• Tag Archives prices

  • Why Justin Trudeau Is Blaming Grocers for Surging Food Prices in Canada

    Posted on by Azrael Comment

    New government data emerged this week showing that food prices in Canada continue to climb.

    Though year-over-year inflation of consumer prices overall cooled to 3.8% in September, food prices increased 5.8% from a year ago, driven by surging prices of bakery products (up 8%), fresh vegetables (7.6%), pasta products (10.8%), and poultry (6.5%).

    Food prices have long been a sore spot for Canadians. Even prior to 2023, statistics showed that some 7 million Canadians, including 1.8 million children, were in households struggling to put food on the table.

    As inflation continued to drive food prices upward in 2023, consumer outrage quickly mounted.

    “If I’m paying that much, I hope there’s gold in that chicken,” one user responded to a viral tweet in January showing a $37 price tag on a package of chicken breasts.

    The episode prompted accusations of price gouging and a high-profile story in the New York Times — but the paper reported that outrage at grocers was misplaced.

    “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,” said Mike von Massow, a food economics professor at the University of Guelph in Ontario.

    Food prices have only gotten worse since then, and Prime Minister Justin Trudeau, apparently not a reader of the New York Times, has found the same scapegoat as many others unversed in basic economics: grocers.

    Last month, Trudeau threatened to slap grocery stores with new taxes if they don’t find a way to lower food prices.

    “Large grocery chains are making record profits. Those profits should not be made on the backs of people who are struggling to feed their families,” Trudeau told an Ontario crowd.

    By taking aim at grocers and “record profits,” Trudeau is parroting the rhetoric of some U.S. politicians, including Sen. Elizabeth Warren (D-MA), who has argued that inflation is being driven by “corporate greed.”

    The idea that corporations suddenly became greedy in the aftermath of the pandemic never passed the economic smell test, and it was recently rebutted in a Federal Reserve paper.

    “Corporate profit margins were not abnormally high in the aftermath of the COVID-19 pandemic, once fiscal and monetary interventions are accounted for,” noted Dino Palazzo, senior economist at the Federal Reserve Board.

    Yet politicians such as Trudeau, who less than a year ago criticized the idea of using a windfall tax on grocery companies to lower food prices, have repeated the claim over and over again that greedy corporations are the root cause of inflation. Why?

    The answer is simple: the true blame for inflation lies with them.

    Pierre Poilievre, leader of Canada’s Conservative Party, hit the nail on the head in a recent interview when he pointed out that the Canadian government’s policies are to blame for inflation — as are those who lead it.

    “[Trudeau] prints $600 billion, grows our money supply by 32% in three years,” Poilievre said. “That’s growing the money eight times faster than the economy. No wonder we have the worst inflation in four decades.”

    This is the mystery of inflation. (It’s not really a mystery.) Politicians and central banks flooded the economy with money, which devalued the currency.

    Basic economics teaches that increasing the money supply faster than an economy can provide new goods and services will result in price inflation, and that is precisely what we’ve witnessed. Indeed, for much of modern history, inflation was defined as expansion of the money supply, not an increase in prices (which is the consequence of expanding the money supply). Henry Hazlitt famously explained the difference in Economics in One Lesson.

    “Inflation is an increase in the quantity of money and credit. Its chief consequence is soaring prices,” Hazlitt explained. “Therefore inflation — if we misuse the term to mean the rising prices themselves — is caused solely by printing more money.”

    Politicians such as Trudeau cannot, of course, admit it’s their own policies and money printing that are to blame for high food prices. So they hold speeches blaming grocery stores and food producers for the inflation they caused and threaten them with new taxes.

    Whether Canadians will see through Trudeau’s crude charade is unclear. What is clear is that Canadian grocers are not responsible for the skyrocketing price of food in Canada. Justin Trudeau and the Bank of Canada are.

    This article originally appeared on The Washington Examiner. 


    Jon Miltimore

    Jonathan Miltimore is the Editor at Large of FEE.org at the Foundation for Economic Education.

    This article was originally published on FEE.org. Read the original article.


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  • Price Controls Should Remain on the Ash Heap of History

    Posted on by Azrael Comment

    With inflation hitting Americans at the highest level in forty years, the debate over price controls, a policy tool long considered defunct, seems to be reigniting. As prices surge, many prominent economists including Robert Reich, the former US Secretary of Labor, and Todd Tucker, Director of Industrial Policy and Trade at the Roosevelt Institute, have recently come out in favor of government-imposed price controls.

    Even the UK’s new conservative prime minister, Liz Truss, announced a plan to fight inflation by capping household energy prices.

    Regardless of whom you blame for the inflation, there could not be a worse way of fighting it than with interventionist price-control measures. As any Econ 101 student could tell you, prices naturally settle at the point where supply meets demand in a market economy. But when the government imposes an artificial cap on prices, supply declines and demand increases, creating a shortage. After all, companies are less inclined to create and distribute products if they can’t get a good price for them. In a survey of forty-one academic economists recently conducted by the University of Chicago’s Booth School of Business, sixty-one percent said that price controls like those imposed in the 1970s would fail to “successfully reduce U.S. inflation over the next twelve months.” Just 23 percent of those who responded said price controls could reduce inflation (and all reported lower levels of confidence in their prediction).

    For older Americans, the price control debate is nothing new. In August of 1971, President Richard Nixon announced a 90-day freeze on most wages, prices, and rents. It was a short-sighted attempt to combat the rise of consumer prices that had reached their fastest pace since the Korean War. Following Nixon’s announcement, markets rallied, and seventy percent of Americans backed the plan in polls. However, Nobel-Prize-winning economist Milton Friedman predicted Nixon’s plan would end “in utter failure and the emergence into the open of the suppressed inflation.” As predicted, prices soared as soon as controls were lifted, exposing the frailty of government interference with pricing.

    Among the many bizarre and tragic consequences of Nixon’s price controls was the appalling specter of farmers drowning millions of baby chicks (or gassing them).

    As the price for chickens was controlled, but the price of the grain used to feed them was not, they could no longer be sold profitably. Sadly, this meant that the only way for the farmers to avoid losses was to kill them. This is but one example of the unintended consequences of excessive government intervention that prevents market forces from operating.

    When left to their own devices, prices tell us vital information about our economy. They pinpoint scarce resources, indicate consumers’ wants, and drive entrepreneurship and innovation. But when the government attempts to cap prices to “protect” consumers, this information becomes distorted.

    On an emotional level, the impulse for price controls is understandable. It’s easy to look at your surging gas station or grocery store bill and long for the temporary relief that lower prices would bring. However, avoiding this misguided extreme will allow for a much clearer picture of the state of our economy moving forward and allow us to focus on responses that will actually bring down inflation.


    Aadi Golchha

    Aadi Golchha is an economic commentator and writer, proudly advocating for the principles of free enterprise. He is also the host of The Economics Review podcast.

    This article was originally published on FEE.org. Read the original article.


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  • Dr. Ron Paul: Unleash the Market to Lower Drug Prices

    Posted on by Azrael Comment

     

    Whenever politicians say they’ll “do something” about high drug prices, disastrous discussion of price controls isn’t very far behind. It makes no sense because price controls lead to shortages and rationing which, in the case of pharmaceuticals, could cost lives.

    Proponents of price controls pretend that high drug prices are a result of a free market in pharmaceuticals. This is the exact opposite of the truth. The real reason pharmaceutical prices are so high is government policies that allow big pharmaceutical companies to exclude their competitors from the marketplace. Therefore, an effective way to bring down the price of pharmaceuticals and increase access to the drugs is to reform by changing government policies that stifle the development of a competitive market in prescription drugs.

    The CREATES Act

    What we need is legislation that would inject needed competition into the drug industry, and we have that in the CREATES Act (H.R.2212;/S. .974). The CREATES Act creates a way to lower drug prices. It does so by making it much easier for drugs with expired patents to be sold in less expensive, generic brands.

    Support for the bill crosses party and ideological lines. Liberal Democrats such as Dianne Feinstein and Richard Durbin and very conservative Republicans including my son Rand and my Senator Ted Cruz support this bill. Also included in the coalition are organizations as far afield as my Campaign for Liberty and the AARP.

    This bill is broadly popular because it reforms government policies that allow big drug companies to obtain long-term monopoly protection by keeping their generic competitors out of the marketplace. This is key. Patents grant makers of new drugs temporary monopolies only, so they can recoup huge investments in research and development and use some of their profits to chase other cures. Once a patent has expired, other drug manufacturers are supposed to be able to reproduce a “generic” but effectively identical version of that drug so that consumers may purchase quality medicines at lower prices.

    Whatever you think of this system (and there are good libertarians on all sides of this debate) most agree the current system is not working the way Congress intended. This is because too many drug companies exploit the complexity of the post-patent rules to make it very time-consuming and costly for competitors to enter the marketplace. They can even withhold supplies of their drugs from companies that—under Food and Drug Administration (FDA) rules—must obtain them to make sure they’re copying them correctly. The result is the big drug companies are able to extend their de facto monopolies well beyond the intent of Congress, thus keeping the supply of the drugs artificially low and prices artificially high.

    In one case that will not go away, drug maker Turing refused to sell its off-patent drug Daraprim to would-be competitors. That might not have been so bad but for the fact that the same company then turned around and hiked its prices from $14 a pill to $750. That they could get away with that with off-patent medicine is a sign that something needs to change.

    The long-term solution is to reduce the power of the FDA and create a true free market in pharmaceuticals. The CREATES Act takes a step toward creating a competitive marketplace by ensuring generic drug companies can obtain the necessary samples to get FDA approval for their products and thus allow consumers to benefit from lower prices.


    Ron Paul

    Ron Paul is an American author, physician, and former politician. He served on the board of trustees of the Foundation for Economic Education.

    This article was originally published on FEE.org. Read the original article.



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