Help consumers. End supply management

NationalPost.com – Full Comment
20/09/13.   Jesse Kline

By proroguing Parliament and scheduling a Throne Speech for Oct. 16, the federal Conservatives have admitted that they’ve achieved their main policy objectives set out during the last election and are ready to table a new agenda. For small-c conservatives still waiting for the Harper government to unveil its “hidden” free-market agenda, the wait will likely go on.

Although the public does not yet know precisely what the upcoming Throne Speech will contain, the National Post’John Ivison reported on Tuesday that government insiders are saying the fall agenda will focus on consumer issues. This could include an airline passenger’s bill of rights, caps on the prices of mobile-phone plans and restrictions on credit card companies and banks.

The agenda items, some of which sound like they could have been cherry-picked from an NDP election platform, are troubling: Not because they focus on consumers, but because forcing private companies to change their pricing structures is akin to using a hammer, when the gentle hand of the free market would arguably do a better job of achieving the same goals.

Canadians have legitimate gripes about how much they pay for common goods and services, but scratch the surface of many industries and one often finds government policies that are standing in the way of lower prices. Take a basic good such as milk — a product that is consumed by most North American households.

Canadians pay up to three times as much for milk than their neighbours to the south, according to a 2012 report from the University of Calgary — costing a family that consumes four litres of milk per week $300 a year. This is not because the government hasn’t stepped in with a dairy consumers bill of rights, but because the feds artificially inflate the price of milk through a system of supply management and high tariffs.

Supply management is an elaborate system of licenses and quotas, which determines who can produce certain commodities, and how much they can produce. Since the government limits the supply of certain foodstuffs, the price is artificially raised, and tariff walls ensure that producers from other countries cannot drive prices lower by importing their goods into Canada (thus raising the supply).

Canada’s supply management system predominantly affects the price of milk, cheese, poultry and eggs. As lower-income households spend close to 25% of their income on food, compared to 5% to 10% for Canadians in higher wage brackets, the policy amounts to little more than a tax on poor people, with the gains going to a handful of relatively well-off farmers.

A 2009 Conference Board of Canada report estimated that dairy production quotas alone cost the economy $28-billion per year. That’s thousands of dollars per household. Since low-income Canadians are disproportionately affected by supply management, doing away with the system — as other countries such as Australia and New Zealand have done — would help them the most. And if the choice is between our government spending its efforts to save airline passengers a few bucks on a first-class ticket, or helping the most needy people in our society purchase goods that are essential to their survival, we have a moral obligation to demand the latter.

In the seven years since Prime Minister Stephen Harper was elected to power, his government has done a reasonable job keeping Canada economically free despite the pressures of the global economic crisis. It is understandable that in order to stay in power, Mr. Harper has governed as a pragmatic centrist, rather than a right-wing ideologue. Yet in the Fraser Institute’s annual “Economic Freedom of the World” index, which was released Wednesday, Canada has made a modest slip from seventh to eighth place. A one-place drop is no cause for panic. But as economic freedom is directly linked to greater prosperity and personal liberty, any downward movement should be taken seriously.

By instituting free-market solutions to the problems this country faces, the Harper government has a chance to make all Canadians better off: To improve our economy, help the needy and reduce the cost of living for all of us. I sincerely hope the Conservatives take this into account while drafting their agenda for the upcoming parliamentary session.

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