Why Government will Always be Beholden to Business

The one-sided dynamic ruining democracy

Canada just bought a pipeline for 4.5 billion dollars (CAN). Well, more accurately, they agreed to buy out a project for a pipeline extension from a Texas-based company to meet some old agreement with China that will see them gain access to Canadian oil.

The pipeline, once constructed, will move 890,000 barrels of oil a day produced in landlocked Alberta to a harbour in British Colombia on the Pacific coast raising fears of an environmental disaster on Canada’s biodiverse west coast. Beyond that, the pipeline has faced stiff resistance from indigenous populations and environmental activists leading to massive arrests, the largest when 172 people were arrested in one week on March including the leader of Canada’s green party. Resistance to the pipeline is not just on a grassroots level. British Columbia has denied Alberta the right to have the pipeline go through its province leading to a trade spiff between the two provinces. This decision can be overturned though now that the federal government has stepped in to manage the project.

Not only is the government going against the overwhelming will of its own people, but it’s proving to be highly hypocritical as Justin Trudeau, Canada’s Prime minister, ran on a platform of pushing for green energy. Not only is the 4.5 billion dollars not going to green energy initiatives, but it’s also not going towards other much-needed projects such as ensuring that the First Nations (native) population has access to clean drinking water, a project estimated to cost 3.2 billion. Instead of getting this much-needed investment though, First Nations now need to contend with further pollution from a pipeline that has already spilt more than 35,000 barrels of oil since its opening in 1961.

Bill Morneau, Canada’s Finance Minister, brushed away concerns and justified the purchase of the pipeline by saying that “it will reassure investors that Canada is a country that respects the rule of law and gets big, important things done.”

Business vs the people

The latest pipeline fiasco in Canada is but one example of business being put ahead of the wants and needs of the people. All over the world governments go to lengths to, like Canada, encourage business growth and “reassure investors” at the expense of citizens health and general well being. Tax breaks for massive corporations, subsidies, and modifications or removals of regulations are just a few of the ways this is done.

With this, cities are transformed into commercial hubs driving rent up along with rates of homelessness, factories that pollute the air and water continue to be encouraged, and funds that are used to provide necessary social services are diverted to meet economic goals.

It’s not hard to see how business wants negatively impact our day to day lives, so why do governments keep intervening in the favour of business and growth?

Our obsession with employment

In our market economy — an economy based on upholding private property and the rules of supply and demand, the main method in which a government can ensure the welfare of its citizens is by making sure there are enough employment opportunities for them. But businesses’ primary imperatives are to reduce their cost of operation, including salaries paid. This leads to a strange relationship where governments are always trying to play catch up to ensure employment levels remain high by encouraging more business. Add to this the complexity of the international labour market and you have a recipe for disaster.

This dynamic creates a continuous push and pull between businesses and labour with the government playing a mediating role. Organized labour, through unions or popular mobilizations, push to ensure that work is properly compensated and safe, the minimum wage and workplace regulations are the most prominent ways of doing this. Of course, these concessions, if given and ratified by the government drive up operational costs for businesses who might then seek to set up businesses in more ‘competitive’ markets. If governments want to maintain the allure for businesses to operate within their borders and ensure favourable employment conditions, they need to find other ways to entice investment. This is where tax breaks on company revenue come in. Providing such tax breaks, however, impacts the governments' own ability to provide services to its citizens, especially those left with no job due to the nature of a competitive labour market — an average poverty rate between 8 and 15% exists in all industrialised nations.

It’s not just labour demands that can push away business growth. Much of today's regulations are in place to protect consumers. Regulations on what kind of materials and chemicals can and can’t be used in the production of goods and regulations on how services are to be delivered are meant to keep us out of harm's way. These regulations, though, also increase businesses operational costs creating the same push back from potential investors.

Not all businesses, however, have the ability to follow the competitive markets and reviving local businesses has always played a major role in our economic discussions. As such, entrepreneurship has become a central talking point in terms of what they can contribute to the economy. Local businesses though continue to operate under the rules of the market and raise in wages and regulations also impact their bottom line meaning that they too will continue to look for ways to cut costs and entrepreneurship initiatives face even harsher economic realities as they have to contend with start-up costs. Government interventions to promote either fall in line with the same push and pull we have described earlier.

Another growing trend has been a shift towards ‘socially conscious’ businesses, businesses that have an exclusively positive social aim — green energy, homelessness reduction, etc. Yet, even here, the dynamic is plagued by the same forces of competition.

Escaping the cycle

The above examples make it clear how government, for the sake of presenting market confidence and encouraging investment, will always intervene in a one-sided manner in favour of business interest, that is unless it can ensure no negative backlash if it chose to intervene on the side of labour. These interventions clearly tip the balance away from the democratic will of the people looking for living wages and access to services. Yet, it would seem that these interventions are necessary within the confines of market economics where what is produced and how is best determined by the profit margin of whatever is being made.

To escape this cycle then we must go beyond the confines of market economics and embrace a more democratic process where what and how things are produced are being decided directly and democratically instead of by the whims of market forces at the expense of the common good. Only then can the government escape from the clutches of business interest and begin representing the needs of its citizens.