Canadian Corporate Profits Reached a Troubling New Milestone

Quarterly operating profits surpassed $200 billion for the first time

Canadian corporations claimed over $200 billion in quarterly profits in the fourth quarter of 2024. This dubious achievement was facilitated by the corporate markup remaining much higher than it was before the pandemic.

The markup is the less familiar counterpart to the profit margin.

Where the profit margin tells you what portion of a corporation’s revenue is profit, the markup is the amount a corporation adds onto its expenses. For example, if a company has $100 in revenue with $80 of expenses, leaving $20 of profit, the margin is 20% (20 / 100), while the markup is 25% (20 / 80).

The markup is a useful measure for assessing the claim that corporate profiteering was not a factor in the pandemic-induced inflation. The perpetual defence from corporations charging higher prices was that they were merely passing along higher costs.

This is a lie.

As seen above, the markup has been around 15% in every quarter since 2021Q1. Before the pandemic, it was already at record highs of about 11.5%.

So, it is not true that corporations were merely passing along higher costs. However, as seen in the chart below, operating expenses were increasing much more than the prepandemic trend. The pandemic and public health responses did cause extraordinary cost increases.

But this fact makes the increased markup even more pernicious.

Because profits are the product of the markup multiplied by operating expenses, when expenses increase profits will also increase even if the markup is kept constant. Consider the 25% markup example used above. If costs rose from $80 to $100, the profits would rise from $20 to $25 dollars without any change to the markup. That means Canadian corporations would have reaped record profits in 2024 without the extra markup. But the higher markup supercharged their profits.

The extra percentage points delivered $741 billion in EXCESS profits over the last four years compared to what corporations would have collected if their markups in each quarter were the same as 2019. That brought total corporate profits to almost $3 trillion.

Households, not-for-profits and governments are the final buyers of the products that corporations sell. That means this excess profit is ultimately coming from us. This excess is the flip side of the strain that people have experienced from higher prices.

There is a new bout of inflation on the horizon thanks to the Trump administration’s tariffs. This means the situation is ripe for companies to again take advantage of the turmoil and their pricing power. This will transfer even more money from average people and public institutions to the most powerful corporations and their ultra-wealthy owners.

More needs to be done to address the rising pricing power of Canadian corporations. A report from Canada’s Competition Bureau noted that maintaining markups in the context of rising costs is a sign of pricing power. In a competitive market, as costs rise a company is supposed to absorb them because trying to pass them along will make their product uncompetitive. In other words, as operating costs rose in 2021, the markup of corporations should have fallen. The fact that they rose is just one more indicator that the actual economy does not work as theorized by orthodox economists.

Governments failed to rein in the profiteering last time. They cannot allow it to happen again.