terms it is larger than Russia's for example, and far larger than Sweden's. It all depends on how you calculate things, but, generally I would place Canada's aerospace industry generally in at least the top five or six nations in the world, in commercial aerospace terms anyway. Certainly it is as significant now as it was in the fifties, and I think most objective observers would consider it to be more signficant. It is neither smaller in relative terms to our economy now than it was in the fifties, and it remains a world leader.

            Only in the very small niche of advanced fighter aircraft were we, briefly, leaders in technology – and the full nature of that lead was never really tested. As I've said elsewhere, it is pretty unlikely successive governments would have been willing to continue to fund an independent military aviation industry in this country. Certainly almost all other nations have given up on trying to develop their own national miltiar aircraft.

    • Well spoken, Gaunilon. I agree with everything you said. Too often do we sell off our Canadian expertise. If I recall the Arrow's possibilities correctly, it was the aerospace marvel of its day, even capable of being used as a kind of mini-shuttle, taking payload like satellites to the edge of the Earth's atmosphere and launching the payload from there.

    • The CF-18 is a vastly superior plane to what the cf-105 would have been. For one thing, the CF-18 is a third generation jet fighter, whereas the CF-105 would have been second generation. The CF-18 features faster rate of climb, ability to supercruise, more efficient and more powerful engines.

      Never let the facts get in the way of a good diatribe though. Keep on dreaming.

      • It's debatable which would have been superior after the extra ten years of development are taken into account. The Arrow would have been on its second generation by the time Canada acquired the first CF-18. Had the Iroquois engines materialized the Arrow may well have enjoyed superior power. Like the Hornet it was supposed to have better than 1:1 thrust-to-weight.

        The Hornet does not have supercruise. The F-22 Raptor was the first fighter with this capability.

        Never wade into a debate with a knowledgeable opponent by launching snide remarks. It's bad for the debate and bad for the points you are trying to make.

        • The question is, of course, whether the Arrow would have performed as anticipated, not something that is guaranteed with any aircraft, especially one with so many leading-edge capabilities as the Arrow. The second question is whether there would have been any political will to keep putting the money into the Arrow to allow it to become the airplane you say it would have been in ten years. Without a huge investment by the defence establishment it would have become a dead-end technologically and industrially. Would a Trudeau government have been willing to spend the money necessary to keep an indigenous defence aircraft industry viable? It seems unlikely.

          (And if you persist in your statement that Canada's aerospace industry is tiny or non-existant, I wouldn't suggest you are, at all, "knowledgeable" on this subject)

    • Wow…that was quite a jump there G. Is it true that the RCAF didn't have any jet fighters between the cancellation of the Arrow (1959) and the purchase of the CF-18 (1982)? Because, you know, I read somewhere that Canada bought 200 CF-104s in 1959, sixty or so CF-101s in 1961 (both of which were nuclear armed), and 140 or so CF-5s in 1968. Thanks for sorting that out.

      • So far as I know (and I could be wrong), the Starfighter (CF-104) and Voodoo (CF-101) purchases were already scheduled regardless of the Arrow, which was supposed to replace them…so they are irrelevant here.

        The CF-5 was purchased as a stopgap when the Bomarc missile turned out to be a flop, but it was clearly a step backward for an advanced air force. Having the same fighter aircraft as Botswana is not an encouraging sign, and the plane became known as "the Flying Tinkertoy" because it was so primitive.

        So yes, the next serious fighter purchase to replace the Arrow was the CF-18. Intermediate purchases of Widowmakers, Bomarcs, and Tinkertoys only serve to emphasize the point that a lot of money was wasted on poorly conceived alternatives to the Arrow.

      • So far as I know (and I could be wrong), the Starfighter (CF-104) and Voodoo (CF-101) purchases were already scheduled regardless of the Arrow, which was supposed to replace them…so they are irrelevant here.

        The CF-5 was purchased as a stopgap when the Bomarc missile turned out to be a flop, but it was clearly a step backward for an advanced air force. Having the same fighter aircraft as Botswana is not an encouraging sign, and the plane became known as "the Flying Tinkertoy" because it was so primitive.

        So yes, the next serious fighter purchase to replace the Arrow was the CF-18. Intermediate purchases of Widowmakers, Bomarcs, and Tinkertoys only serve to emphasize the point that a lot of money was wasted on poorly-conceived alternatives to the Arrow.

        "Thanks for sorting that out." – you're welcome.

      • So far as I know (and I could be wrong), the Starfighter (CF-104) and Voodoo (CF-101) purchases were already scheduled regardless of the Arrow, which was supposed to replace them…so they are irrelevant here.

        The CF-5 was purchased as a stopgap when the Bomarc missile turned out to be a flop, but it was clearly a step backward for an advanced air force. Having the same fighter aircraft as Botswana is not an encouraging sign, and the plane became known as "the Flying Tinkertoy" because it was so primitive.

        So yes, the next serious fighter purchase to replace the Arrow was the CF-18: bought in 1982 and scheduled to remain our premier fighter until at least 2017. Intermediate purchases of Widowmakers, Bomarcs, and Tinkertoys only serve to emphasize the point that a lot of money was wasted on poorly-conceived alternatives to the Arrow.

        "Thanks for sorting that out." – you're welcome.

        • Well, yes, you are wrong. The CF-104 was purchased as a strike fighter, to replace the CL-86 Sabres based with the Canadian air division in Europe. The Arrow was not designed to dogfight or drop bombs – although it could, conceivably, have been developed into a long range interdiction bomber, on the lines of the TSR-2. The Arrow, however, was never envisioned as a replacement for the Sabre or the CF-104 (which entered service long after the Arrow was cancelled.

          The Arrow was designed to be a replacement for the CF-100. When it was cancelled the long-range North American air defence needs were filled by the Bomarc and the CF-101B, both of which needed nuclear weapons to be effective (not that Mr. Diefenbaker agreed with that). The CF-5 purchase had nothing to do with the Bomarc. I agree it was a step back to acquire a less than front-line fighter. But, again, it was not designed for the same job as the Arrow and its purchase was not connected to that of the Arrow.

  13. Um, all of this is very interesting, but it ignores the fact that Nortel is a giant when it comes to tech funding (with no replacement waiting in the wings), and that Lazaridis is right when he suggests that the Canadian funded technology will now be used to compete against Canadian based companies.

    The Avro Arrow analogy may not be apt, for the reasons described by Coyne, but surely he now understands that Government intervention is necessary to protect key industries. Or has he not noticed what evey other country, including the U.S., has been doing lately?

    • Actually, I have noticed. I just don't happen to take it as a given that Canada must be in the aerospace industry, which is the premise of your observation.
      There's a theoretical case for subsidy if in so doing you could seize a worldwide monopoly in a given industry. In such a case, the profits accruing to the industry in question would outweigh the losses to other industries forced to subsidize it, rather than the usual zero-sum game. But among the many conditions required for this theoretical case to hold is that other countries do not match our subsidies with their own, thus cancalling any advantage we might have hoped to gain.
      In other words, the willingness of other countries to subsidize their "key industries" makes the case against subsidy, rather than for it — even if there were any meaning to the phrase "key industries," which there is not.

    • Actually, I have noticed. I just don't happen to take it as a given that Canada must be in the aerospace industry, which is the premise of your observation.
      There's a theoretical case for subsidy if in so doing you could seize a worldwide monopoly in a given industry. In such a case, the profits accruing to the industry in question would outweigh the losses to other industries forced to subsidize it, rather than the usual zero-sum game. But among the many conditions required for this theoretical case to hold is that other countries do not match our subsidies with their own — which I think you'll agree would cancel out any advantage we might have hoped to gain.
      In other words, the willingness of other countries to subsidize their "key industries" makes the case against subsidy, rather than for it — even if there were any meaning to the phrase "key industries," which there is not.

  14. The Avro Arrow debate will be interesting to follow, but can we all agree that RIM is thoroughly disingenuous for even bringing it up?

    • I agree, but ya can't blame em for trying to get themselves a sweet deal.

    • It's like that Seinfeld episode where J Peterman buys life stories from Kramer for use in his autobiography.

      Lazaradis probably paid some spin doctor/coach for this analogy – and he didn't want it to go to waste. Besides, it had no book value.

      • It seems like a model airplane for the desk could be part of the deal…

  15. It is worth pointing out that most countries have had the same "Avro Arrow moment" when nationalist politicians insisted on indigenous fighters. For instance, Japan created the F-2 program of creating an indigenous clone of the LockMart F-16. The result was that they ended up paying over a hundred million dollars for a plane that was inferior to the aircraft purchased by the UAE (F16s) for half the price. France's aviation industry is just a list of jingoistic failures. Their latest Dassault has faled to secure any customers outside of France, mainly because they built something that cost more and performed worse than American equivalents or even Euro equivalents.

    The reality is it makes more sense for most countries to engage in licensing and subcontracting as opposed to prime contracting. Israel has been a good example of the success this approach can have, as has the U.K. which is now home to one of the main defense contractors on a lot of US defense projects (BAE). Even Canada, lament of the Arrow crowd aside, has a surprisingly strong defense industry. We are the world's 13th largest arms exporter (believe it or not, we are only 10-20m behind China), mainly from selling components to US projects. The value of our contributions to the US led JSF program will total between 4-6 billion dollars and we haven't even signed any orders for the plane yet. Outside of the USA and Russia, the countries with the most successful defense industries are those that have specialized into niche production and left final prime contracting work to the Americans.

    • Interesting information.

    • Yes, the United States of America has also had a number of "Avro Arrow moments" too. The only difference is, they're not a bunch of whinging, visionless losers, so they actually follow through and build their projects. Tell me, how much does the F-22 Raptor program cost ?

      • The F-22? The one that's just been ordered to have production wind down because they can't afford it? I'd say it cost a lot more than it's worth – and the USAF seems to agree.

      • The F-22 cost quite a bit. That's why they are only buying 150 of them as opposed to the 700 they originally intended to. Just like they canceled the FCS program (the army's 340b modernization plan), the ARH program (a 6.2b helicopter acquisition program), wide swaths of BMD systems (i.e. the airborne laser), the Zumwalt class of new destroyers, the Comanche helicopter program, a new Space Based Radar system, the VH-71 program, the E10 and so forth. And those are only from the past five years, and not even a complete list when one looks at the number of smaller programs.

        CF-105 specifically, the USA did actually have an identical moment to us. They canceled the XF-108 project, also designed to create an advance interceptor to counter soviet bombers, the exact same year Canada canceled the Arrow because by then it had become clear that the entire concept of such planes was flawed (Britain also canceled both of its' high speed interceptor programs around this time) and costs were too high. The Arrow itself was obscenely impractical, with a price some 5x that of its peers and without a functioning weapons system.

        I don't really know where people get the idea that the US just blindly throws money into defense projects but is dead wrong. Programs do go over budget, but nowhere near the degree shown by the Arrow. Currently, a program which exceeds the approved budget by 75% faces an automatic Congressional Review to determine if it is worth it. Generally anything 100% over budget gets canceled or at least has it's program redefined and restarted under different goals and time lines.

        • The British had the Vulcan. Just keep that in mind.

  16. Well I don't know much about the Arrow, but the Avro Jetliner did have potential. Howard Hughes was interested in it for TWA, which would have showcased the aircraft to the world. The Jetliner's problem was that A.V. Roe wasn't serious enough about it and wanted to concentrate on the CF-100s.

    • Actually, most versions of the story state that it was C.D. Howe who ordered the company to halt work on the Jetliner in order to ramp up production of the CF-100. That decision, which delayed Canada's role in the commercial jetliner industry by about forty years, is probably more significant than the Arrow cancellation – yet earns little mention among the nationalist crowd. Possibly (and this may be a cynical view) because it was the Liberals who cancelled the Jetliner?

  17. Most of the negative comments on here comparing the Arrow to other ventures are incorrect. It's not like Canada spent millions on an aircraft that was inferior to those out there. On the contrary, it was vastly superior.

    There is a difference in spending money, and spending your money, and getting your money's WORTH. Sure the original project went over budget, as virtually ALL military projects do. But in the end, I think it is safe to say that the money would be earned back many times over.

    I for one am tired of Canadian companies being eaten up and sold off to foreign owners. Keep the jobs, and business inside of Canada.

    • Dman said…But in the end, I think it is safe to say that the money would be earned back many times over.

      Reminds one of our "lost decade" in the 1990´s NDP government in BC when the gov´t decided to re-train union welders to learn the new aluminum welding, so that three new high speed ferries could be built in BC by the same unions. No studies. No research. No basis of need. No background thinking to their decision. No consulting the electorate. No ceiling on the budget for the ferries. No worries!
      No wave studies. No sediment studies. No harbour/docking/infrastructure studies. No cars allowed on the ferries! No time saved to Vancouver Island. They were deemed unsuitable to ply any body of water in Canada including the Strait of Georgia their original destination. No good. NFG! No sales. No buyers anywhere in the world for these useless but beautiful derelicts. Not even as a floating McBarge restaurant! Local company bought them all for $20 million (originally cost …25 to 35 times that) and it took them years to find yet another recent buyer for the as-yet-unused fast ferries.
      This kind of Be Canadian for the sake of Canada is getting to be a tired old saw. Pride is not really as attractive as many think.

    • That is simply untrue. The F-104 series aircraft, eventually licensed built by Canadair as the CF-104, were broadly similar to the Arrow's projected capabilities. Both had an approximate speed of 1,300 mph and ceiling of 15,000m, identical combat radii with the F-104 enjoying vastly superior weapon systems. By itself that is just trivia, and doesn't proove much. The kicker though was that the F-104s flyaway costs were about 1.5m (1960 USD), while the Arrow was pushing 8m and hadn't even entered production.

      Yea, most defense projects do go over budget. That isn't remarkable. The remarkable part is costs going 800+% over budget. That IS obscene.

      • The 104 is not a comparable aircraft to the Arrow, either in capacity or role. The 104 was a replacement for the Sabre. The Arrow was the planned replacement for the CF-100, The CF-100 was eventually replaced by the CF-101B and the Bomarc, both of which relied on nuclear weapons for their effectiveness.

        The CF-104 was designed as a strike fighter and, in its intial role in Canadian service, was intended to launch long-range interdiction strikes with nuclear weapons against Warsaw pact forces. The Arrow was an all-weather long-range interceptor. It could have made an interesting long-range strike fighter, along the lines of the TSR-2, but never got the chance. But, yes, the Arrow's costs got away from them – trying to design an airframe, engines, weapons systems and missiles from scratch was an unwise idea.

        • That's a very loose comparison: CF-105 vs CF-104;

          Crew of 2 vs 1
          Max take of weight of 31 tons vs 13 tons
          Afterburner thrust of 47,000 pounds vs 15,000
          etc.

    • Me too, Dman. I'd sure like it if our fellow Canadians saw the worth of holding onto our research and kept the jobs and technology in our own hands. How long before all Canadian industry/technology is sold off to other countries?

  18. Classic cheap Canadians. The Americans aren't afraid of cost-overruns. I guess that's why they lead the world militarily and we play catch-up.

    • Well, that and the fact that they're a superpower with a military budget that is thirty times higher than ours.

      • You've just proven Richard's point. They have 10 times the population but 30 times the military budget. Why ?

        • Ummm, could a $1.8 billion deficit have something to do with it?

        • That's a good question. Anybody who isn't an out and out imperialist should wonder why any country should deem it necessary to spend approximately a trillion dollars per annum on defense related expenditures while any number of social ills remain unresolved both domestically and internationally. Even by itself the US's public defense spending represents approximately one half of the world's spending and taken with her NATO and major non-NATO allies (i.e. Japan, SK, Australlia, NZ) represents over 3/4s of global defense spending, so it is ridiculous to argue there are credible national security concerns.

          • I think they spend so much money on their military because they're scared of us.

    • Canada's aerospace industry is hardly non-existant. Bombardier, Pratt & Whitney Canada, CAE, etc are major employers and leading edge aerospace companies.____The method of cancellation of the Arrow as a shame, and the destruction of the existing airframes a purely political act. But even had the airplane turned out as its proponents hoped (and that would have depended on a number of factors, including the Orenda engines working as promised) it may have simply led to a dead-end. The plane itself had some design limitations – the undercarriage placement limiting the ability to carry additional weapons or fuel underwing, for example. And the cockpit would have had to be re-designed at some stage. But more importantly, Canada was not likely, in the atmosphere of the sixties, to have made the necessary committment to further military projects that would have allowed the industry to carry on into a second generation of military planes. ____The Arrow was a fascinating development of the fifties. Major investments would have been necessary to allow it, or a successor to be upgraded and produced in the seventies and eighties. It seems unlikely that a Pierre Trudeau would have allowed that to happen.

  19. Dammit Andrew, there you go again. Ruining Canadians' own high opinion of themselves with fact.

    Geez…what are you…a Conservative?

  20. Sorry, forgot we were talking the US, not Canada. Make that $1.8 thousand billion.

    • $1.8 thousand billion US!

      Although, at the rate our neighbours to the South are eager to render the value of their currency worthless, that may not be the big deal it once was…

  21. I generally consider myself a pacifist and left-wing, but the one thing I can't get is the moment you walk into a campus NDP meeting, or just about anything else that isn't the Canadian Taxpayers Federation, everyone will line up to sing about how the Arrow was the greatest thing ever. These are people who typically have nothing but harsh words for the military (or at least military projects which divert tax money from things like national daycare), defense contractors like Lockheed Martin (UTSU passes a resolution every year to get UofT to stop holding stock in LockMart) and engaging in US led conflicts (like the Cold War, the single impetus for the Arrow).

    To hear it from most Canadians though, the Arrow was actually national PharmaCare as opposed to an overpriced/under-performing killing machine, Avro was some kind of corporate champion of Canada as opposed to an incompetent spinoff of a multinational defense conglomerate and the idea that shoveling (what would today be) billions into a privately held company for a weapons system under purely nationalist (if not jingoist) aims is seen as in line with liberal/social norms. I don't get it.

    • "I don't get it."

      Correct, you don't get it.

      It has nothing to do with whether the company producing the Arrow was private or not, all the Yankee companies which do stuff for the military and space programs are also private. It has everything to do with creating and retaining a technological and thus strategic advantage, which the Conservatives under Diefenbaker completely emasculated.

  22. I love this guy Coyne. He’s hilarious. No high speed rail, no high tech industries, no aerospace…not for him!

    Oh no. He’ll make sure that Canada remains a nation of loggers and miners if he has to push the axes and shovels into people’s hands himself.

    • You're actually partly right. Even if you disagree with him, he's principled– if logging and mining are where Canada could make the most money with the least (or zero) government involvement, he'd say so be it, loggers and miners we shall be. But it would have to be up to individuals to freely choose those occupations within the market economy, with no pushing of axes and shovels into hands!

      • More particularly, I would not take money from loggers and miners to give to incompetent high-tech companies, which stripped of its preening rhetoric is what every plea for "industrial strategy" amounts to. Mind you, to compound matters, we also subsidize the logging and mining industries. Canadian industrial policy amounts to a vast subsidy-go-round, every industry subsidizing every other…

        • Mining has a chance if unions don't get invovled but logging has no future in Canada; we just can't compete with China and Brazil. The only future left for our forestry industry is selling off our harvesting and processing technologies to these countries.

          Yes, we do have high-tech development in logging as well, don't faint.

        • Oh, the rhetoric gets better than "industrial strategy."

          "The MInister of <whatever> and Canada's New Government expressed their strong confidence in <whatever industrial sector>" by… feeding it billions of our dollars.

    • I love how Demosthenes think that jumping into a debate by tossing out random insults and mockery constitutes a real argument.

  23. Only one question show be asked of the Arrow program. Why was it destroyed and not sold off. There is something smelly in the whole affair. Sorry Coyne but as usual you only scratch the surface of the questions and facts.

  24. Not defending what happened– I wish they'd spent the damn money and kept the Arrow as much as the next guy– but to counter those who smell conspiracy when talking about the blueprints and prototypes being destroyed: wouldn't that have been standard for scrapped military projects across all NATO and the Warsaw Pact nations? Not wanting tech info falling into enemy hands and all that? Seems like the simplest and most likely explanation to me. What happens to prototypes and blueprints to current-day weapons research that is cancelled?

    And to add to Will's observation above about the incongruity of military-despising lefties who simultaneously long for the Arrow, correct me if I'm wrong, but wasn't it supposed to be armed with nukes? Talk about cognitive dissonance…

  25. Everyone should keep in mind that if the Arrow program continued and our military had these jet then our roll in the cold war would be much different. Canada would be seen as more of a threat to the Soviets, possibly making the situation more hostile then if we just continued with our "middle power" approach. The Arrow program would also leave less money for social services and infrastructure projects which most Canadians probably would not like.

    • "More of a threat?" That seems unlikely. The Arrow was, after all, a defensive system, armed with conventional weapons. After its cancelllation, the Pearson government, in pursuit of what I suppose you would think of as a "middle power" approach, armed both our air defence and our strike squadrons in Europe with nuclear weapons. That was a threat to the Soviets. An appropriate one, of course.

      I agree, however, that to build and maintain an aerospace defence industry we would have to have maintained our defence spending at the levels we did in the late fifties and early sixties, when they ran at about 20% of the federal budget (as opposed to about 8% now). That would have put the defence industry at odds with the social service programs that started to put us in debt in the seventies. It seems unlikely thee would have been public support for a continued aerospcace program after the Arrow.

  26. I think everyone is missing the point. 50 years ago some unpleasant sh*t happened. What about Nortel? Was the sale fair? Or not?

  27. AC, while I'm waiting for your "lots to say about this Nortel nonsense", not sure if you saw Jack Mintz, Palmer chair in public policy, University of Calgary on BNN today re: Gov't intervention on sale of Nortel assets.

    http://watch.bnn.ca/#clip204843

  28. Get your facts straight. You took snippets of his comments and made it sound contrary to what he actually said!

    Lazaridis didn't take a position on whether Avro should have been killed. In fact, he went out of his way to say something like "However you feel about the decision to discontinue the Avro…."

    His point was that regardless of whether you think the decision was right or not, the subsequent actions by the government of the day lost an opportunity of big proportions to just let the people and technology evaporate. Canada had a critical technology that was a beechhead in the future of the aviation industry and they just threw it away – and that is absolutely comparable to the Nortel situation.

  29. Was there a possibility to revamp the Arrow program or was dismantling the only and best option?

  30. While the purchase of the CF-5 was not directly related to that of the Arrow it does raise a related issue.

    The fact the government of that day was clearly not willing to make serious investments in the air force should cause you to ask yourself what the likelihood would have been of any Canadian government, much less that of Pearson or Trudeau, continuing to invest hundreds of millions, or billions, of dollars in the continuous development of a domestic aircraft for the Canadian air force. If they weren't willing to do that (and I don't believe they were), then the Arrow, beautiful an airplane as it was, would simply have been a dead-end anyway.

  31. How pathetic to scratch for excuses for yet another Conservative government blunder. Wonder how much is going into Coyne's pocket of the 2.3 million subsudy from this Harper ConReform government

    • Actually, the article could be interpreted more as a criticism of the current Conservative government, as they've been playing the nationalist card themselves in dragging their heels over approving this deal.

  32. It's almost quaint the way the Toronto Star refers to 'foriegn investors' as though they were writing about 'terrorists' or 'white supremacists'.

    No, we can't let Canadian technology fall into the greedy clutches of – GASP – foreign investors!!

    It will be interesting to see how Sweden begins treating the numerous Canadian firms with investments and operations in that country if the Canadian government does go ahead and block this deal. And Canada pulling this stunt so soon after concluding a free trade deal with the Northern Europe Free Trade Area, and announcing intentions to pursue a similar agreement with the EU? With all the hand-wringing about our "international reputation" I normally see on these boards, it's odd the nationalists aren't worried about it here, where it might actually count.

  33. Everyone connected to the nuclear industry who doesn't want AECL sold, and thinks taxpayers should subsidize for millions/billions forever keeps bringing up the Avro Arrow as well.

    Is this all that Canadians can come up with?

    They should give it rest.

  34. The author of this article needs to do more research on the viability of the Arrow and it’s systems. It was maybe not an advanced breakthrough as it was the best choice to do a job that didn’t disappear.

  35. Coyne; I would expect you would have researched your reference to Bliss’ ignorance when you wrote this “piece”. The fact is Bliss,when confronted with the facts and evidence on the Arrow years later, recanted, admitting that he had handed the research on his Arrow missive to a student and did not verify their work.(True to form, there was no retraction printed). Why don’t YOU learn something from this as well. The Arrow was offered, in a fixed price deal in 1959 prior to cancellation, to the government for $3.75 million each ($30 million in today’s dollars) for a 100 jet production run with missiles, fire control system, 2 engines, airframe and all supports. If you really want the truth see “Avro Arrow Bourdeau Industries (Official)” on Facebook. Your readers expect more than this from someone with your reputation . . .

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