To The Business Council of Canada: Don't Piss on My Leg and Tell me It's Raining

The economy is so bad that Canada’s biggest companies are asking their employees to email politicians to improve investments. Except profits are at record highs. So maybe it’s not government?

I was watching a science show on YouTube when it was interrupted by the commercial above, from the Business Council of Canada.

I found it so intensely irritating that it takes some effort to unpack the many things that are wrong with it.

Consider this: this is a campaign that says Canada is a bad place to invest in, that will have slow growth, yet Canadian executives, shareholders and bondholders are seeing record profits and returns on investment. The very executives who make up many of these companies have seen extraordinary returns, profits and bonuses, just this year.

It’s the same old story, same old song and dance, when we are dealing with radically different challenges - hostile and deliberately disruptive foreign powers, and recovering from multiple massive shocks over the past 15 years (and before) which have created lasting distortions to our economy, most of them global impacts which Canadians had to respond to.

As I have said, many times, it’s the economy of private sector that isn’t working and that is breaking down and the vast majority of people are treading water or sinking because they are paying more and more of their income in rents or being farmed for interest payments on an endless treadmill.

I’ve just recently published a lengthy article, “Everything sucks because no one knows what they are doing” which digs into the reality of politics and business in Canada and elsewhere.

The letter:

• Blames the federal government alone, while ignoring the role of provincial governments

• Tells politicians to stop criticizing corporations

• Recommends exactly the same shit we’ve heard recommended - and that’s been followed for 50 years, which has not worked;

The video offers a kind of “concern trolling” about all the things that are supposed to be wrong with the Canadian economy, followed by a call to action, which involves signing up at the Business Council of Canada’s website, who are collecting people’s names and e-mail addresses and providing them with a sample template of a letter to complain about the economy to Canadian Members of Parliament,

This is the letter, intended to be from someone who works for one of Canada’s big companies.

{TitleAbbEng} {ParlFirstName} {ParlLastName}

House of Commons

Ottawa, Ontario

K1A 0A6

{SalutationLtrE} {SalutationEng} {ParlLastName}:

I’m one of the more than 5.5 million Canadians employed by a large company in Canada, and I’m proud of the work I do.

I know that my work and the company I work for support families and communities across the country. Large companies and their workers, like me, make an outsized contribution to federal taxes, research and development and charitable donations. Canadians rely on revenues from publicly traded companies for their savings and retirement income.

And yet, far too often I see large employers like mine being targeted and criticized. The reality is that large employers and job creators are essential for our economy. But right now, public policies are making Canada an unattractive place to do business.

I believe our country can do better.

In the coming decade, Canada is expected to finish dead last among OECD countries in per capita economic growth. Our weak economy is contributing to weak personal and government finances, creating a vicious economic cycle. Canada’s economic decline is being felt by everyday Canadians in very real and personal ways.

Our deficit-funded public services are strained to the point of not delivering what our families need, and inflation has eroded our purchasing power making it harder for Canadians to make ends meet. We can do something about it. Our country has all the ingredients to succeed, but we need the federal government to pursue a pro-growth agenda.

Big thinking and bold leadership are needed for us to go from worst to first in economic growth. That is why I’m asking you to support the Can-Do campaign. Together we can help grow Canada’s economy to everyone’s benefit. The Can-Do campaign is focused on creating the right conditions to turn things around, including:

- Championing, not criticizing, the large employers who drive Canada’s economy

- Creating a welcoming environment for private sector innovation and R&D

- Strengthening our country’s energy and food security

- Putting in place taxes and regulations that invite investment

I believe that everyone – workers, employers and policymakers – has a role to play in building a stronger Canada. We can build a country with high-paying jobs, a growing economy and strong public services – improving the quality of life of all Canadians.

I know we can do it, but only if we work together. I hope you agree.

Support Canadian workers like me by visiting candocanada.ca

Yours sincerely,

{name}

{address}

{email}

Now, there’s a lot here that’s incredibly vague.

The reason it’s not just utter bullshit, but dangerous and harmful bullshit, is because it’s totally disconnected from reality.

It relies on a series of myths about the economy and completely ignores the actual history of the last 15 years.

Canada’s economy does have serious problems that need to be addressed, but this letter doesn’t even begin to address them.

• Reason #1 for Canada’s fouled-up economy: It’s the Price of Oil, Stupid.

  • “It’s the Price of Oil, Stupid” is from a reader’s comment, pointing out that problems with Canada’s economy are inevitably due to the price of oil, a global commodity with global prices.

  • In October, 2014, OPEC and Saudi Arabia started a global oil price war. The price of oil sank faster and deeper than at any time in history.

  • It had been over $100 a barrel for years, Alberta and Saskatchewan and Newfoundland and other energy producing provinces were rolling in money, then Saudi Arabia turned off the taps.

  • This is 100% the cause of the crisis in Canada’s oil sector. Not the Federal Government. Not the carbon tax. Not regulations. Not taxes. Not pipelines. There was a massive boom in oil, followed by a massive bust. It was financial warfare. It affected countries around the world, including the U.S.

  • THIS is the reason for the loss in Canada’s GDP, loss of investment, and loss of income, employment.
    

• Reason #2 for Canada’s fouled up economy: High personal debt from a colossal Real Estate bubble

  • We are currently in a massive financial “superbubble” created by the incompetent and reckless policies of unelected central banks. Since the Global Financial Crisis of 2008 and before, Governments and Central Banks have been trying to fix the economy by lowering interest rates so that people go into more debt by driving up real estate prices.

  • Instead of investing in productive “real economy” businesses, R & D and innovation, Canadians as individuals have added more than a trillion dollars in personal debt that has gone into driving up the price of real estate

  • Commercial real estate is already in deep trouble.

  • This relates DIRECTLY to economic misery in provinces like Alberta and Saskatchewan, where there were housing and mortgage debt booms along with the oil boom.

• Reason #3 for Canada’s fouled up economy: A Global Pandemic, Especially Central Bank Responses

  • The policy decision to address the Pandemic with monetary measures, where people were encouraged and expected to take on debt to keep themselves and the economy going has played the single greatest role in fouling up the economy. The trillions of dollars that were loaned out - on top of previous trillions - drove up the price of existing assets including real estate, stock, and meme stocks.

    It was not long-term investment in productive industry. It drove greater concentration of wealth, including considerable wealth based only on reckless speculation. That concentration also included mergers and acquisitions.
    This has created the economic trap that Canada, and the U.S. and countries around the world all face.

    Contrary to the market dictum for making money “buy low, sell high,” speculation fuelled by low-interest debt means people are paying top dollar for assets - including major investors.
    That leads to a self-evident market conundrum: the more you pay for an asset, the harder it is to get a return. This drives inflationary pressures, as companies have to hike rents and prices in order to keep achieving elevated returns.
    In response to inflation created by easy money, central banks then moved forward with some of the sharpest interest rate hikes in history. This mindless monetary response to a crisis of central banks’ own making has accelerated personal and small business defaults.
    If central banks were looking to emulate the “success” of Paul Volcker’s inflation-crushing 20% interest rates in the early 1980s, they didn’t bother to compare levels of debt in that era (very low) to today (very high). Add to that that in his first term (1980-84) Reagan reversed his initial tax cuts and brought in the largest tax increases in history, and ran huge deficits, grew government and had an economic stimulus larger than Obama did after the Global Financial Crisis of 2008.

These three realities - which are indisputable, and based in evidence and facts, are the three major reasons for the overall problems with Canada’s economy.

The real problems are significant. The opportunities are great, but the Business Council of Canada is not engaged with them.

The recommendations being made are always the same. They never make sense, because they are self-contradictory: cut taxes and regulations, cut government, cut debt, and somehow spend more at the same time.

No one wants waste, but the argument that tax cuts or efficiencies will pay for themselves either now, or in the long run is one we’ve been hearing for half a century, and I don’t know why we would buy it, because no matter how much we try it, it’s still not delivering for anyone but a rarified few.

Governments in Canada and around the world have been following this advice, for years. They have cut taxes for the wealthy, and it has worked, for the wealthy.

It brings to mind the classic Monty Python sketch, a parody of Robin Hood, where a John Cleese plays dimwitted highwayman, Dennis Moore.

Moore starts stealing from the rich and giving to the poor, and then keeps at it. He keeps stealing from the same rich folks and giving to the same poor folks, to the point that the rich have no clothes and the poor start complaining that the stolen goods aren’t high enough quality.

Well, the reason the economy is in the shape it’s in is because governments have been listening to business lobbies and business councils.

We have been cutting taxes, regulations, government, in the hope of “growing the economy.” Ten years ago, the Federal Government was the smallest it has been as part of GDP since the 1930s.

We have more wealth and property concentrated in the hands of a fewer people, while more people than ever have less, than at any time in Canadian history.

And it’s not just the federal government, it’s provincial governments as well.

The real problems the Business Council identifies with the economy isn’t because of “naive” economic policies. It’s not because governments have been ignoring their requests: it’s because they’ve been dutifully implementing them.

public policies are making Canada an unattractive place to do business.

Specifically, which public policies?

Canada’s reality is that the provinces have bigger combined budgets than the federal government, and are responsible for much more infrastructure, and programs, and regulations.

The reason it’s a challenge to do business in Canada is because the private overhead is so high - because of real estate prices.

In the coming decade, Canada is expected to finish dead last among OECD countries in per capita economic growth. Our weak economy is contributing to weak personal and government finances, creating a vicious economic cycle. Canada’s economic decline is being felt by everyday Canadians in very real and personal ways.

Yet, as this decline is happening, Canada is at record levels of concentrations of wealth and income. Stock markets are high.

Canada’s banks are making record earnings. RBC - whose CEO is quoted in the Business Council’s video, enjoyed record earnings.

How can we explain this discrepancy? Well, it’s because the record earnings, incomes profits and bonuses mean that record amounts of Canadians’ income is being captured by the private sector, and it’s going straight to the top.

This is how Canada’s 2022 oil industry earnings were described”

“Canada’s oil industry gross revenue was:

• $93.7 billion in 2020

• $174.0 billion in 2021 (increase of 87.5%)

• $269.9 billion in 2022 (increase of 49.0%)

From a CBC report August, 2022

"Imagine a bank machine that's broken and it's spitting out $100 bills and there's not enough people to pick them up and there's $100 bills gathering on the ground. This is how profitable these businesses are right now," he said.

In 2022, the Canadian oil industry had record profits. These were not plowed back into the company, or new production, or new jobs. The money went to paying shareholders and bondholders.

Our deficit-funded public services are strained to the point of not delivering what our families need.

In Canada, the Federal government provides almost no services. The provinces, run health care, education (K-12 & post-secondary), labour, roads, highways, bridges, natural resources, the environment - the list goes on.

Under the previous Conservative Government, Canada’s defense spending dropped to half of what it was as a percentage of GDP under Pierre Elliott Trudeau in the 1970s. We lost a blue water navy.

As for the public services, the governments are overwhelmingly conservative and have gutted health care, and despite receiving major new increases in federal health transfers, have been more focused on cutting deals with cronies. They’re all such terrible capitalists it can’t even be called crony capitalism.

Those provincial governments’ deficits are a direct consequence of unfunded tax cuts for the wealthy and corporations - as are massive deficits around the world.

Even as provincial premiers demanded billions in new health funding, they have routinely refused to invest in services, infrastructure, or business development. That includes NDP and PC Premiers from coast to coast, who have let services rot, and refused to invest for the future in training, who keep running deficits and building up debt to increase unfunded tax cuts for the wealthy.

In Manitoba, the child poverty capital of Canada, the provincial government decided to start to add a half a billion dollars a year to the deficit and debt to finance property tax rebates. Totally regressive, debt-financed, and it stays in place whether the government is PC or NDP.

Canada’s deficits (less than 2% of GDP) are a fraction of the deficits that the U.S. (7%), Japan (9%) and China (9%) are all running, and they are all doing better.

That is because, and I apologize for the All Caps:

WHEN A GOVERNMENT SPENDS MORE THAN IT TAKES IN IN TAXES, THE PRIVATE SECTOR GETS ALL OF IT.

DEFICITS and PUBLIC DEBT are PRIVATE ASSETS.

Canada's economy is worse because of austerity and restraint, not because of excessive spending.

and inflation has eroded our purchasing power making it harder for Canadians to make ends meet.

In Canada and around the world, the inflation has been a direct consequence of price-gouging and collusion on prices between large companies.

The record oil prices mentioned above? Those were the result of OPEC joining with U.S. companies to restrict production and increase the price of oil. It was a choice. It was not just the invasion of Ukraine.

There have been a series of investigations into “anti-combine” activity in Canada, what is called anti-trust in the U.S.

The Federal Trade Commission discovered the OPEC oil collusion. In Canada and the U.S. there are allegations that companies are using software to coordinate their prices, including rents, pharmaceuticals, insurance, and food.

As Adam Smith said, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

In Canada and elsewhere, there is a lack of competition as the result of decades of mergers and acquisitions, which like everything else are supposed to be better for all of us because their “efficiencies” will result in lower prices.

The empirical evidence is that mergers and acquisitions lead generally lead to “efficiencies” that are layoffs, but the savings achieved by people losing their jobs and incomes aren’t passed on to the customer, they are passed on up the line. It also means less competition, and more pricing power that comes with being a dominant market player, or even a monopoly.

We can do something about it. Our country has all the ingredients to succeed, but we need the federal government to pursue a pro-growth agenda.

Canada needs more competition, more access to capital, less personal debt, real estate prices going back to something approaching normal. That would actually achieve equitable, widespread growth.

Big thinking and bold leadership are needed for us to go from worst to first in economic growth. That is why I’m asking you to support the Can-Do campaign. Together we can help grow Canada’s economy to everyone’s benefit.

This is the same advice, the same recommendations, and the same solutions that governments keep putting in place at the request of corporations, that have resulted in the current problem.

The Can-Do campaign is focused on creating the right conditions to turn things around, including:

- Championing, not criticizing, the large employers who drive Canada’s economy

- Creating a welcoming environment for private sector innovation and R&D

- Strengthening our country’s energy and food security

- Putting in place taxes and regulations that invite investment

Some of these requests are incredible, in the sense of being difficult to believe.

Look, I want Canadian companies to succeed. I don’t have a problem with protectionist policies, but government and democracy is about holding people to account. If citizens are being critical of a company, it’s a politician’s job to speak up. Not to stay quiet.

Asking politicians not to be critical of large employers is seeking to infringe on the fundamental democratic rights of elected officials in Canada.

In Canada’s representative democracy, politicians are supposed to represent the people who elect them - voters. Not the people who donate to them.

In Canada, under Westminster’s Parliamentary System, members of legislatures and of parliament, as well as Senators and witnesses and presenters at committee, have parliamentary privilege, which is the ultimate in freedom of speech, because you can’t be sued for it.

The other requests are vague policy requests that allow you to read whatever you want into them.

- Creating a welcoming environment for private sector innovation and R&D

Sounds great. How? Innovation in what? Banking? Groceries? Finance?

• Most true breakthroughs in innovation in R & D takes 20 years. The private sector’s idea of “long term” is three years.

• As Marianna Mazzucatto has recognized, most breakthrough technology is developed at public, not private expense. That includes high tech as well as pharmaceuticals.

• Canada does not even have adequate protection and enforcement of existing intellectual property laws - patents and royalties.

• We don’t need more scam-based innovation, like crypto.

- Strengthening our country’s energy and food security

Again, sounds great. What does it mean? It’s not going to happen for free. It is going to require investment.

Security and greater certainty requires reinforcing and strengthening domestic supply chains and production, so that we are not dependent on another jurisdiction. That requires both public and private investment.

- Putting in place taxes and regulations that invite investment

Here, “inviting investment” always means the public giving something up - services, safety, jobs, oversight, having a say in your community, because it is based in an ideological premise that the public cannot make investments themselves.

This is because markets and capitalists are always supposed to be better at allocating scarce economic resources and capital than citizens and government. This belief ignores market crashes of misallocated capital of 1987, dot-com crash of 1999, Global Financial Crisis of 2008, and Commercial Real Estate Crash of 2022.

We’ve been doing this for 50 years. Canada’s corporate taxes are lower than the U.S. Canada is already tax haven, and there is a lot of international tax avoidance.

It has to be said that while it is claimed that making changes in taxes and regulations for the purpose of “new investment” many of these policies don’t affect or benefit entrepreneurs or new businesses starting or scaling up.

They are a benefit to companies that are already established - which means, as a consequence, it’s a policy that inflating the price of existing assets.

Entrepreneurs and new businesses starting up need access to capital. It involved risk-taking and the creation of new value through innovation and work.

Reducing costs for existing businesses by cutting taxes, reducing regulatory burdens, etc, the largest businesses in Canada is not creating new value. It’s swapping costs and revenue.

Many Business Council of Canada Companies Benefited from Government Assistance

What’s more, the Business Council of Canada includes corporations that have received hundreds of billions of dollars in government support during the Global Financial Crisis and the Global Pandemic.

Canada’s banks were backstopped by $200-billion in 2008-09. During the pandemic, Canada’s banks and other corporations received hundreds of billions in quantitative easing and other supports from the Bank of Canada and CMHC, to say nothing of the fiscal supports for businesses.

It is not an overstatement to say that the actions of the Government of Canada (and other governments around the world in their respective) prevented a complete economic meltdown.

The problem is that they were the world’s most expensive patch-job.

All the problems with the economy already existed before 2020. They were there before 2016. By the time the pandemic hit in 2020, economies around the world were already in a dyfunctional state.

All the symptoms of problems have been ignored.

In the 2000s, Canada had lost hundreds of thousands of manufacturing jobs in Ontario, Quebec and elsewhere. The world opened to Chinese exports, which led to lost jobs in manufacturing export markets around the world. The Global Financial Crisis ruined more markets, as did the Euro Crisis. Trump was not the only sign that something was different in 2016. Bernie Sanders was a serious contender against Hilary Clinton. Brexit happened.

And whenever there was a crisis, the response from central banks has been to lower interest rates and expect and demand that individuals go into more debt, which they have.

We don’t need more BS. We don’t need more bad explanations and canned summaries about what’s wrong with the economy.

There are other major threats to Canada’s prosperity, from within and without, and the root of it all is that we keep trafficking in political and zombie economic ideas. People stick to them even when the evidence contradicts them, and that there are better explanations that actually lead to effective solutions.

Put it another way. I know people are better and smarter than this, but we’re talking about vague bullshit when we need to talk about the reality of what’s gone wrong. A market crash and a near decade of depression in the oil sector. The monetary policy that has completely distorted the economy with debt. The massive economic bubble we’re in, which is clearly bursting.

We need to recognize that these are what the problems are. There is lots of evidence for them, including lots of the political divisions, radicalization, violence, hate, crime, conflict. Calls for separation in Quebec and Alberta.

The root cause is a financial crisis that is unfolding but and the bubble is bursting but the folks who’ve been on the big streak at the Casino are trying desperately to keep their streak going, when everyone else’s luck has already run out.

These economic and financial missteps, especially the manipulation of interest rates, caused an “everything bubble,” and the result is an economy where no one has enough money to pay their bills. Too much of what’s behind sometimes glowing economic numbers is debt - not savings, or cash.

It’s a fine mess monetary policy has gotten us in to, and I am a strong believer that central banks can play a role in cleaning it up

I have my own opinions and suggestions about what needs to be done, and I think we need a New Deal, and a Marshal Plan. We work to allow asset prices to deflate by allowing for debt restructuring for individuals and farmers. Then you inject equity into the economy to reinflate and restabilize it.

Provide access to capital for Canadian owned start ups and scale ups. This can enhance food security as well as economic security. We should work with large farms to create new small farms for families who are interested. Energy, security and environmental goals can all be enhanced and improved with new investment.

Further, we should break up monopolies and work to invest in some the priorities that aren’t around taxes.

The goal is to rebalance an economy by replacing some debt with equity at the personal level as well as in the broader economy. The goal is to create new value and rebalance the economy by focusing on real economy investments.

And I’ve said that some of it can be financed by the Bank of Canada, through monetized deficits for example, or central bank bank accounts where Canadians could withdraw money and deposit in a private bank.

The goal of the New Deal is to allow and encourage renegotiation. It’s also to provide capital to new businesses. The goal is more “industrial” capitalism and less “finance and tech” capitalism where finance and tech are tools that companies use, instead of us all working for them.

The other reason I think central banks have the capacity and an obligation to play a role is that they have created the problem, as well as hundreds of billions of dollars in funds for banks and for other financial institutions and corporations. The question there is why is that the publicly created money can only go to certain corporations in the private sector? Because it has, at the very time that Canadian businesses and households were defaulting and losing everything.

There are better options than a crash.

But we need a plan that will address the real problems with meaningful action.

Happy New Year. Let’s hope this Zeit gets the new Geist we need.

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