CAW's Lewenza Challenges Business to do More for Economic Recovery
March 29, 2011, 2:50 PM EST
In a lunch time address today to the C.D. Howe Institute downtown Toronto, CAW President Ken Lewenza challenged Canada's business community to step up its contribution to Canada's fragile economic recovery.
In his speech, Lewenza reviewed recent data on income and expenditure in the country's economy. Consumers and governments have increased spending since 2008, but business is the only sector in Canada's economy still spending far less than before the recession began. While business capital investment has rebounded somewhat in recent quarters, the business sector has reversed less than half of the spending cutbacks imposed during the recession.
Meanwhile, business has used resources to pay off debt and accumulate liquid assets, rather than committing to new investment projects. Non-financial corporations in Canada are now sitting on cash and short-term assets equal to almost half a trillion dollars.
"This excess corporate saving is not helpful at all to the recovery," Lewenza said. "We need companies to be borrowing and investing: financing new projects, creating new jobs, doing the things business is supposed to do in our economic system."
Over a longer-term perspective, too, business investment has been sluggish - especially in contrast to the increases in business profits and after-tax cash flow. Indeed, businesses are not fully re-investing their cash flow into new investment projects in Canada. After-tax cash flow has exceeded business capital spending in Canada by $750 billion since 2001 and by $200 billion since the recession began.
"Canada needs that money to be spent," Lewenza challenged the audience. "Not sitting in an idle pile, but pumped into growth, investment, and job-creation."
Lewenza also highlighted the decline in business spending on research, development, and innovation. Business R&D spending fell again last year, to just 0.9% of Canada's GDP - the lowest level since Statistics Canada began gathering this data. Lewenza noted that business investment (on both fixed capital and R&D) has in fact slowed down, despite successive corporate tax cuts.
"The problem is not a lack of profits. The problem is not high taxes. The problem is the failure of Canadian businesses to innovate."
Lewenza concluded by encouraging Canadian businesses to join with government, labour, and other stakeholders to work cooperatively to build a high-investment, innovative economy. "Instead of pointing the finger at deficits, taxes, and unions, let's take the resources we clearly have available in our economy, and put them to good use in new investment and innovation."
Lewenza's full remarks are available at: http://www.caw.ca/en/10073.htm