For more than four decades the economic paradigm that prioritized private market-led policy has been embraced by corporate, academic, bureaucratic and political elites.
The paradigm enlisted a variety of well-known policy tools, including inflation control, deregulation, privatization, austerity, balanced budgets and globalization.
The corporate-government power relationship that underlies this paradigm is one of capture and complicity. Only partially suspended during the pandemic, the relationship remains in place and its legacy is still very much with us.
Under this relationship, regulations and legislation are systematically tilted to benefit the private interest at the expense of the public interest.
Public institutions have been weakened, their resources and regulatory powers stripped. Fiscal capacity has been eroded by tax cuts for corporations and the super-rich, and the legitimization of their ability to engage in tax avoidance via offshore tax havens and other tax shelters.
The lost tax revenue in Canada from 2000 to 2019 amounted to almost $50 billion annually. Since 1980, the tax rate on the top income bracket has dropped from 43 per cent to 33 per cent, and corporate taxes are down from 36 per cent to 15 per cent. Tax breaks on income from investments have also become more generous over time.
Justice Virgil Moshanski, who led the Commission of Inquiry into the Dryden air crash, testified in 2017 before the Transport Committee that inadequate funding was "the root cause of the Dryden crash in 1989, and it remains hanging like Damocles’ sword over the Canadian air travelling public today." Such risks transcend the aviation sector.
Corporations are congenitally averse to regulations, virtually all of which are seen as red tape, i.e. harmful to the bottom line. They have developed powerful means to block, reverse, dilute and delay regulations that they oppose, through lobbying, political contributions and threats to relocate to “more accommodating” jurisdictions.
The tightly knit world of lobbyists, industry associations and federal officials is a revolving door of back and forth movement between industry managers and government officials.
Corporations commission studies by consultants or analysts at industry-supported think tanks—which produce self-serving data presented as sound science, amplified by allied media—to manipulate the assumptions upon which policy decisions are based.
Regulatory independence has been compromised by the shredding of agencies’ safety oversight and scientific resources. Without in-house technical expertise, they are beholden to the industry.
A vicious circle is created, wherein the loss of expertise due to budget cuts has led to regulatory outsourcing to companies. The result is corporate self-regulation, self-policing, and voluntary measures substituting for regulations.
Justice Virgil Moshanski, who led the Commission of Inquiry into the Dryden air crash, testified in 2017 before the Transport Committee that inadequate funding was "the root cause of the Dryden crash in 1989, and it remains hanging like Damocles’ sword over the Canadian air travelling public today."
There is no shortage of examples of regulatory capture
The following examples demonstrate that the legacy of this capture-complicity relationship is still very much with us.
Public Health Agency of Canada:
Mistakes by the Public Health Agency of Canada in its response to COVID-19 made the pandemic much worse than it should have been, according to testimony before parliamentary committee. Michael Garner, former senior science adviser at the agency, testified that the problem stems from the replacement of scientists within the agency by senior bureaucrats with no public health training.
It originated with the Harper government and was kept in place by the Trudeau government. The Global Public Health Intelligence Network, a key tool for Canada in gathering advance signals of outbreaks, was shut down by the agency eight months before the COVID-19 outbreak.
The lack of medical expertise at senior bureaucratic levels was most recently highlighted the March 2021 Auditor General’s report on the agency’s response to COVID-19.
Intellectual property provisions
The Canadian government is resisting more than 100 countries’ demands for a temporary waiver of the intellectual property provisions [TRIPS] under the WTO in order to speed up the largely unvaccinated population of the Global South.
Its rationale, bending to the powerful pharmaceutical lobby, is that a waiver won’t solve the supply problem and that firms in the Global South don’t have the necessary manufacturing skill or capacity. In fact, they do. A waiver would increase leverage for governments and alternative suppliers negotiating with Big Pharma, whose real focus is sales in profitable markets.
Joseph Stiglitz and Lori Wallach write, “any delay in ensuring the greatest availability of vaccines and therapeutics is morally wrong and foolish—both in terms of public health and the economy. The waiver is a critical first step.”
Joseph Stiglitz and Lori Wallach write, “any delay in ensuring the greatest availability of vaccines and therapeutics is morally wrong and foolish—both in terms of public health and the economy.
The SNC Lavalin scandal is an example of corporate-government capture and complicity at the highest political level. Prime Minister Trudeau and the federal government sought to help SNC avoid legal liability by enacting a law legitimizing remediation or deferred prosecution agreements, advocated by the company in order to avoid fraud and corruption charges for its bribery payments to Libyan government officials.
These actions came to light only when then Justice Minister Jody Wilson-Raybould refused to go along with the scheme, allowing the Public Prosecution Service to proceed with the charge despite the DPA. She was ultimately fired for refusing to play along with capture-complicity game.
Canada Infrastructure Bank
This elite government-corporate power cabal was evident at the very beginning of the Trudeau government’s term in office. It effectively outsourced economic planning to global management consultant McKinsey & Company, which provided research, analysis and administration, placing the company in a privileged position to shape government policy—a company that advises virtually all of the world's 100 largest corporations.
One of the first recommendations that the federal government implemented was the creation of the Canada Infrastructure Bank, a public-private partnership— to which the government contributed $40 billion—providing private asset managers with lucrative investment opportunities. The current Infrastructure Bank CEO is a former partner with McKinsey.
This is the same company that recently paid $573 million to settle claims related to its recommendations to Purdue Pharma and other drug companies for their opioid marketing and sales strategies. Their plan to "turbocharge" sales of OxyContin with health care providers helped cause an unprecedented epidemic of suffering and death across North America.
Fossil fuels sector
The fossil fuels sector exemplifies the capture-complicity relationship in terms of obstructing climate actions. It has been using the pandemic as a vehicle to push for exemptions, amendments, suspensions, etc. to policies and regulations.
The Canadian Association of Petroleum Producers pressured the federal government to suspend environmental regulations, delay lobbying reporting, scrap its plan to implement a clean fuel standard, put new climate policies on pause, provide “liquidity support” and make fossil-fuel investments 100% tax deductible.
A market crisis joint working group composed of cabinet ministers, deputy ministers and oil company CEOs met weekly with a view to “keeping industry active and viable, preserving jobs and encouraging investment” and to “reduce operating costs and regulatory burden.” They were subsequently extended to include supporting offshore, liquified natural gas, and oil sands projects.
I have written extensively about capture-complicity in the railway sector in my book about the 2013 Lac-Mégantic oil-train disaster. CP Rail, which played a major role in the worst industrial disaster in a century, is still in court seeking to evade its responsibility to contribute to the class action fund for victims, as well as clean-up costs incurred by the Québec government.
Recently, CP Rail bought the line through Lac-Mégantic to give it access to the Atlantic coast. It is delaying the construction of a rail bypass around the town that was long promised by government; a bypass route that has already been certified by major engineering companies. CP Rail wants modifications to the route and the government has willingly complied.
Previously, Transport Canada had rejected all modifications to the route submitted by elected officials and citizens of Lac-Mégantic and surrounding towns, citing additional costs. The government buckled immediately to CP Rail’s demands despite their greater expense and the fact that, once completed, it will be handed over free of charge to CP Rail.
Capture-complicity is neither inevitable nor absolute. Variations in the nature of the relationship exist depending on the specific regulatory body and/or the integrity of individuals occupying senior positions within government.
Regulatory capture can be resisted
Capture-complicity is neither inevitable nor absolute. Variations in the nature of the relationship exist depending on the specific regulatory body and/or the integrity of individuals occupying senior positions within government. Nevertheless, the basic edifice remains intact.
Countervailing measures aimed at rolling back corporate power include:
- Transparency, i.e. lifting the veil on these activities which normally occur behind closed doors;
- Mechanisms that encourage public participation;
- Additional resources to support regulatory oversight and enforcement;
- Accountability/liability at senior government and corporate levels;
- Reforms to regulatory policy to prioritize public protection over private interest;
- Rigorous conflict of interest rules protecting against revolving door phenomena;
- Whistleblower protections for those who are willing to speak out against transgressions.
These measures are largely self-evident. The challenge of putting them into effect is formidable. Continued media and other investigations that expose the dangers of the capture-complicity relationship between government and corporations are absolutely essential.
This is an existential issue that corrodes our democracy. However, its gravitational pull can be resisted. A paradigm shift is possible, but not without widespread citizens’ mobilization for change. In a time of climate crisis, the stakes could not be higher.