What about jobs?

Men reading the want ads in Toronto during the Great Depression

As I was listening the the election rhetoric from last night’s CBC broadcast, it seemed to me that the messages are becoming much more personal and are moving away from discussions about jobs and the economy. All three parties claim they will improve the economy and produce more jobs for Canadians, but in a Free Trade economy, I doubt if that’s even possible any more.

In a recent blog posted on Motley fool, titled “Made in America? Not Exactly for These 5 Popular Products”, the author is lamenting that products identified as American are not really made in the USA. These include:

1. Levi Strauss: the manufacturer now makes most of it’s high-quality Levi’s jeans overseas, but it has not diminished the popularity of the brand.
2. Apple: It’s no secret that almost all of Apple’s iPhones and iPads are made in China.
3. Nestle: Nestle now owns Gerber’s and virtually all that baby food is now made in places like Poland, Venezuela, and Mexico
4. Jared: Rawlings baseballs used in virtually all the Major League Baseball games are now made in Costa Rica, not in the United States. Most of the baseball bats used by the MLB, The SamBat, are made in Canada.
5. Mattel: Barbie dolls are all made in China.

If large American companies cannot stop the expatriation of American jobs, how can smaller Canadian companies resist the trend if they want to compete? We’ve already seen this happening even when there are no off-shore manufacturing facilities to lower costs. Bigger corporations simply gobble up smaller ones and then, because of the economies of scale, reduce costs and often also raise prices, and there’s little we can do to stop this especially if the company has a monopoly or a near monopoly in the marketplace.

For example, we have no more major Canadian beer companies. Molson Breweries, the company that gave us a beer named “Canadian” was established in 1786, but in 2005 it was merged with Coors to form the Molson Coors Brewing Company, and the worldwide head office was moved to Denver Colorado, although the Canadian Division is headquartered in Montreal. The Labatt Brewing Company was founded in 1847 but it too was taken over by Belgian brewer Interbrew and is now part of Anheuser-Busch InBev.

Tim Hortons, the quintessential Canadian company, which first appeared in Hamilton in 1964, was most recently merged with Burger King, which is controlled by 3G Capital who are majority shareholders of Burger King. Tim Hortons was previously owned by Wendy’s, another American burger chain. The Canadian government insisted the head office remain in Canada and so Burger King shut the offices in Dublin Ohio to move their American headquarters to Oakville in Canada.

We have become consumers who like cheap and our economy is controlled by companies whose sole purpose is to “drive up shareholder value”. Investors can no longer earn 20% or 30% investments from bank interest or bonds or the old mainstays of investments like oil companies. So they are branching out into areas they would never have even considered before.

Take for example the recent takeovers in the pharmaceutical industry. In the Wall Street Journal Article “Pharmaceutical Companies Buy Rivals’ Drugs, Then Jack Up the Prices”, one company, Valeant Pharmaceuticals International Inc., increased drug prices by 212% to 525% overnight. The costs of manufacturing these drugs had not changed - just the owner. The price increases were more driver by shareholder greed to pay out higher dividends, than they were for any other business need. Other companies doing the same thing are included in this article.

The point I’m trying to make is that full-time, well-paying jobs are quickly disappearing in Canada and the United States as more and more companies use these behaviours to improve their bottom lines. It’s not that the jobs couldn’t stay in Canada, or that the products couldn't be sold at the same prices they sold for before the takeovers. It would just mean that the investors and wealthy shareholders would have to wait longer to build up their obscene cash piles instead of cashing in right away and then moving on to other targets.

Isn’t enough enough? Shouldn't we be taxing the excess profits and dividends that these tactics are creating? Shouldn't we be closing the loopholes that corporations and wealthy individuals use to avoid paying these taxes?

When all the good jobs have been exported from Canada and the United States and all that’s left are the service jobs at Tim Horton’s and Walmart, who are going to be the customers that shop there? We’ll be left with a society of the poor, the vast majority, who will only be able to afford to shop at the Dollar Store and Goodwill, and the ultra-wealthy who will be shopping at Starbucks, Holt Renfrew, Nordstrom’s and Tiffany’s. The huge disparity will create discontent and conflict. Some theorize that this forcing of people into unemployment and then trying to over-tax them, but not taxing the wealthy to pay their fare share, are the type of events that led to events like the French Revolution. In order to create a just and fair society, we need to achieve a better balance between the rich and poor and find a way to provide hope and survival to the middle class, and allow that group to thrive and even grow.

Works cited:

James, William (photographer). "File:Men reading the want advertisments for jobs, Melinda Street.jpg". Wikimedia Commons. https://upload.wikimedia.org/wikipedia/commons/c/c5/Men_reading_the_want_advertisments_for_jobs%2C_Melinda_Street.jpg/. Web. 1919. This image is available from the City of Toronto Archives, listed under the archival citation Fonds 1244, Item 526.

Williams, Sean. “Made in America? Not Exactly for These 5 Popular Products”. Motley fool website. http://www.fool.com/investing/general/2015/10/17/made-in-america-not-exactly-for-these-5-products.aspx/. Web. 18-OCT-2915.

"SamBat: The Original Maple Bat Corporation". SamBat website. http://canada.sambat.com/. Web. 18-OCT-2015.

"Molson Brewery". Wikipedia. https://en.wikipedia.org/wiki/Molson_Coors_Brewing_Company/. Web. 18-OCT-2015.

"Labatt Brewing Company". Wikipedia. https://en.wikipedia.org/wiki/Labatt_Brewing_Company/. Web. 18-OCT-2015.

 "Tim Hortons". Wikipedia. https://en.wikipedia.org/wiki/Tim_Hortons. Web. 18-OCT-2015.

"Burger King". Wikipedia. https://en.wikipedia.org/wiki/Burger_King. Web. 18-OCT-2015.

"3G Capital". Wikipedia. https://en.wikipedia.org/wiki/3G_Capital. Web. 18-OCT-2015.

 Rockoff, Jonathan D. and Silverman, Ed. The Wall Street Journal Online. "Pharmaceutical Companies Buy Rivals’ Drugs, Then Jack Up the Prices". http://www.wsj.com/articles/pharmaceutical-companies-buy-rivals-drugs-then-jack-up-the-prices-1430096431/. Web. 18-OCT-2014.

"Valeant Pharmaceuticals". Wikipedia. https://en.wikipedia.org/wiki/Valeant_Pharmaceuticals/. Web. 18-OCT-2015

 "French Revolution". Wikipedia. https://en.wikipedia.org/wiki/French_Revolution/. Web. 18-OCT-2015