July 27, 2024
HERE'S MY TAKE
This week’s agreement by Loblaws to pay $500-million to settle class action lawsuits about price-fixing for the cost of bread is another talking point in a larger cultural conversation about profits and their place in society. Canadians these days are cynical about capitalism with twice as many likely to say it’s a system enabling “the rich to get richer and the poor to get poorer” rather than a system in which “anyone can get ahead.”
This is not a defence for the misdeeds of Canada’s corporate crowd. There is plenty of evidence that we have multiple Canadian sectors in which capitalism isn’t working. Oligopolies, whether evolved from historical developments in a big country with a comparatively small population or through regulation and industrial policies that make it difficult for newcomers to enter the market, are too common in the Canadian marketplace. Barriers to entry that enable a handful of corporations to cosily share a defined market create conditions where it’s too easy to succumb to the worst temptations of capitalism. Certainly there are plenty of examples, bread price-fixing in the grocery industry being just the latest, of capitalism gone bad—making profit a dirty word. But before allowing that to define our view of economics, perhaps a bit of perspective is helpful.
While we easily recognise the high-profile names of large businesses (let’s use the Statistics Canada definition, which means companies of those with more than 500 employees), the reality is that there are just over 3,000 such businesses in Canada (although they collectively employ about 36% of the private sector workforce). Small businesses (those with less than 100 employees) employ 47% of the workforce, and the remaining 17% are employed in medium-sized businesses. These are imperfect proxy measures to be sure, but they do point to the reality that about half of our economy (when measured by GDP) comes from the small-and-medium business sector where individual entrepreneurs are key to the operation, operating in a system of capitalism where there are risks of a very different sort. I don’t doubt that there are plenty of examples of misplaced values and bad ethics in the entrepreneurial part of the economy just as there are plenty of examples of virtue and good ethics in the corporate sector. However, from my general observations, sweeping conclusions of the sort prompted by the Loblaws headline aren’t accurate.
Into the mix of current discussions about a wealth tax, a growing sense that “excess profits” are to blame for the affordability crisis, and a growing cynicism that our economic system simply doesn’t work fairly, let me offer three nuancing considerations.
It’s understandable that for many, facing the real affordability challenges in our day, news about grocery price-fixing reinforces their feeling that profit is a dirty word. But the misuse or abuse of the profit motive doesn’t negate its proper role. Profits and growth are good and necessary ingredients for a healthy society. They aren’t the only thing, and chasing profits without the boundaries of respect for the dignity of others, be they management, employee, customer or supplier, is problematic. Similarly, it is also misguided to think only about individual returns and ignore that individual human satisfaction is best achieved in the context of social flourishing.
This may sound moralistic, and in part it is. This insight is based on an assumption that is seldom articulated in public debate, but it is often presupposed or ignored in action. There is meaning and purpose and order to economic life, rooted in a reality we share—one that is both natural and eternal.
Good morals (and a healthier and flourishing economic life) flow from truth and reality. And government rules regarding economics, which probably do include competition tribunals and punishments of selfish collusion, are undoubtedly part of the solution. But the penalties Loblaws is facing, while hopefully a deterrent to bad behaviour, aren’t themselves a solution. My trust in government to solve the problem is limited, a sentiment it turns out that most Canadians share. Surveys confirm that while trust in business is falling, it is significantly above the level of our trust in government to act competently and ethically.
Healthy economic life starts with the understanding—at least implicitly—that growth and profits are good. These are not absolute goods that should be pursued without constraint or due concern for other goods. But they are to our economy what breathing is to life. Without breathing, we die. But when we think too much about breathing, we are also not well. We don’t live to breathe. But healthy breathing is important to a fulfilling life, even when it’s not thought about. Life needs breath and an economy needs businesses that produce profits.
When confronted with the misdeeds of business and the moral failings of those who abuse profits and power, let’s not lose perspective. Healthy markets, of which healthy profits and wealth are by-products, are part of the solution to our present economic challenges—not the problem. In a broken world, we will never fully overcome the problems of scarcity or the envy of “those who have not” towards “those who have.” We will not fully overcome the temptations of “those who have” to misuse and abuse that blessing. But keeping perspective and confidence that rewarding healthy and positive entrepreneurialism will ultimately provide social good and benefits for all is a key ingredient to overcoming our current economic and affordability challenges.
Any good taken out of the context of other goods can easily become bad. Augustine pointed to the right ordering of our loves as being at the core of virtue. Profits are not on top of the list but they are on it. Forgetting that only makes our economic challenges more difficult. The Scriptures remind us that normally we can expect diligence to lead to profits and that the blessings of health and wealth are gifts from God to be enjoyed. But with those blessings comes responsibility. Money is good; the love of money is the root of evil, making wealth an uncertain basis for hope and satisfaction.
One of the functions of good law is to be a schoolmaster to guide citizens toward good behaviour. Punishing corporate greed and the unjust pursuit of profits is a good thing. But in our present social context, where the basics of healthy and natural economic rules are increasingly being questioned, it’s important that we not take away the wrong lessons. Economics should start with the creational good and promise of abundance even as we pursue justice in how economics is practised and its rewards are distributed.
Profit is not a dirty word.
WHAT I’M READING
A Power Decision
Mischief. That’s how constitutional scholar Kerry Sun describes last week’s Supreme Court of Canada decision in a case known as Canada (Attorney General) vs. Power. According to Sun, the decision suggests that “courts are entitled to require the government to pay compensation for legislative acts that are ‘clearly wrong, in bad faith or an abuse of power.’” Sun also notes that governments have traditionally been liable for executive decisions that stemmed from legislation. But now, he says, by making the government liable for parliamentary processes and decisions, the Supreme Court is making “a striking misapprehension of Canada’s constitutional architecture and the system of parliamentary democracy upon which it is founded. In the Westminster model of responsible government, it is Parliament, not the courts, that is charged with deliberating upon the state of the law and changing it where warranted.”
Housing Affordability
Economist Trevor Tombe estimates that 13.5% of the cost of a new home is due to various taxes, three quarters of which come from the federal and provincial governments while municipalities are responsible for the rest. On top of these visible taxes are hidden taxes, which vary significantly but are especially pronounced in Manitoba (4.3%), B.C. (3.3%), and Saskatchewan (2.2%). Such taxes are estimated to have a less than 1% impact on the total costs of a new house in other provinces. Various initiatives are under consideration to address housing affordability, widely acknowledged to be one of the country’s leading issues. It would seem that tax reform should be part of the discussion.
The Science on Gender
The Manhattan Institute did a podcast episode called “Gender Medicine and Scientific Evidence” (full transcript online) which provides many interesting insights on how the political use of rhetoric and language regarding gender-affirming care often contradicts science. The results are potentially putting various levels of government (such as school districts) at risk with significant potential for a new era of lawsuits likely starting soon.
The Business of Political Disruptions
I don’t intend to provide a play-by-play commentary on the fast-shifting landscape of U.S. politics, even though it has been dominating the news cycle lately. There are almost certainly more twists and turns that will emerge and this provides a challenge not only for political pundits but also for business. The Financial Times reports on the uncertain assessments that corporate leaders are making as to which party, Republican or Democratic, actually has a more pro-business agenda, especially as it relates to antitrust and trade provisions.
MEANINGFUL METRICS
China’s Global Investment
An American Enterprise Institute report this week observes that China’s global $2.5 trillion of investment and construction around the world has an emphasis on the anglosphere. Still, there remains a significant trade imbalance with the U.S., which holds a $910 billion portfolio in China, more than four times the inverse. The report suggests that there is significant risk to the U.S. relating to supply chains and technology if it doesn’t pay attention to this imbalance. Auto and parts production remains the focus of Chinese investments. However, construction activity, with a focus on power plants and refineries, is quickly rising.
TAKE IT TO-GO
The Insights Experience You Had
Unusual for this point in the week, my wordplay file folder is empty. So instead of using a weirdly worded news item to start a domino of puns, Iet’s play a slightly different word game. Here’s what I read in my social media feed recently: “The faith he had had had had no effect on the outcome of his life.” I presumed a mistake had been had here. But then I realized I’d been had.
There are about 600,000 word forms in the Oxford dictionary and “had” can be used in a past participle, pluperfect, and future perfect tense. The author of the online sentence managed all three (with a bit of participatory redundancy), a feat of grammatical accomplishment. But in light of the 599, 997 other options he had, he can be critiqued. He might have been justified had he chosen a word other than a three-letter, one syllable word that did not have double entendre possibilities. Had he done so, I’d have admired his choice. But alas, he didn’t and it makes me feel like a mad hadder.
It’s true. The Insights experience that you had had this morning will be past tense by the time the next-time Insights edition arrives in your inbox. Next week is a long weekend so we’ll next be in your inbox again on Saturday, August 10.
Until then.