Supporting businesses during the pandemic means supporting workers. Businesses like other institutions are vehicles, mere shells with people who decide every aspect. The left complains that government shouldn’t support companies. The left is anti business and pro worker, but that’s an unsound position. If you are pro worker, logic dictates you be pro business to ensure firms create and sustain employment and value in the economy.
Supporting Businesses During Pandemic
Society needs firms to hire people to provide needed goods and services. Without businesses, government has no revenues, charities no funds, and the economy no lasting economic wealth. Governments do not create long-term productive jobs. That’s why we must stress support for business to keep people on their payrolls during and after the pandemic. Coupling this approach with proper planning, empathetic and effective leadership will preserve lives and protect the economy.
Denmark got it right, Canada followed, but Trump continued his narcissistic approach of basking in his “soaring” TV ratings. The Dane’s focus is to avoid mass layoffs. They will pay 75 percent of salaries of private companies’ employees hit by the pandemic. In effect, government will pay for some people to stay home. Those who continue to work do not get this benefit, estimated to cost about US$2.5 trillion or 13 percent of GDP over three months. In addition, the Danish government agreed to guarantee 70 percent of new bank loans to companies to prevent the financial sector from closing. The government hopes this funding will encourage more lending.
Canada’s Focus Supporting Businesses During Pandemic is Right On
Canada announced a $82 billion aid package, 4 percent of GDP, to help Canadians and businesses. It includes $27 billion in direct income and wages support, and $55 billion to help business liquidity through tax deferrals.
Providing loans to small firms that need help to maintain payrolls is a crucial step. But these firms must not lay off workers. This approach lays the basis for firms to ramp up to pre-pandemic levels when we get through the crisis. The alternative is to allow firms to layoff workers who then apply for unemployment benefits. However, when people are unemployed, they become stressed and de-motivated and might drop out of the labour market. Besides, the firm might close without this support, and those firms that remain will have to retrain workers. It’s much harder to restart after closing than mothballing and staying open until the pandemic passes. People, firms, and the economy are better off with the Danish approach.
Seven Changes to Corporate Taxes & Corporate Welfare
The steps governments are taking to protect firms are band aids. If they had level playing fields with no business taxes and no corporate welfare, firms would cope better in crises and not look to them for help. This pandemic is a time to reflect on how to develop new approaches to corporate taxation and corporate welfare. When we recover from the pandemic’s effect, the Canadian and USA governments should phase in these changes:
- Eliminate business taxes.
- Provide no welfare payments to businesses.
- Outlaw stock buybacks.
- CEOs, board members, and executives must not receive bonuses if they lay off workers in five consecutive prior years.
- Hold CEOs responsible for proven fraudulent activities of their firm for which they knew. Holding the firm and not the CEO responsible while paying tremendous bonuses to the CEO, penalizes shareholders and rewards the CEO.
- CEOs must repay bonuses earned during the fraudulent period, even if they did not take part in it.
- At each annual general meeting CEOs must provide shareholders with a personal letter that during the previous year they carried out due diligence and they and their senior staff are not aware of any unethical or fraudulent activities in the firm.
God alone knows when and how we will get through this crisis. However, we know the USA’s asinine, narcissistic leader’s prime concern is about him and his ratings. Let’s pray he puts aside his focus on his TV ratings and realize his reckless behavior is creating harm not only to his followers in the USA, but others who listen to him.