Friday Morning Links

Assorted content to end your week.

- Jordan Brennan discusses the utter failure of past trade agreements to live up to their promises, making it all the more unclear why we should be prepared to accept a new wave of even more inflexible restrictions against democratic decision-making.

The trade and investment liberalization regime led to rapid and relentless restructuring of North American corporate ownership by opening the door to the two largest merger waves in Canadian history. On the world stage, these merger waves led to higher levels of Canadian corporate ownership abroad. Domestically, heightened amalgamation activity created larger Canadian-based corporations — and the attendant market power that greater size bestows.

Between 1914 and 1988, for every dollar spent on expanding industrial capacity, Canadian business spent an average of just 23 cents on mergers and acquisitions (M&A). Between 1988 and 2013, an average of 93 cents was spent on M&A for every dollar ploughed into industrial capacity — a four-fold increase. Large firms are spending nearly as much acquiring their rivals as they are on new structures and an expanded workforce.

So what are the consequences of this amalgamation-fuelled concentration? The causes are complex, but the facts suggest that increased corporate concentration — power, in other words — has contributed to both slower GDP growth and heightened income inequality.

Unlike investment in fixed assets, which results in the creation of new structures and expanded employment, M&A is wholly an act of redistribution: It reallocates corporate ownership claims between proprietors, the purpose of which is to gain a larger income share. My research (contained in a recent report for the Canadian Centre for Policy Alternatives) confirms that amplified M&A activity has redistributed profit and assets up the corporate hierarchy, towards large firms.
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(T)he redistribution of business investment away from fixed assets towards M&A has also meant that fewer corporate resources are deployed in the expansion of industrial capacity, with more ‘dead money’ stockpiled on corporate Canada’s balance sheet, both of which put downward pressure on GDP growth.

It may be an unwelcome conclusion, but the enduring significance of free trade and liberalized investment has been an amalgamation-driven increase in corporate power — which has depressed growth and exacerbated inequality. Don’t expect any of this to be mentioned in the 2015 campaign, of course. But if Canadians ever want to overcome these afflictions, we’ll have to stop believing the hype.

- Meanwhile, Ian Welsh observes that extreme wealth tends to lead to deliberate efforts to exacerbate inequality - making for a noteworthy addition to the debate between Joseph Heath and Alex Tabarrok as to whether we should respond to weakening democratic systems with more effective neutral states or ever-greater reliance on market forces.

- Adrian Morrow comments on the similarities between the Ontario PC's election message and the austerity now being inflicted by a Lib government which pretended to be progressive just long enough to be able to attack public services. And Hugh MacKenzie sees transit as the only investment that's escaping the chopping block for now.

- Finally, CBC follows up on the health and environmental risks posed by unfettered oil development. And Mychalo Prystupa reports on the Duffy trial's revelations as to the privileged and secret access offered by the Harper Cons (among other governments) to the people profiting from the harm.