Capitalism is broken...
It actually doesn't exist anymore and it has not for at least the last 51 years. I am most certainly NOT advocating for communism or government overreach, so before anyone decides that, remove it from your thoughts. Capitalism, when it is functioning, drives innovation and plays a key role in how western society has developed and grown. Or so we think.
Let's start by looking at what capitalism and a free market are SUPPOSED to be. Simply put that government, outside of protection regulations, essentially keeps their focus on those functions that are required for a smooth running of society. Education, infrastructure, social programs, law enforcement, national defense, etc. Government is not in the business of... business.
That means that, in theory, the free market will dictate the success (or failure) of a business and the business should be self sustaining. A business needs to be well structured, profitable, and well managed to effectively compete in the open market. A business that is well run will experience growth and success, when there are poor decisions made, or other issues, the company suffers.
Really no different that your own personal circumstances. Your life is governed by the decisions you make and the consequences are yours as well. For instance, if you make a bad investment decision, and you lose the money, you are alone responsible for the fallout. There is no one there willing to write you a cheque to bail you out.
The same methodology should be applied to business, at least according to capitalism theory. The truth is as far removed from the definition as you can possibly get, at least in terms of a free market, and it is all due to government subsidies from Federal, Provincial, and Municipal governments across the country.
As an example, in 1973 (the year I was born) Canada (federally) ran a 1.9 Billion dollar deficit and had a total debt of 23.9 Billion. In that same year the federal government alone gave out 6.6 billion to private industry in tax breaks and direct subsidies, none of it repayable. At the time it was the largest tax incentive program in the history of the country, and when you factor in Provincial and Municipal supports the total reaches a staggering 9.8 billion dollars, or 3.2 billion more than our national deficit and close to 1/2 of the federal debt.
That doesn't sound like a lot of money today, but when you consider that we STILL have not paid off that debt and have been paying interest on it for the past 51 years, it becomes less easily stomached. Translate those 1973 dollar figures to 2024 and it is even more shocking at a total of 78 billion dollars.
That was 1973, now let's consider the totals from 1973 until 2022 (most readily available data) and we have a total that is mind bendingly high in today's dollars, but let's use the "as of granted" figures first. So from 1973 to 2022 there have been a total of 703 billion in federal subsidies granted, 643.2 billion in provincial subsidies, and finally 157 billion in municipal. Add that all up and we are talking about 1.5 TRILLION dollars in tax payer funded subsidies for private business in Canada. The thing is, that does NOT include "bailout" funds spent and is not in today's dollars - if you translate those dollars into 2024 dollars... factoring in the value change for each year, we are talking about between 3 and 5 TRILLION dollars in today's money. That is 3 to 5 times the size of our national debt.
When you also consider bailouts, that amount increases by billions. As an example, in 2008/09 Canada;s banks received over 114 billion in bailouts, money that was SUPPOSED to be a loan, and result in some ownership of the institutions by the Canadian tax payer. Fast forward a mere 4 years, and 100% of that bailout money was "forgiven" by the government, in the same period Canada's automotive sector also received billions in "loans" 100% of which were also forgiven. When you add in all of the other "supports" provided, we are talking about an amount that is an eye watering 7 to 10 trillion dollars over the past 50 years when adjusted for inflation. That is enough money to give 175,000 to every single Canadian today, is enough to not just balance our budget but also repay 100% of our national debt and still have several trillion left over in the bank.
That is NOT capitalism, that is by definition communism and socialist economic strategy. The idea that the tax payer should "save" corporations is about as far removed from what capitalism is as you can be without government actually owning the business itself.
The argument made, loudly, is that these financial "incentives" drive a bigger tax base and that translates into a better society. The problem, it almost never actually results in any meaningful gain for Canadians. Take banks as an example. We taxpayers have spent hundreds of billions of dollars bailing out our banks after they make what can only be considered bad decisions. There are almost zero consequences for poor business decisions as the business are often considered "too big to fail" - which is absolute garbage. That is a myth perpetrated by the very same businesses that are reaping billions in profit off the backs of the tax payer, and that is NOT capitalism.
Let's take a look at the Royal Bank as an example. Since their almost record breaking bailout of billions in 2009, that was then forgiven in full in 2014, RBC has reduced their employee count by over 20% and has recorded record profits every year since 2014. Loblaws received millions in grant money to add doors to their coolers, thus not only reducing climate issues, but also saving them millions in energy costs. Since then, Loblaws has cut staffing by nearly 30% across Canada, introduced self checkout, and has recorded record breaking profits year after year.
In fact the same can be said of almost every single company that has received those tax savings benefits. Make bad decisions, get bailed out by government, pay out debts, make record profits. Rinse and repeat.
Air Canada, GM, Ford, Chrysler, RBC, TD, CIBC, BMO, Scotia, Rogers, Bell, Telus, Loblaws, Suncor, Husky, etc. are all just some examples of businesses that have received billions in government funding and have recorded record profits afterwards, and yet ALL have reduced their workforces by a wide margin and all are still getting billions in taxpayer subsidies.
Recently, in an effort to pay for some of the social programs, and to try to manage our national debts, we have seen successive governments raise taxes. They all make promises to reduce taxes, put more money in the wallets of Canadians, yet we always hear about how the government can't afford it, or there is no money for housing, etc. Yet in the very next breath they give private enterprise billions to create a few thousand jobs (if we are lucky). The issue is that with the tax benefits, subsidies, and grants most corporations in Canada will not employ enough people, or pay enough in taxes, to ever allow the taxpayer to truly recover the costs to the average Canadian.
Too big to fail is perhaps one of the single dumbest mentalities I have ever heard in my 33 years working. Ok, you employ 40,000 Canadians who pay taxes (using RBC as an example), but those same people are using the money that you pay them to spend, including paying every increasing fees for less service. You read that right, today we pay significantly more costs for banking, yet the level of service we receive has been declining steadily since the 1980's.
Grocery is a prime example of this as well. We pay more for our groceries today than at any point in the history of modern society, yet those same businesses employ 1/2 the people and we do all the work. Think about that for a moment and really digest it. Grocery giants like loblaws receives millions in grants to pay for the same technology that is eliminating jobs and forcing the customer to do the work that an employee would have done in the past. They get massive government benefits using the argument that they employ people, but if they are eliminating jobs how is that the case? Each person that they 'get rid of" is one less salary, and that much less taxes paid to contribute to society.
None of that aligns in any way, shape, or form with what capitalism is, or should be.
Many of you reading this will say "that is why we need to get rid of the Liberals and Trudeau" and you might be right. This government has not demonstrated fiscal responsibility and it is an issue, the thing is they are not the only ones who ned to shoulder blame. Alberta, a conservative stalwart, provides some of the highest corporate subsidies when considering the per taxpayer cost. The largest corporate bailouts in Canadian history actually happened during the 2008/09 financial crises with the automotive and banking sector receiving over 200 billion in "loans" that were ultimately never collected and forgiven. Of course because they were tracked as loans, and ultimately written off, they do not count as a grant or subsidy (tricksey little politicians)!
There is not a single political party, at any level of government, that does not abide by this as a guiding principal. Throw money at private business to make them happy because they create jobs. I don't know about you, but 16 billion dollars to create 1000 jobs doesn't seem like a fair trade off to me given that it will take around over 300 years for the tax revenue to actually pay back the grant money given - and that is factoring in all the claimed "offshoot" employment created in the supply chain. The issue is that is highly difficult to quantify as there is no evidence to support the assumption. The only thing we can bank on is the amount of tax we actually earn from the operations themselves, when you consider that... it will take almost 1000 years (not factoring in inflation) for the taxes paid both corporately and personally from employees to cover the initial 16 billion invested. Canada may not even exist in 1000 years!
That is not a good investment.
That is not capitalism. It is communism.
A lot of people will say, yes but Paul you are over simplifying the situation. Actually I am not, what I am doing is de-complicating something that was intentionally complicated to justify the outrageous spending of our public dollars.
Grants, subsidies, and tax benefits are ALL investments and should be treated as such. To put it succinctly, if I give you $1 to invest for me, I expect a reasonable return for that investment. If I am ultra conservative I might expect a return of around 5 to 8% per year, so my $1 should translate into $1.05 or $1.08 and that would all be clearly laid out, in plain language, for me.
As a taxpayer I am OK paying taxes for infrastructure, health care, education, and all of the social constructs that makes Canada what it is today. I do have an issue when my tax dollars are being used to subsidize corporations with no reasonable return of that investment expected, or realised.
Rogers is another excellent example of government support gone wrong. When they embarked on the mission to acquire Shaw communications Rogers made a lot of promises to get it approved by the competition bureau. No lay offs, no increase in customer rates, and no closing of community programming. Guess what? Every single one of those commitments was broken within a year of the take-over being finalised.
The same was true when Telus took over BC Tel, when TD merged with Canada Trust, and almost every single other major merger in Canadian history. The businesses were made to deliver promises for the approval, and all of them reneged on their commitments within 48 months of the merger/acquisition happening. It should be noted as well that all of those businesses, including Rogers, all received expansive financial supports from the government over several decades. Not a single one of them maintained the promises made.
When a private business takes advantage of these programs, it is not their fault really. Government allows them to continue to conduct themselves poorly, and continues to look the other way while feeding them billions in tax credits and subsidies. All with reduced workforces when compared to 20 years ago, and almost all of them have been recording record profits since they started to receive the grants.
None of that is capitalism and whenever government injects money to "save" these businesses they directly stymie competition and innovation. Large, multibillion dollar corporations are NOT the ones that need the fiscal supports of government because they are not the largest employers in Canada, that falls to small business. The mom and pop businesses across Canada actually employ more Canadians than even government does, the single largest employer in the country. These small businesses are the ones that should be getting the grants, they actually create direct employment and tax revenue. They are not beholden to faceless investors who only demand more and more profit, and they contribute to the safety and stability of our communities.
Small business contributes more to local charities, tax bases, and community than any large business in Canada through their direct engagement at the grass roots level. If government was truly interested in the growth of this nation, that is where the dollars should be invested. Not in large multi-national companies that re-direct most of their profits outside of Canada, and not to multi-billion dollars companies that are making record profits and reducing their tax base by laying off employees.
We need to choose, capitalism or communism, and we need to stick with that choice. We need to dispel the idea that a company is too big to fail, and let them fall. There must be consequences for poor decisions made and when government swoops in to bail them out, there are none.
Politicians all talk a great game when it comes to holding corporations accountable, and they all spin fantastical tales of the benefits that will come with making such massive "investments" in Canada's future. The thing is, if it takes 1000 years to get the initial investment back BEFORE we start to see a positive return, that is not investing in Canada's future at all. That is investing in the future of the corporation and ensuring that they will be here long after any of us are gone, and likely even after Canada as a nation no longer exists.
We have spent enough money since 1973 on grants, subsidies, and bailouts to n ot only have paid off our national debt 4x over, that same money could have been invested and every single Canadian could see a reduction in their tax rate by as much as 50% - and government would still have a surplus.
Or, if you do lean towards socialism, there is enough money there for every single adult Canadian to have a guaranteed income of around $1600 per month, for the rest of their lives.
I do not lean towards that, I would much rather see that money invested in things like education, health care, housing, and our military. At the end of WWII Canada had one of the most advanced naval fleet and airforce in the world, today we would struggle to defend ourselves from a developing nation (pretend the USA isn't there to protect us). We should be spending heavily on our military and defense capabilities, and we are, but the money announced for military spending is a fraction of the money spent to subsidize and bail out large corporations. Case in point, the bank bailout in 2008/09 was more than 4 times what we spend on our military today, if you translate that into 2024 dollars it is 6 times the money.
I am self employed and I have no issues paying my fair share of taxes. I do however think that if, as a leader, I am unable to build a successful company that is not the government's responsibility - no matter how big my business is.
(Research for this article completed via: The Fraser Institute, Stats Canada, The Canadian Bankers Association, CBC, CTV, Global, and City news, as well as reference material from the Vancouver Public Library.)
None of this was written with the assistance of Artificial Intelligence and all thoughts are my own. This is an opinion piece only.