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Mark Milke

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In Great Union Debate, Who Speaks For Consumers?

Posted: 09/07/2012 12:15 pm

Around Labour Day, a plethora of news stories focus on the state of unions, and often, their interaction with business. Given the name of the holiday, the attention is understandable.

However, the focus on unions and corporations, especially where governments are involved to set policy and create legislation, often misses two other critical groups: consumers and taxpayers.

It is those two cohorts that are often overlooked and whose interests are damaged when governments assume, on purpose or by accident, that only the interests of organized labour and business matter.

Here's one example: In many provinces, governments own, distribute and retail beer, wine and spirits. (Alberta is the lone exception with no government involvement beyond sensible regulation.) Provincial governments also play favourites with the private businesses allowed to operate.

In Ontario, thanks to government policy, beer sales are mostly reserved to The Beer Store chain (owned by Labatt, Molson, and Sleeman). It garners 80 per cent of the beer market in that province. That works well for the three beer companies.

Similarly, thanks to a government-granted ban on new private liquor stores, Ontario's government-owned LCBO stores capture 50.8 per cent of that province's overall beverage alcohol market (i.e., when all beer, wine and spirit sales are accounted for).

That works well for the 7,503 employees of the Ontario government stores. But it works less well for the 9.1 million Ontarians over the age of 18 who can legally consume such beverages.

They are subject to a de facto duopoly, where the market is mostly split between government stores on the one hand, and The Beer Store outlets on the other.

Or ponder the lack of airline competition in Canada. At present, so-called foreign carriers cannot pick up and also drop off passengers within Canada; only "domestic" air carriers can do that. That limits competition.

If Canada had a truly open skies policy like Europe, consumers would benefit from more competition on prices, service and routes. Thus, the passengers who buy 109 million "seats" annually on airplanes (using 2010 data, the most recent available) would benefit. Instead, the federal government has resisted a consumer-friendly airfare policy, this to protect so-called domestic airlines and jobs, even though that shows little faith in their ability to compete.

Another example of undue government favouritism occurs when governments practise corporate welfare. That comes at the expense of taxpayers. They take a direct hit when governments give special subsidies to particular companies.

In the case of the Chrysler-GM bailout in 2009, and after accounting for partial repayments by those two corporations, Canada's taxpayers were still out $5.5 billion three years later. Governments colluded with two companies and its labour unions, even though across Canada, 259,000 jobs disappeared in 2009 and 5,420 companies went bankrupt that year.

The federal and Ontario governments favoured two companies and their staff at the expense of other automotive companies, their employees and also and especially -- taxpayers. (On income tax alone, 16.2 million people paid income tax that year.) The two governments should have favoured no one.

Lastly, ponder the dairy and poultry aisles in your local grocery store: Canadian consumers are subject to "supply management" boards (also known as marketing boards), which limit the supply of eggs, chicken, turkey and dairy products.

Efforts to establish such boards date back as far as 1872 when attempts were made to "improve" prices for farmers and other producers. That was an "improvement" from the producers' perspective, but not for consumers.

The first official marketing board was established in British Columbia in 1927. Ever since, and in various iterations, and especially since the 1970s, such anti-consumer boards have been given powers over supply, pricing, controls on imports and subsidies to producers (which is where taxpayers get roped in).

So supply is restricted within Canada. Meanwhile, foreign products are kept out by high tariffs. Consider the tariffs on dairy products, which range from 202 per cent (skim milk) to 298 per cent (butter) with cheese, yogurt, ice cream and regular milk within that range.

All of that means this: 12,965 dairy farmers are favoured at the expense of most of the other 34,755,634 Canadians -- i.e., the ones who consume such products and must pay higher prices as a result of the government-granted dairy and poultry cartels. That is anti-consumer and anti-poor, given that those on low-incomes spend most of their money on basic necessities such as groceries.

So next time you hear people debate whether labour or business should win in some dispute or in a proposed government policy, the correct answer is: "neither." The interests of millions of consumers and taxpayers should come first.

 
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04:22 PM on 09/08/2012
""""If Canada had a truly open skies policy like Europe, consumers would benefit from more competition on prices, service and routes."""""

this is economics text book NONSENSE ------we have "open skies" in the gasoline markets -------and i dont see anthing except the same prices everywhere

the theory of market competition is not borne out by reality

and how many airlines can remain viable without some kind of subsidy --like waived landing fees -----or chapter 11 cancellation of pension obligations
04:02 PM on 09/08/2012
the US subsidizes its agri business 26 billion a year and big oil another 4 billion -------the agri part is wht mexicans flock to the US---- the subsidies make their farms uncompetitive
03:54 PM on 09/08/2012
""" often misses two other critical groups: consumers and taxpayers."

two groups ???? ---they look like one and the same to me
08:28 AM on 09/08/2012
I actually like Air Canada, the more times I fly through the USA which is composed of several terrible airlines. But AC has a huge pension problem. They want to defer their pension obligations out to 2024 because they can't pay them now and stay in business. So to any government-union relationship I say go for it. And if it falls apart (like Air Canada will one day) then no bail-outs.

Farming on the other hand is a different animal. It's hard to turn people into farmers. They're not used to the hard work. I have a feeling that if you're not born on a farm you just won't have what it takes to become a farmer. So leave them and their subsidized industry alone. And when I see farmers driving around in Land Rovers and wearing Gucci suits then we can revisit that industry.
11:57 PM on 09/07/2012
Right on. This whole area of government subsidized cartels needs to be blown wide open. Every time you get some government or quasi government committee involved in managing anything, it will over time get fat and unrealistic... all at the expense of consumers.

Our society is infested with these self interest cartels. Dairy farmers, and the others named are just the tip. How about government car insurance and the setting of body shop rates... to the extreme benefit of body shop owners. How about the "professional" groups closed shop rates... lawyers, vets,
physiotherapists etc etc.

But the dairy racket is the one I'm most familiar with. Back in the 60's our family sold a fairly large dairy "quota". We got $12000 for it. Now the same size quota sells for about 6 million dollars. Why?
Because you can make a lot of money in the dairy business.

I know dairy farmers who own brand new, real expensive equipment that is only used a few hours a year. Gotta keep those expenses up there. Don't want to look too well off when it comes time to setting those rates now do we.
jimbo57
ni dieu ni maitre
05:33 PM on 09/07/2012
Most taxpayers are workers. Most consumers are workers. Surely whatever arrangement allows working people to earn more is also good for most taxpayers and consumers.
03:46 PM on 09/07/2012
You did not provide any evidence that organized labour is given better, nor equal, treatment to corporations by government.

And your argument in deregulating all markets does not benefit consumers. Heavily deregulated markets - provided they don't become monopolistic (which they already are) - can reduce commodity prices. However, that competitive pressure you fetishize aims its sight at labour first.

And do you know what happens when capitalism has its way with workers, those workers mysteriously transform into more impoverished consumers.

You can't hate workers and then pretend to love consumers. We can see right through you.
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02:58 PM on 09/07/2012
I won't speak for the rest, but generally, the evidence suggests that government monopoly in liquor distribution is, in fact, more efficient for the consumer and the taxpayer. For example, this study looking at BC (pre-privatization) versus privatized Alberta, found that under the government system, the people in BC paid less, on average, than Albertans INCLUDING the fact that BC has a 10% sales tax on liquor that Alberta does not. Moreover, because the government system favours larger stores, selection quality is better in the government system than one of small private distributors. Private distribution is pretty much a loss across the board for consumers (and probably taxpayers as well).

http://www.consumer.ca/pdfs/030515_report.pdf