Loblaw chairman Galen Weston Jr, the creaseless face of inherited Canadian wealth, smiled serenely at parliamentarians as he explained why, when it came to rising food prices, his company was blameless. Speaking to an agri-food committee in the spring of 2023, he told them that Loblaw’s profit “goes back into the country.”
“The profit we do generate, we reinvest back in this country to create more stores, more services, and more jobs,” Weston said in the same dulcet tones he uses to sell President’s Choice products on television. While Weston didn’t back up his claims with any numbers, nor did his critics have any with which to dispute him.
Now we do.
Two new reports, one by Canadians for Tax Fairness and the other by CLC economist D.T. Cochrane, reveal that Loblaw—and many of Canada’s major corporations—are primarily using their profits to enrich their already wealthy owners, instead of using them to the benefit of Canadians. The data shows that since the 1980s, Canadian corporations have reinvested dramatically less and less into new equipment or products, even as corporate profits steadily increased.
Where is the Money Going?
Decades ago, they devoted as much as a third of their profits to reinvestment. Today that number has shrunk to a piddly ten per cent. In the case of Loblaw, the decrease in reinvestment is even more extreme: from 2020 to 2022, it was a mere one percent.
According to the number-crunching by Canadians for Tax Fairness, Canadian corporations are using more than two-thirds of their profits to pay out dividends to their shareholders and buy back their shares. The latter maneuver drives up the price of their share (not to mention the bonuses of executives like Galen Weston Jr, which are often tied to share prices) and plows even more money into the pockets of their investors. What it doesn’t do is contribute to productive investment.
In other words, and flatly contradicting Weston, not more stores, not more services, and not more jobs. So much for the ‘trickle down’ of corporate profits.
For decades, we’ve been told we shouldn’t worry about the slash-and-burning of regulations and corporate taxes. Higher profits for companies and their wealthy owners would supposedly “trickle down” to the rest of us in the form of investment, which would spark more jobs and better incomes. But the numbers betray this essential dogma of the neoliberal era.
Despite a friendly business environment—basically, unheralded power and freedom—Canadian corporations are investing their profits less than ever before. Economist Jim Stanford writes that this is a “sure sign companies literally have more money than they know what to do with.” He points out that the grocery giants Loblaw, Empire and Metro “spent twice as much last year on share buybacks as it would have cost the entire food retail sector to raise wages for all grocery store workers by $2 per hour.” (Remember when the grocers offered workers $2 “hero pay” during the initial COVID lockdowns, then clawed it back?)
Investors may understand that any major growth that comes from investment will make workers hungry for a bigger piece of the pie. Instead, by curtailing growth, they can keep workers permanently insecure and more compliant. But whatever the cause of the hoarding, the connection between higher profits and greater investment has been resoundingly shattered. And despite the sweet promises of Weston Jr, the time for small fixes is over.
Both reports advocate significant increases to corporate and windfall taxes. That would ensure that massive corporate gains truly, in Weston’s words, “goes back into the country.”
