An Economy Out Of Balance

You have to be cautious about drawing inferences out of one month’s numbers, but today’s job figures are of the type to be considered “eye popping”, and I note economists reacting as such. Just this very week, Mark Carney was on television promoting the virtues of the Canadian economy, how it was fundamentally poised to withstand global uncertainty; not immune but relatively strong. One particular comment struck me, Carney said “corporate balance sheets have NEVER been better”, an objective fact, nobody would dispute. A few days later we receive these abysmal job numbers, which demonstrates some disconnect pointing to a fundamental problem.

I predict if someone were to graph corporate profits and employment trends, you would see a divergence the likes of which unique in economic history. Day after day, quarter after quarter, corporations are racking up impressive profits, on fundamentals, price to earnings, the stock market should be surging to record terrority. And yet, we still see consistent drags on performance, a primary root is the continual inability of economies to create robust job numbers. Apologists will NOW argue the corporate tax regime was never intended to create jobs necessarily, but I would suggest a review of past statements to truly understand the sales job. What is happening- and nobody disputes- corporates are HOARDING their cash, Carney is right about the balance sheets, but offers little guidance on opening the taps to the greater economy.

On economic health we receive theoretical commentary about how corporations will eventually start spending, there is a nervousness which precludes normal investment, expansion. I would suggest a review of bank practices- the largest benefactor of corporate tax decreases and you will see that during the HEIGHT of expansion, those heady days prior to the 2008 crash, they were slashing jobs LEFT and RIGHT, across the board, despite making absurd profits. Economists can turn themselves into pretzels telling us why corporate tax cuts work, but there is little real world evidence to support outdated theory.

There is something fundamental wrong at the moment, economically things are out of balance, what should be happening simply isn’t and we are left to look for remedies. I have floated an idea of putting a cap, perhaps a claw back, on corporate dividends, given that this money isn’t fairly distributed, but rather reinforces inequities. Corporations currently have more cash than they know what do with, judging by the jobless numbers, this notion that profits benefit all is simply fiction. It is quite clear, the corporate tax cut argument has gone too far in a ill advised race to the bottom. The policy has resulted in record profits WITHOUT the promised benefits, every stat betrays proponents, we are left to nothing more flimsy than future inevitability arguments.

The economy is no longer in harmony, of that I have little doubt. I also have more confidence that the general population is coming to this sober realization which provides opportunity. Someone, or some entity, must address the growing inequalities, they are real and pronounced.

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