The current spate of corporate theft in North America can be traced to one overriding element in continental corporate culture. Concentration. While the debate about concentration rages, the fact of concentration continues. The only end served is not efficiency but greed. While 80% of our new jobs are produced by small business, bank credit and tax breaks go to the conglomerates. While the top 20% of our corporations and citizenry exploit the levers of legislation for their own fiscal benefits, 80% of our total taxes are collected from small businesses and workingmen and women 45% of who have no more than two weeks of cash flow in savings. In the midst of an already inequitable environment we now hear calls from the banks to allow mergers.
It is incumbent upon a progressive administration to impose a two-year moratorium on all combinations involving any of Canada’s 200 top corporations. At the same time a Royal Commission on Corporate Concentration should be empowered to consider the social and political effects of mergers and monopolies, not just the economic edge that big business seeks in order to pursue its worldwide activities. This Commission would also be mandated to force the pro-merger advocates to demonstrate how increased combinations would flow through benefits to the public at large. Today, many firms merge not merely because it is efficient, but because our tax laws permit the sheltering of profits in the financial structure of the acquired firm. The techniques of accountancy make firms look more profitable than they really are, causing massive over investment and subsequent rapid divestment thereby destabilizing working men and women’s futures and security while executives get golden parachutes. Recommendations on reforms of our fiscal codes would be part of this Commission’s mandate as well.
We have had wage freezes and price freezes in the past. A merger freeze would at least give us time to think before these combinations destroy whatever is left of a supposed competitive economy. The absurdity of the very people who demand a free market devising constructs of monopoly accompanied by unyielding demands on government cash and credit cannot be lost on any rational, thinking citizen.
Several decades ago, in the midst of an economic downturn, a commentator wrote, “the money changers have fled from their high seats in the temple.” Today it may well be said “the money managers have tumbled from their high perches on the tower.” The intimate relationship between the funny-money specialists on the Street and the corporate titans in the boardrooms has already destroyed the financial economy of the securities markets and now threatens the real economy of the job market. We are living through a time of elimination of permanent jobs unprecedented, in gross numbers, since the Depression. It is commonplace to hear, almost daily, of corporations eliminating twenty, thirty and even forty thousand jobs in one cut.
This malaise cuts across all sectors and all industries. In part, this is due to reversionary business cycles, the negative effects of which government can only seek to cushion the public from. But this is also due to mismanagement by many corporate chieftains characterized by the arrogance of avarice and a cynical smugness stemming from the incestuous intimacies between supposed competitors in the exchange of goods and services and supposed lenders and borrowers in the exchange of capital. All may be fair in a strictly private enterprise environment. But there is not one industrial or financial giant that does not benefit from government largesse. It is time to bring the behemoths to account and reduce the burdens on the ordinary citizen.
A six point plan should be undertaken to reform the current climate that makes it all to easy for the irresponsible, the unethical and the greedy to undermine the stability and security of this country and the lives of the ordinary working men and women that are its foundation:
1.Prohibit all interlocking directorates in the financial services sectors. We may finally see the return of competition and an end to the lock-step approach we have today that shuts credit. and facilities to small business and the individual. We may even get better service for customers.
2.Prohibit directors of competing businesses from sitting on the board of the same bank. This would close one ready forum for collusive or anti-competitive “off-the-record” discussions between corporations and their financiers. Supposed competitors may not tell all to each other, but they do say hello far too often.
3.Open up directorships to wider groups. By legislation if necessary. The adoption of policies at the board level in return for similar corporate favors is rampant, particularly in the financial services industries. Financial decisions critical to a community are undertaken with no reference to the people these decisions affect. Banks and insurance companies are chartered, serviced, protected and regulated by government. They cannot continue to collect obscenely unnatural profits made possible by public policy and political persuasion and still demand the autonomy of a purely private operation.
4.Close the tax loopholes protecting bank profits. Excess bad debt reserves, favored capital gains treatment—such breaks simply add to the tax burden of the wage earner.
5.Require bank investments in community and socially useful purposes. Our model should be the U.S. Community Reinvestment Act. Using federal funds to insure against high risks, federal law should require that a set percentage of profits be used for community reinvestment. Particularly in poorer areas where Canadian banks have been known to close six branches in one county because the people were not wealthy enough to make it worth their while. Banks like to claim that they are in the business of “wealth management”. In fact, for the past thirty years, they have been in the business of debt creation. They cannot simply be allowed to cut costs, grab fees and abandon communities where their own created debtors make it less profitable for them to operate.
6.Tax the profits hidden by life insurance companies in tax-free reserves. By using outdated actuarial tables and underestimated investment income, insurance reserve funds are swollen by tens of billions. Taxing this hidden profit could produce billions in tax revenues.
Few hold protest rallies against the over-all economic practices of corporate Canada. Only about their investments abroad or their participation in globalization policies. Yet corporate Canada’s domestic policies, particularly those of banks and insurance companies, are among the most important forces behind the unfair distribution of wealth and power in our land. Protected by law (including a largely unreconstructed Bank Act from 1895), given dozens of tax breaks, permitted to hold degrees of concentrated economic power long outlawed in other areas of economic life, they have used their power to deliberately and systematically redistribute wealth, power and, more importantly, equality of opportunity, away from working people and the poor and towards the rich.
Much of the needed reforms can be accomplished through existing financial and consumer legislation. Some will require radically new definitions of what corporate citizens may do, may not do and must do. But at the end of the day, Canadians will be able to eye a great prize---an equitable redistribution of power and profit, preference and privilege; and a generous redefinition of the dignity and debt owed to worker and depositor not just to stockholder and investor.