The generous assessment of the Trudeau Liberals’ announcement that they are looking at using special taxes on grocery stores to reduce food prices is that, like the rest of the government’s economic agenda, it is deliberately hostile to business, intentionally impoverishing to consumers and punitive towards much of the private sector, but also likely to score political support from special interests and certain segments of the activist community. The ungenerous explanation is that the Liberals are unaccountable blockheads. The deliberately hostile politician and the unaccountable blockhead are not mutually exclusive characters, however, so both assessments may well be correct.
Federal economic policy has become so bad the business community is finally pushing back, which is rare because businessmen generally are not reliable supporters of free enterprise. Milton Friedman often said most businessmen are in favour of free markets for everyone except themselves: when it comes to his own business or industry the businessman wants a special subsidy, protective tariff, tax credit or other government favour. The result is that big business is often too government-friendly, leaving the pushback against bad policy to scrappy groups of smaller, independent businesses. Thankfully, there are signs this is no longer the case in Canada.
Last week, the Canadian Bankers Association chief executive lashed out against the federal government for targeting financial institutions with special taxation (three separate tax measures in the past two years) and overregulation. Then on the heels of the Liberal announcement taking aim at the grocery stores — with both a possible tax but also an idiotic plan to force the five largest grocery chains to stabilize prices — it was the Retail Council of Canada that pushed back. “Anyone who understands the grocery sector,” it said in a statement , “knows why food prices have gone up,” which is that grocery stores themselves are facing higher vendor costs from manufacturers and producers, which are then compounded by costs added by government.
“Rather than casting blame where the experts agree it does not belong, the federal government should look in the mirror,” the statement continued. The government’s plans to force grocers to reduce plastic packaging could increase costs by billions of dollars annually. And supply management and carbon taxes obviously don’t help. Karl Littler, the Retail Council’s senior vice-president of public affairs, points out for that 70 to 80 per cent of big grocers’ sale price is the cost of goods sold, which is already baked in from manufacturers, producers, and processors. Most of the rest comes from wages, fuel, utilities, interest payments and taxes, all of which are generally either fixed or rising, some in large part due to inflationary government policies. The grocers’ net profit margins are in the low single digits.
“There is an inherent absurdity,” Littler tells me, of “trying to locate a price stabilization obligation within the 20 to 30 per cent that is even remotely within grocers’ control or within the two to four per cent profit that they make on food.” Indeed, even as they attack that slim two to four per cent margin, the Liberals are doing their best to inflate the other 96 to 98 per cent of grocers’ costs, including by trying to harass them into raising wage costs. Several times in the past year, Parliament’s Standing Committee on Agriculture and Agri-Food summoned grocery executives to inquisitions . At one point, Liberal MP Leah Taylor Roy chastised Loblaw for a supposed policy in which store managers were denied bonuses when they did not cut employee wage costs, effectively accusing Loblaw of underpaying its workers. Loblaw executive Jodat Hussain calmly informed her such a policy does not exist.
Not all businesses are yet raising their voices against the Liberals’ economic agenda, but money speaks louder than words, and for eight years entrepreneurs and investors have been voting with their bank accounts. Business investment has climbed steadily in the United States , but in Canada, real business investment in non-residential structures, machinery, equipment, and intellectual property per member of the labour force is essentially flat or down since the Liberals were elected in 2015. In fact, from 2015 Q3 to 2023 Q2, it is down four per cent. With Trudeau and his band of blockheads forging ahead with their oppressive anti-business agenda, expect more of the same ahead.
Matthew Lau is a Toronto writer.
Source: Financial Post
