The Sixth Estate

For those of you who don’t know, retired Harper Cabinet minister Stockwell Day now has two jobs: political “counseling” and journalism. Mr. Day has taken a position as occasional contributing columnist to CBC. This is presumably yet more evidence of the far-left agenda in our national media.

Today, Mr. Day has published a half-baked column filled with some extraordinary untruths. By untruths, I don’t just mean ideological statements that I don’t agree with. I just mean some incredibly obvious, basic, errors that someone with a course or two in economics really I don’t think would make. Which is where it gets kind of disturbing. We don’t have many retired Cabinet ministers kicking around, so it’s tough to generalize, but if this is the intellectual calibre of the people running our country, I don’t mind telling you, it’s a little bit worrying.

The main complaint from Day — and this is the hypocrite part — is that Barack Obama and Justin Trudeau both support fiscal policies which would keep their countries mired in budget deficits. Uh, hello? You know what party you were in, right? You remember the budgets you voted for? Or maybe you just slept through all those votes. The hypocrisy is extraordinary here. Our right-wing budget deficits are necessary responsible investments. Their left-wing budget deficits are unsustainable giveaways. I agree with Day that budget deficits are a problem. I’m just not sure he agrees with himself.

But, as I say, my concern is not with political grandstanding or ideology. It’s with things like this:

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Last time, in my new Hollowing Out series, I began taking a look at the Globe & Mail’s list of Canada’s largest 1000 companies back in 1996. (This list is not freely available online to my knowledge, so I cannot link to it.) I found that around 30% of the largest 100 companies on that list had since been sold to foreign interests — a ratio I thought was fairly disturbing, although not nearly as bad as it could have been or, indeed, as bad as some people have been led to believe.

I’ve now finished going through the top 300 on the list, and the numbers have changed somewhat, but today I want to ask a slightly different question: if a large minority of major Canadian companies aren’t Canadian anymore, who’s buying them all? The answer is, predictably, mostly American. But not entirely American.

China doesn’t yet figure prominently on this list, but if the recent wave of acquisitions in the energy sector is any indication, they will in coming years. Here’s how the foreign ownership picture stacks up for whatwereCanada’s largest 300 companies in 1996:

In the wake of the recent Ted Opitz case, in which the Supreme Court of Canada issued a bizarrely partisan split ruling, written by two Harper appointees to the nation’s highest bench, accusing Liberals of trying to undermine democracy, I thought it would be useful to take a quick look at another recent ruling by the Supreme Court, also on a subject of some importance for Canadians. This one has to do with multinational corporations and tax laws. It’s an important subject. As I noted recently, since 1995, around one-third of Canada’s largest corporations have been bought out by foreign multinationals, mostly American and European.

This case has to do with pharmaceutical giant GlaxoSmithKline, which was charged by the Canadian Revenue Agency with what appears to be a form of tax avoidance.** In particular, between 1990 and 1993, Revenue Canada noticed that GlaxoSmithKline Canada was importing an anti-ulcer drug called Zantac (ranitidine) from a fellow GSK affiliate Adechsa and made in Singapore, at around $1600 per kilogram. In contrast, generic drug companies were purchasing the same active ingredient for around $200-$300 per kilogram.

Was GSK just getting a raw deal? Revenue Canada apparently didn’t think so. The corporate tax rate in Singapore was much lower, and GSK wasn’t paying taxes on the cost of the drug imports. They reassessed GSK’s taxes and charged them as though the difference between the book price one GSK subsidiary paid to another GSK subsidiary ($1600 per kg) and the real estimated value of the drug (up to $300 per kg). The total difference was about $50 million in taxes, spread out over three years.

We should cut through the medicalese to explain the point here. What Revenue Canada is concerned about is what could best be described, in hypothetical terms, as a tax evasion scheme — sort of ultra-white-collar corporate money laundering. The corporate tax rate in Country A is (say) 25%. But the tax rate in Country B is 5%. So Big Multinational Corporation’s subsidiary in Country A buys its goods from Big Multinational Corporation’s subsidiary in Country B at an exorbitantly inflated price. The Country A company writes off the expensive import on their taxes, and the Country B company reports it as income at the much lower tax rate. Presto: instant savings.

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In honour of the recent controversy over the proposed takeover of Nexen by the government of China (since only foreign governments are allowed to make money off of Canada’s oil patch, not our own government), I thought it might be nice to start a major new project, devoted to studying the hollowing out of the Canadian corporate sector. It begins with the question: Exactly how many major companies are being bought out by foreign competitors? Aside from the few high profile cases — Nexen, Tim Horton’s, Molson, The Bay, etc. — how common is this, really?

The Globe & Mail, aka the Daily Plagiarist, provides an answer. Every year since 1984, the Globe’s Report on Business has listed Canada’s top 1000 publicly traded companies, and a varying number of its top privately held companies, by profit and revenue. Unfortunately I don’t have the early lists, but I have been given access to the 1996 list, and have started putting it into a spreadsheet. This will mark the beginning of a major project to explore the answers to the question I asked in the first paragraph.

I’ve only just got started, but the numbers for the top 100 companies by profit, which had gross revenues ranging from around $300 million to $25 billion, are revealing. In 1995, 7 of Canada’s top 100 companies were controlled by foreign multinationals. However, in 2012, 37 of those companies were now foreign-owned.

Which is to say that in the last 17 years, one in three of the country’s largest corporations has been taken over by foreign interests. This includes a few countries that went bankrupt and had their remains snatched up by outside companies, like Nortel, but most of the takeovers were mergers of still-apparently-solvent companies by foreign multinationals.

Let the Great Canadian Fire-Sale continue.

Being neither a lawyer nor an accountant, I have to stress I may be missing something here. I do invite correction. However, I don’t think I’m wrong here. Here’s a simple question: what percentage of their income are MPs paying into their pension fund this year, and what percentage of their income will MPs be paying into their pension fund next year? Is the second number higher than the first? Are you sure?

After weeks of rumours about MP pension reforms in the works, the Harper regime finally brought them out in the budget… sort of. And it received great aplomb for it. The mediasphere is tremendously excited at the good example the government is setting here. Even Stephen Maher of Postmedia wrote a glowing commentary praising Harper for the big pay cut he’s about to give himself. The Globe & Mail, aka the Daily Plagiarist, said the same thing. CTV said they “did the right thing.”

But then something weird happened: the Liberals and the NDP asked the Conservatives to separate the MP pension reforms out of the omnibus budget bill to vote on separately, and the Conservatives agreed to do this. That’s strange, because it was widely expected that the Conservatives put them into the bill in the first place specifically to embarrass the Opposition. In three years’ time, when there’s another election campaign, the Conservatives planned to attack the NDP and the Liberals for voting against the budget in order to save their gold-plated pensions. That’s what the National Post said the strategy was. That’s what the Globe & Mail said the strategy was. It’s certainly the sort of ammunition the Conservatives’ PR office loves to make use of.

So why would they abandon such a golden strategy midstream? And more to the point, a few quick questions: What do MPs pay into their pension scheme this year? How much will they pay in next year? Is the second number higher than the first? Are you sure?

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A few years ago, when the Harper regime was young and idealistic, they had a grand plan for the future of regulatory inspections in Canada — inspections of meat processing plants, aircraft maintenance, etc., etc. No longer would the government field an army of inspectors, trotting around the country peering under the hood. Corporations could manage their own inspections; the main job for the government inspectors would be checking up on the process of corporate self-inspections, rather than conducting their own actual inspections. That’s the first problem.

The second problem is economic restructuring. That’s not a government problem per se, although the government has done nothing to prevent it. The private sector no less than the public one has been hollowed out, chopped up, and sourced out. Not every company that sells beef has to have its own slaughterhouse. Not every company that flies aircraft around the world has to have its own maintenance division. Consequently, when those cut-rate outside contractors have a problem, it means that huge numbers of their customers — i.e. the companies we buy products and services from — also have a problem. This is the second problem.

Canadians have now sat through two major failures in the food processing sector under the Harper regime: one at Maple Leaf Foods, and one another at XL. No one in government least of all the Agriculture Minister, has accepted responsibility for the failures. Nor have they laid charges against the companies responsible. Product safety, it seems, is no one’s responsibility and no one’s obligation.

Some people are no doubt wondering what the next food product controversy will be. They needn’t worry about that. Instead, they should be wondering how long it will take before the inevitable happens and the same sort of failure of the Harper-style inspection regime occurs in some other sector. Airlines, for instance, where maintenance inspections have been withdrawn in the same fashion under the intriguing name “safety management systems (SMS).” The idea — and I’m sure you’ll notice the similarity — is that maintenance will be even better when companies can “proactively” run their own systems rather than being constantly held back by the presence of tiresome and intrusive government inspectors.

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In recent months the Canadian airline industry has been pushing, hard, for lower costs. Not content with having the Harper regime order its employees to work under threat of legal sanction (so much for small government, eh?), Air Canada apparently wants to have that same government give it a variety of other under-the-table handouts, too. This lobbying has resulted in several reports in recent months, including from the Senate and, this week, from the Conference Board of Canada.

In light of the ongoing Margaret Wente plagiarism scandal, it seems only fair to point out that the Conference Board of Canada has a plagiarism problem, too. Unlike the Globe & Mail, though, they more or less dealt with it. I’m not condoning what happened. Some disturbing evidence emerged about corporate influence over report-writing. But on the whole, they did the right thing with regard to plagiarism: they recalled the reports, acknowledged plagiarism occurred, admitted “undue reliance on… a funder,” and contracted an Osgoode law professor to prepare new reports. Bonus points for all that.

Both the Senate report and the Conference Board report have received entirely favourable and uncritical news coverage, of course, which is less a comment on the quality of the reports, than on the negligence of journalists. Even more extraordinary, though, are the ways in which some of the findings contradict one another. There’s really no other way to put this than as follows: the Conference Board is better at producing sound, independent analysis under industry pressure than our own government is. Whether you agree with the conclusions or not, it’s not hard to tell who the more competent research organization is. The Senate report is 21 pages long; the Conference Board report is 43 pages long.

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… Although given how readily they swallowed it, it might be a bit of a stretch to call it bait in the first place.

Apparently one of the items in the next Conservative omnibus bill will be reforms to MP pensions. The “reforms” are, in a word, horseshit. They’ll make MPs wait a few extra years before collecting, and they’ll apparently up the contribution rates. And — best yet — they won’t apply except to new MPsafter the next election. In short, the current crop are all safe. That’s Conservative “reform” for you.

And then I turn to the Globe & Mail for its coverage:

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Recently I took a Globe & Mail columnist to task for arguing that Ontario’s public school teachers are overpaid. As a humble blogger I hardly expect a response from such a great luminary as Margaret Wente, but I do want to return to the topic anyways, because a couple of people raised some important points. In particular, one of my correspondents suggested that if a public-sector employee earns more than an equivalent worker in the private sector, then the public-sector is overpaid. Seems straightforward. Right?

Well, maybe. One of the most disturbing developments in recent Canadian history is how mean we’ve become — let’s make this point #1. Cheerfully guided by right-wing politicians, including the current Prime Minister, we’ve become an unhappy, resentful mob, easily whipped into a foaming rage because we feel that no one deserves to get more government largesse than we do. I want to emphasize that point. As much as people groan about civil servants being overpaid, I doubt many have ever or would ever tell their employer, when offered a raise, “I think you’re paying me too much for my job. I think it would be better for all concerned if you docked my pay by 15%.” It’s a lot easier to make these judgements when someone else’s paycheque is on the line, isn’t it?

Now, then. Here are some widely held proposals on how to ensure that public-sector employees are earning a fair wage. But I think very few people are actually firmly committed to any of them. I believe that many people just want public-sector employees to be paid as little as possible, certainly no more than they get paid themselves, and people are willing to grab at whatever intellectual argument seems to support that position in any given case, no matter how inconsistent with their other beliefs it might be. Quite frankly, I have no idea whether a public-sector wage is fair, just as I have no idea whether a private-sector one is fair. But people who do have such ideas ought to make sure they’re at least being consistent and ethical.

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When the Parti Quebecois announced that one of their strategies as a new government — if they ever form one — would be to provoke a fight with the federal government over who runs the Employment Insurance system, I don’t mind telling you, it worried me. Not because of anything related to the PQ, but more because of Stephen Harper himself. During his days as an Albertan anti-nationalist, you see, Harper also argued that federal programs like EI (and CPP, and the police, and healthcare, and income tax, etc., etc.) should be dismantled and handed off to the provinces to run as they chose:

The time has come for Albertans to take greater charge of our own future. This means remusing control of the powers that we possess… but that we have allowed the federal government to exercise… It is imperative to take the initiative, to build firewalls around Alberta, to limit the extent to which an aggressive and hostile federal government can encroach upon legitimate provincial jurisdiction.

This letter could have been lifted virtually verbatim from the pages of the PQ manifesto, just swapping out the names of the two provinces. It demonstrates why Harper is exactly the wrong Prime Minister to defend Canada against the demands of the separatist PQ — because at least on this issue, he actually agrees with them. I have warned for a long time now that electing a man who is basically an anti-nationalist would have dire consequences if there was ever another sovereignty battle with Quebec, and, if the PQ win the next election, those dire consequences will arrive.

What I’m suggesting here isn’t merely that Harper will “throw” the match, so to speak, but that he will see the PQ’s demands as an opportunity to press forward on some of the more controversial elements of his own agenda, and then “blame the separatists” to avoid taking responsibility for his own actions. This spring’s comparatively minor EI reforms provoked howls of protest, especially in Atlantic Canada. Imagine the political fallout if the federal EI system gets dismantled altogether. Politically unpopular? Absolutely! And yet the Prime Minister’s personal political beliefs are that the federal EI system should be dismantled. It’s just a question of how to convince the unwashed masses that it’s a good idea. Letting the separatists take the blame for it would be a good distraction, if he can find a way to swing it.

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