Investment & Profits

Corporate Canada is doing well, particularly finance and financialized sectors. An economy where most of the benefits from economic growth go to a small number of large financialized interests is not sustainable. These indicators track who is capturing the growing wealth of the Canadian economy.

Corporations should make profits. Historically in Canada, profits as a percentage of GDP sat at 10-12%. The last two decades have seen somewhat higher profits in the range of 14-16% of GDP. At a time of stagnating wages and high inflation, the distribution of benefits between capital and labour compensation needs to rebalanced. (Source: Statistics Canada (Wages, Profits))

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)).