Investment & Profits

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Corporations should make healthy profits, but they are capturing a much bigger share of GDP and economic growth than they did in the 90s and 00s. Despite this, workers’ wages have not grown in a comparable way, and corporations have reinvested in their own productivity at rates much lower than Canada’s peers. Extractive practices are robbing Canadians of better salaries and sapping our economy of its productive capacity. (Source: Statistics Canada Wages, Corporate Profits. Calculations by Social Capital Partners).

Corporations should make profits. From the 1960s through the 1990s, those fluctuated around 8% of Canada’s GDP. Then they started to take off, growing to 12-16% in the last two decades. These growing profits have contributed to growing economic inequality as investors scoop a larger share of GDP. (Source: Statistics Canada Profits, GDP. Calculations by Social Capital Partners).

It is difficult to assess the extent of “financialization” with just one measure, but finance and real estate have been growing as a share of our economy. (Source: Statistics Canada. Calculations by Social Capital Partners).

Canada’s economy is being financialized. Increasingly, Canadian corporations are not making things—they are moving money around and taking a fee. For almost 30 years, profits made by financial industries in Canada hovered around 30% of overall corporate profits in Canada. In the last decade, this jumped to around 50%. This trend towards financialization is seen around the world and is driving wealth inequality and de-stabilizing democracies’ economies. (Source: Statistics Canada (1988-2019,2019-present)).

Rising corporate profits have not gone back into building a stronger, more productive economy for all Canadians. Since 2000, the proportion of profits distributed to investors through dividends and share buybacks has grown, while reinvestment has steadily fallen. (Source: Progressive Economics Forum – DT Cochrane).