It doesn’t say much for the entrepreneurial spirit, when the government needs to tell corporations to stop sitting on their hands and do something.
At a time when the idea of stimulating a stagnant economy continues to drift into conversations, federal Finance Minister Jim Flaherty has suggested private business is in a prime position to help.
Last week, Bank of Canada governor Mark Carney said Canadian companies are holding on to piles of cash because of global economic instability. He suggested putting some of that money into their shareholders’ pockets would boost economic activity.
Flaherty borrowed from that sentiment Monday saying Canadian corporations should invest $525 billion in dead cash back into the economy. He added that the federal government has been performing its role by introducing tax measures designed to encourage business expansion and investment.
That’s a lot of money gathering dust – or at least earning very little for the corporations considering today’s ultra-low yields on investment. It sounds astronomical, but the figure comes from a previously released Canadian Labour Congress study that suggests Canadian businesses are sitting on some $500 billion in cash assets.
Compare that to the announcement early in 2009 that the federal government would sink $35 billion in borrowed money over two years in an attempt to stimulate the economy.
That money, much of it spent on public projects, was intended to keep more Canadians working as economic doldrums loomed.
The difference when that kind of capital is in the hands of private companies is that they’re the ones that supposedly know how to turn over a dollar. Think of what could be achieved in research, design and developing new products, in expanding manufacturing and trade – if some of that money were invested.
Economic jitters is largely an emotional phenomenon. There is admittedly some risk involved in investing in new ventures, but there’s also potential for some huge gains.