DOBBIN: Corporate Greed? Enough Already

[Oscar]

Corporate Greed? Enough Already

[ http://thetyee.ca/Opinion/2015/04/03/En ... ign=030415 ]

Record profits have produced lousy jobs.

By Murray Dobbin, April 3, 2015, TheTyee.ca

A news story this week blandly described the perverse reality that is the current state of the Canadian economy. The headline read "Corporate profit margins at 27-year high and likely to stay there." Pretty heady stuff if you took it out of context. But the context is everything: pathetic growth projections, record high personal debt, stagnating wages, hundreds of billions in idle corporate cash, a multi-billion dollar infrastructure deficit, a growing real estate bubble and a Bank of Canada chief who has no idea how to fix things. And, of course, a prime minister who thinks fixing things is heretical.

The headline describes the conclusion of a report by CIBC World Markets the gist of which is that not only has the profit margin hit a 30-year-high of 8.2 per cent (the historic average is less than five per cent) but the signs are that it is going to stay there: "profit margins are fully supported by the fundamentals."

Ah, yes the fundamentals. The study doesn't purport to make any ethical or moral judgments (or even economic ones for that matter) -- it just states the facts. Indeed it doesn't talk about the context of those facts at all, nor that this hyper-profitability might indeed be bad for the economy in general, for growth, for employees, families and governments. It's as if the fundamentals were somehow God-given, having fallen from the sky.

But of course "fundamentals" don't fall from the sky, they are the result of the actions of governments, corporations, individuals and other agents -- some random, some planned, some unpredictable -- like the crash in oil prices. Economists love to talk about fundamentals, but in this case they are related to a structural change in the profit rate: that is, a permanent shift from the below five per cent level to over six per cent -- a 20 per cent increase. The key fundamentals, says the report: "globalization, innovation, lower cost of capital, high barriers to entry, and reduced bargaining power of labour..."

The report points out that the crashing Canadian dollar is a big factor but for the economy as a whole, for Canadians' standard of living and for future investment it is the last item that matters: the "reduced bargaining power of labour." Wages and salaries have been flat literally since 1980 and personal debt has tracked upwards in parallel as inflation ate into disposable real incomes. This is not sustainable for any functioning capitalist economy that depends on growth to survive.

Here are some of the consequences of a continuing high-profitability/slow growth scenario:

• The rich will continue to get rich and income and wealth inequality will continue to grow. Stock prices will continue to rise, as corporations accumulate more and more idle cash, dividends will increase. According to the IMF Canadian corporations are accumulating "dead money" faster than in any other G7 country.

• As increasing amounts of the wealth created every year accumulates in corporate coffers, personal debt, now at a record high of 163 per cent of annual income, will continue to rise increasing the already bloated profits of the big banks.

• Corporations exist to make profits, not to invest for the sake of investing. What is the motivation to invest if your profits are at record levels and the bargaining power of labour remains low? According to the CIBC report, "No less than one third of Canadian GDP last year was produced by sectors with falling labour unit costs."

• With corporations relying on falling labour costs there is even less incentive to invest in innovation, training, or new equipment and technology to increase productivity.

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At no time in the past 70 years have Canadian workers and their families been confronted with such a ruthlessly indifferent combine of corporations and the state. Neo-liberalism, the so-called freeing of market forces, is thus revealed as having no limits, ethical, moral or political, to its greed and its contempt for society. And it has little to do with "market forces." It's simple corporatism.

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[ http://thetyee.ca/Opinion/2015/04/03/En ... ign=030415 ]