Want to improve the economy?

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Doug Saunders in the Globe and Mail:

Canadian companies have piled up more than $525-billion in cash reserves - almost a third the size of the entire economy - up from little more than $150-billion a decade earlier. According to a recent analysis by the Gandalf Group, at least 45 per cent of Canada's biggest companies are hoarding cash rather than investing in employment or capital.

None of it is going into research and development, expansion of market share, new offices and factories or, crucially, on employing people. Nor is it going into tax revenues, since cash reserves - and some of the earnings that contribute to them - escape the taxman, giving companies an incentive to not invest.

There's lots of money around. But as long as it's being hoarded — and those who are hoarding continue to accumulate a disproportionate share — the austerity agenda won't get the economy moving again. Neither will Tim Hudak's right-to-work labour agenda nor much else. Those measures don't address the problem: at this point governments are cutting taxes and streamlining regulations to benefit the very people who are hoovering up cash and sitting on it.

Want to improve the economy? Get a bunch of that money into the hands of the people most likely to spend it. Wherever they spend is where demand will increase and prompt the private sector to increase capacity to meet the demand. If the system works as advertised one of the byproducts of that expansion will be jobs. No messy tax credit programs. No "picking winners." No flashy economic development projects that create bureaucracies and photo ops for politicians. Everybody wins! Free markets!

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4 Comments

It's utterly staggering! Guardian gets to the guts.

£13tn: hoard hidden from taxman by global elite
http://www.guardian.co.uk/business/2012/jul/21/global-elite-tax-offshore-economy

For best results what we could really use is at the same time to carefully bring back some protectionism. That way, some of the money people spend will actually be for goods produced in the country and help create more jobs, instead of going to Mall-Wart and their suppliers in China, Indonesia and anywhere else the people can be forced to work for pennies an hour.

To heck with taxing the hoards - confiscate them all!

A question for everybody on this blog-have you read John Ralston Saul's book A Fair Country?

He spends a good part of the book ripping into Canada's current government and business leadership, particularly when it comes to their short-sighted thinking and willingness to "take the money and run", so to speak.

Saul further cites business leaders in other countries who express disbelief at what we're allowing in Canada, and even some Canadian business leaders themselves who feel the same way about the direction we're heading in. Saul and Mel Hurtig have both quoted various Canadian CEOs, bankers, Conservative politicians and business pundits who are all expressing many of the same concerns about the current direction of our economy.

All this suggests that there's a lot more consensus about what to do than anyone realizes, but whether we have the leadership and political will to fix the problem is another matter entirely.

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This page contains a single entry by pogge published on July 21, 2012 4:47 PM.

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