The report â€śAscent of Giantsâ€ť on NAFTAâ€™s impact on corporate power is based on data from Canadian firms and discusses how trade and investment liberalisation enabled corporations to concentrate market power through mergers and acquisitions. Investing in buying other companies diverted resources from productive investment which dragged job growth. Stockpiling cash also increased.
The timing of the study is important given the US current governmentâ€™s intensive policy of negotiating ever-more intrusive NAFTA-like trade and investment agreements with countries like Japan, the European Union, China and others.
Here are some excerpts:
- Â â€śCorporate amalgamation fuels asset and profit concentration. In 1950 the largest 60 firms accounted for 29% of total corporate profit, which was little changed in 1993 (30%) on the eve of the NAFTA. Following the agreement Canada witnessed its two largest merger waves and profit concentration doubled, peaking at 58% in 2011. Itâ€™s the same story with asset concentration. In the early 1960s the largest 60 firms held 27% of total corporate assets, rising to only 30% in the early 1990s. But by 2010 the largest 60 firms controlled 46% of all corporate assets.
- â€śBy concentrating corporate assets and centralizing income streams, amalgamation waves have also contributed to the stockpiling of cash on corporate Canadaâ€™s balance sheet, which is another key ingredient in the stagnant GDP growth of recent decadesâ€¦ Between the early 1960s and the early 1990s the stockpile of corporate cash averaged 4% of assets but this nearly tripled (to 11%) between 1990 and 2012.
- â€śIn 1993, on the eve of the NAFTA, the markup was less than 3% but surged to a postwar high of 12% in 2007. The windfall is not being shared equally between the owners of corporate equity and the labourers who help produce it. As corporate power increases, as it did in the decades since 1990, owners tended to win at the expense of workers.
Â Ascent of Giants: NAFTA, Corporate Power and the Growing Income Gap is by Jordan Brennan
The report can be downloaded here.
Our thanks go to Gail Cartmail of Unite.