I predict if someone were to graph corporate profits and employment trends, you would see a divergence the likes of which unique in economic history. Day after day, quarter after quarter, corporations are racking up impressive profits, on fundamentals, price to earnings, the stock market should be surging to record terrority. And yet, we still see consistent drags on performance, a primary root is the continual inability of economies to create robust job numbers. Apologists will NOW argue the corporate tax regime was never intended to create jobs necessarily, but I would suggest a review of past statements to truly understand the sales job. What is happening- and nobody disputes- corporates are HOARDING their cash, Carney is right about the balance sheets, but offers little guidance on opening the taps to the greater economy.
On economic health we receive theoretical commentary about how corporations will eventually start spending, there is a nervousness which precludes normal investment, expansion. I would suggest a review of bank practices- the largest benefactor of corporate tax decreases and you will see that during the HEIGHT of expansion, those heady days prior to the 2008 crash, they were slashing jobs LEFT and RIGHT, across the board, despite making absurd profits. Economists can turn themselves into pretzels telling us why corporate tax cuts work, but there is little real world evidence to support outdated theory.
There is something fundamental wrong at the moment, economically things are out of balance, what should be happening simply isn't and we are left to look for remedies. I have floated an idea of putting a cap, perhaps a claw back, on corporate dividends, given that this money isn't fairly distributed, but rather reinforces inequities. Corporations currently have more cash than they know what do with, judging by the jobless numbers, this notion that profits benefit all is simply fiction. It is quite clear, the corporate tax cut argument has gone too far in a ill advised race to the bottom. The policy has resulted in record profits WITHOUT the promised benefits, every stat betrays proponents, we are left to nothing more flimsy than future inevitability arguments.
The economy is no longer in harmony, of that I have little doubt. I also have more confidence that the general population is coming to this sober realization which provides opportunity. Someone, or some entity, must address the growing inequalities, they are real and pronounced.
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And on the other hand, not only is the cooperative movement surviving,and thriving, but they actually hire people.
Liberals need to understand the cooperative economy is the only alternative to a corporatist one, the only one that operates with ethics and principles, everything else is just gangster capitalism, or vanishing small enterprise.
In fact, cooperatives around the world provide over 100 million jobs, 20% more than corporations.
I think, unfortunately for Liberals, that this is a natural conclusion of Paul Martin's corporate economics which was continued by the explicit cooperation between Liberals and the Harper government for years. And it will, of course, continue in ernest under the current government. Meanwhile the Liberal Party still tells us that lowering corporate taxes is a good idea and have no significant economic policies that address the exponential increases in corporate profits and the incredible expansion of the prosperity of the wealthiest. This is not to suggest that there are no differences between the LPC and CPC or that the LPC wouldn't, in these troubled times, be at least incrementally better than the CPC. But it seems clear to me that the global capitalist system is in the midst of the most significant crisis it has faced since the 1930s, and it is time for reforms and controls on the global corporate economy which are commensurate with the types of reforms we saw seventy-five years ago. Unfortunately, it may have to get a lot worse before such reforms come because the corporate structure is significantly more powerful than it was in the '30s and their control of the media ensures that people are convinced that we cannot force corporations to bow to the power of the people.
So it goes.
Actually, when we first began corporate tax cuts we weren't competitive at all, and it was somewhat warranted. However, there came a point where Canada became quite attractive, quite competitive, stacked up well against other jurisdictions, but we carried on in a "race to the bottom". This is why I titled the post "out of balance", because we've gone to far to one side of the equation.
If I remember correctly, the main argument for corporate tax cuts was not that corporations already in Canada would spend more and in the process create more jobs. It was rather that corporate tax cuts would give Canada a comparative advantage. Canada would have a lower corporate tax rates than other countries and so corporations will set up shop here and not elsewhere. The problem with engaging in a corporate tax cut arms race (and Canada was by no means the only participate) was that everybody ends up cutting their own throats. Furthermore, there are a whole host unintended consequences. For example: "Munir Sheikh, former head of Statistics Canada, and former associate deputy minister of finance, has shown that the real winner of Canadian corporate tax cuts is the U.S.
Tax cuts here give corporations bigger profits and because the U.S. corporate tax rate is about twice as high as ours, U.S. corporations in Canada then just pay more American tax on their Canadian profits. This transfer from Canadian to U.S. treasuries amounts to $4-6 billion a year."
One thing sky high corporate profits give lie to is Republican claim that corporations are not spending because they are being regulated and taxed too heavily. Corporations are not spending because there is a lack of demand full stop.
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