Prime Minister Justin Trudeau addresses the World Law Congress at the United Nations, on July 21.Christinne Muschi/The Canadian Press
What do Justin Trudeau and Ron DeSantis have in common? The two men’s ideologies could hardly be more different, but both have shown they’re willing to conjure up corporate scapegoats for populist crusades, and to wield the threat of punitive taxes for political advantage.
For Florida’s Republican governor, the crusade targets Disney and the company’s opposition to a state law that bans teaching gender identity and sexual orientation to pupils in kindergarten to Grade 3. In Canada, the Prime Minister is training his populist lens on grocery stores, now cast as the villain in a plot to fleece Canadians by driving up food prices.
Mr. Trudeau summoned the heads of the grocery chains to Ottawa on Monday; they are to hash out a plan by Thanksgiving to “stabilize and lower prices.” If they fail to do so, Mr. Trudeau threatens to take action, including imposing a tax on companies that refuse to get with the Liberal program.
“It does not make sense that in a country like Canada our largest grocery chains should be making record profits while Canadians are struggling to put food on the table, and we’re seeing record usage of food banks,” Mr. Trudeau told reporters on Thursday.
In an effort to aid the Prime Minister’s understanding, we would posit this: inflation has driven up the cost of food production dramatically. Which means shelf prices have risen. Which means revenues have risen. Which means profits have risen even though the gross margins of grocery chains have mostly remained flat during the pandemic.
Mr. Trudeau might be shocked to find that the same dynamic at work in the federal budget, where sales tax revenue has risen 30 per cent from fiscal 2019 to the current year.
Live updates: Canada's inflation rate jumps to 4.0% in August
The notion that grocery chains and others are responsible for inflation – greedflation – is not founded in fact. One informed observer put it this way: “… rising global inflation was driven by supply-chain disruptions, strong consumption of goods, and rebounding global demand.” Those words are from Mr. Trudeau’s own Department of Finance, in the spring budget. (The budget did gloss over the role of continued federal deficits in fueling inflation, but the point on supply-chain disruptions is well taken.)
Without any hint of irony, Mr. Trudeau touted the Liberals’ devotion to “evidence-based government” in his Thursday press conference.
The evidence, so far, on inflation in food prices is that grocery chains have for the most part been passing on increases from further back in the supply chain (including steep government-mandated bumps in the regulated cost of milk, cheese, butter, eggs and chicken). The Bank of Canada, arguably a reputable research outfit, has studied the greedflation notion and concluded there is no evidence to support it.
Mere evidence did not stop Mr. Trudeau from co-opting NDP Leader Jagmeet Singh’s rhetoric in denouncing grocery chains, and professing his disdain for the market economy.
Now, it must be said, if grocery chains are engaging in anti-competitive practice, the Competition Bureau should expose and punish any offenders. Handily, the government is proposing to give the bureau new powers to compel companies to cooperate with market studies. That change and the scrapping of the outdated efficiencies defence for mergers are long overdue steps.
Once passed into law, newly muscular market studies will give the Competition Bureau the power it needs to fully scrutinize the grocery sector.
But Mr. Trudeau is not waiting on such trifles; due process does not move at a speed sufficient to bolster the Liberals’ sagging poll numbers. Instead, the Prime Minister has already decided the verdict – guilty of capitalism – and a threatened sentence: punitive taxes. This is a dangerous path down which the Prime Minister is strolling as he substitutes political whim for the rule of law.
A predictable business environment, free of arbitrary measures, is one of the great economic advantages that Canada has historically had on offer. The Liberals’ actions endanger that stability not only for investors in the grocery sector, but in any sector. And it is part of a disturbing pattern of conflating success with greed − look no further than the targeted taxes imposed on the financial sector in 2022.
Of course, few Canadians will spare a tear for Big Grocery or the big banks. Like any ambitious populist pandering to popular misconceptions, Mr. Trudeau has picked his scapegoats well.