Monday, May 13, 2013

The Corporate Ethic.

Globe & Mail writer Jeffrey Simpson once said, “Without productivity growth, there’s no real economic growth, no real wealth creation, no improvement in the country’s overall standard of living.”

With all the political and media hype about R & D and corporate tax cuts, why the rapid decline in the standard of living for so many Canadians?

According to a study by Toronto’s Impact Group, “Very few Canadian companies do R & D; over seven years, only 9 percent of Canadian firms did R & D every year. The rest did nothing or at best were occasional performers.”

Simpson also wrote; “The hidden issue of Canadian economic structure is foreign ownership. Canada remains a branch-plant economy, and branch plants don’t do much R & D unless bribed by government.” Our nation’s manufacturing industry is over 50 percent foreign-owned. Why would foreign firms, mostly U.S.-based, transfer R & D out of their own country, even with big incentives? Statistics Canada says, “It is investment spending by firms and households that is the prime mover in economic fluctuations.”

According to published OECD figures, Canada’s productivity ranked 5th in 1970, 12th in 1980, 16th in 1990, 16th in 2000, and between 2000 and 2005 we were 20th out of 29 countries studied. By 2006 we had fallen to 22nd place, and in 2007 we were 47th out of 50 in terms of GDP per hours worked. Recent figures show the trend continuing.

Most of the barriers identified by business leaders in the 80’s and 90’s as impediments to economic growth are gone; yet the growth of productivity has never been worse.

Investment in machinery and equipment capital stock has fallen in recent years. This eduction in new technology acquisition also reduces growth in productivity, and this at a time when all other developed and developing nations are forging ahead.

According to David Crane of the Toronto Star, “Productivity is about innovation—skilled employees with advanced technologies generating high-value products and services that support good jobs and create the wealth for a successful society. Productivity is not about a race to the bottom.”

The Information Technology Association of Canada says in 2005, Canadian companies were investing only 43 percent per worker when compared to U.S. companies. In January 2006, the Globe & Mail blamed the “private sector’s pitiful investment in the adoption of new technologies,” then went on to advocate another round of tax breaks for big corporations.

In the International Productivity Monitor, TD Financial’s Don Drummond and co-author Rita Sapru stated, “Productivity growth has slowed dramatically over the last seven years, a development that threatens the well-being of Canadians.”

Yet corporate share of Canadian earnings as a percentage of GDP has been growing at record levels.

Based on past performance, big corporations do not deserve more tax breaks.

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