National Review
Canadian Food Prices: Passing the (Depreciated) Buck
By JON MILTIMORE
November 6, 2023 6:30 AM
Food inflation isn't grocery stores' fault.
A Canadian House of Commons committee is inviting executives from Canada’s top grocery chains to appear before Parliament and explain what they’re doing to control surging food prices.
High food prices have been a major issue in Canada. In October, the government released new data showing September food prices were up 5.8 percent from a year ago, pushed by sharp increases in bakery products, fresh vegetables, pasta products, and poultry.
Days after the inflation data were released, the agriculture committee passed a motion calling on grocery executives to testify on the measures they are taking to address food inflation, which is rising much faster than overall consumer prices.
François-Philippe Champagne, Canada’s Industry minister, said he had secured commitments from several major Canadian grocery chains — including Loblaw, Empire, and Metro, as well as Costco and Walmart — to offer strategies to reduce prices. “These measures will bring a much-needed more competitive marketplace,” Champagne said. “And the winners of that are obviously Canadians.”
‘Little Evidence Grocers Taking Advantage’
Dragging grocery-store executives before Parliament might be good theater, but it’s unlikely to lower food prices. Canadian grocers aren’t responsible for food inflation. But Canadian lawmakers and the Bank of Canada have a great deal to answer for.
Canadian prime minister Justin Trudeau can talk about the “record profits” of grocers, but it wasn’t grocers who printed $600 billion and pumped it into Canada’s economy over the past three years. It wasn’t food companies who grew the money supply 32 percent in three years — eight times faster than the economy. Those were Justin Trudeau’s policies.
Grocery executives make a convenient scapegoat for Trudeau, but he’s the one responsible. It’s Econ 101: When you expand the money supply faster than an economy can produce goods and services, inflation results.
The New York Times concluded as much in a deep-dive report earlier this year exploring the surge in food prices in Canada.
“While it’s easy to get angry at the grocer, there’s very little evidence that the grocers are actually taking advantage of the situation,” Mike von Massow, a food-economics professor at the University of Guelph in Ontario, told the paper.
Basic monetary theory holds that the money supply is the single biggest factor (by far) in determining price inflation in an economy. More money chasing the same amount of goods and services means money is less valuable.
‘You’ll Forgive Me If I Don’t Think about Monetary Policy’
Politicians like Justin Trudeau often pretend this reality doesn’t exist. Two years ago, Trudeau was asked about changes in the Bank of Canada’s mandate that would continue to give the bank “flexibility” despite growing concerns about inflation. His response was telling. “You’ll forgive me if I don’t think about monetary policy,” Trudeau responded. “I think about families.”
The idea that families are not impacted by monetary policy is nonsensical, of course. And the result of the continued expansion of the money supply was predictable. Inflation in 2022 doubled to 6.8 percent, the highest increase Canada experienced in more than 40 years, and it has persisted well into 2023.
Food prices are a particular sore spot for Canadians, probably because demand for these goods remains high even during tight times, in contrast to other goods. Not buying a new pair of shoes or a set of tools is easier for most people than not buying milk, bread, eggs, or chicken. Whatever the reason, research shows the typical Canadian family will spend $1,065 more on groceries in 2023 than it did in 2022.
Canadians can feel the loss, and they are not happy about it.
The Trudeau government cannot of course admit it is to blame, so it has developed a strategy: blame grocery chains for profiteering and threaten them with new taxes.
None of this will lower food prices. But the campaign has helped convince 28 percent of Canadians that corporate profiteering is at the root of surging food prices — not the government’s massive money printing.
Instead of watching this sad bit of theater in the parliamentary agriculture committee, Canadians seeking to understand inflation would do better to simply crack open the works of Nobel Prize–winning economist F. A. Hayek, who in 1975 was asked on Meet the Press what could be done to stop inflation. “All inflation is ultimately the result of activities which the government determines and can control,” Hayek replied. “And all inflations have been stopped in the past by the government stopping creating money, or preventing the central bank from creating more money.”
JON MILTIMORE is editor-at-large of the Foundation for Economic Education. He formerly served in the George W. Bush White House in the speechwriting department.
No comments:
Post a Comment