Quotulatiousness

May 29, 2024

Ontario’s long and winding (and subsidy-strewn) road to beer in convenience stores

Filed under: Business, Cancon, Government, Wine — Tags: , , , , , , , — Nicholas @ 03:00

Apparently I’ll have a little bit more to celebrate on my birthday this year as the Ontario government’s glacially slow-to-change alcohol sales rules are being liberalized as of September 5th to allow all the province’s convenience stores to begin selling beer and wine:

“The Beer Store” by Like_the_Grand_Canyon is licensed under CC BY-NC 2.0

Premier Doug Ford promised Ontarians beer in corner stores, supermarkets and big-box stores, and by God he has delivered. As of Sept. 5, all Ontario convenience stores meeting eligibility criteria will be allowed to sell beer, wine, cider and pre-mixed drinks. As of Oct. 31, the privilege will be extended to all grocery and big-box stores. The province says it expects as many as 8,500 new booze-procurement sites to come online under the new regime. By Ontario standards, it’s absolutely revolutionary.

The new regime is also, of course, hilariously complicated. And absurdly, offensively expensive.

It is fair to describe the new regime as somewhat more competitive, and certainly more convenient. In addition to offering potentially thousands of new locations, supermarkets (including the roughly 450 already licensed) will be able to offer volume discounts on beer — i.e., a 24-pack will cost less per bottle than a six-pack. This was a privilege hitherto reserved for The Beer Store, the American-, Belgian- and Japanese-owned conglomerate that dominated beer sales in Ontario from the end of Prohibition until fairly recently.

Private retailers will even be able to set their own prices, which until now has been considered blasphemy.

It is not fair to describe the new regime, as the government does, as an “open” market.

Near as I can tell, Ontario will by 2026 have the following retail environments in place:

  • The Beer Store. Smelly, surly, and the best-available value. Only beer — no cider or mixed drinks. It’s in the name.
  • LCBO locations. Government-run liquor stores retain their near-absolute monopoly on hard liquor sales, in addition to selling beer (especially craft beer, in which The Beer Store’s owners aren’t so interested), wine and everything else.
  • LCBO- and/or The Beer Store-branded “agency stores” in rural areas, which sell everything the LCBO does, but operate inside of convenience stores, small supermarkets and other local businesses, and are staffed by non-government employees.
  • The existing supermarkets licensed to sell beer, cider and wine (and in rare cases all three!), plus scores of new outlets — the new 8,500 new locations.

The Beer Store maintains a monopoly (in urban areas) on wholesale for bars and restaurants and on refunding cans and bottles, although its new “master framework agreement” (MFA) doesn’t even oblige it to maintain its current number of locations — which in urban areas have been dwindling rapidly. I’m a 17-minute walk from my nearest Beer Store. The house I grew up in, in the heart of midtown Toronto, is a 45-minute walk. I’m not schlepping a leaky garbage bag full of empty cans either distance.

December 28, 2023

The Liberals may be bad at “deliverology”, but they’re world-beaters at pouring money into black holes

Filed under: Cancon, Government — Tags: , , , , , , — Nicholas @ 03:00

Tristin Hopper explains the apparent paradox that the federal government is spending money faster than it can be printed, yet the things the government is responsible for are perennially underfunded:

From back when The Onion was allowed to be funny – https://youtu.be/JnX-D4kkPOQ

This may surprise the average Canadian given that so much of the government is noticeably threadbare and underfunded. Canadians are dying in hospital waiting rooms due to unprecedented shortages in health care. The navy’s so strapped for cash that it can only deploy one offshore patrol vessel at a time. The RCMP’s federal policing is so under-resourced that Parliamentarians are now calling it a threat to national security. And even $600 billion in cumulative debt hasn’t been enough for the Liberals to honour their 2015 campaign promise to ensure universal clean water on First Nations reserves.

It’s popular to blame all this on some easy-to-identify example of government profligacy, such as Ukraine aid, free hotel rooms for refugee claimants or Prime Minister Justin Trudeau’s noted penchant to rack up outsized travel bills. But Canada’s fiscal problems are well beyond anything like that. At the current rate of spending, the cumulative $2.4 billion in military aid that Canada has sent to Ukraine represents less than a month’s worth of new debt.

So where’s all the money going? Below, a cursory guide to how Canada is able to spend so much while seemingly obtaining so little.

Debt servicing just got way more expensive

First, an easy one: The Trudeau government borrowed an obscene amount during the COVID-19 pandemic, and with rising interest rates the treasury is getting hammered with debt-servicing costs.

As recently as 2021, interest charges on federal debt cost $20.3 billion per year. In the current fiscal year, it’s probably going to blow past $46.5 billion. Ottawa now spends about as much on debt management as it does on health care transfers to the provinces.

The phenomenon of pricier debt is not limited to Canada: Virtually every government in the world ran up record-breaking debts during COVID and are now facing the consequences. But if Canada is different, it’s that our rate of pandemic debt accumulation was at least $200 billion higher than it needed to be. And in justifying all this extra spending at the time, Trudeau argued that it was a good time to take out extra debt since “interest rates are at historic lows”.

The corporate welfare is just unbelievable

Canada has a long history of government signing over grants and bailouts to politically connected corporations. As far back as 1972, then NDP Leader David Lewis famously championed the cause of stopping Canada’s “corporate welfare bums”.

But the Trudeau government has taken corporate welfare to new heights. It was only a few years ago that Bombardier was the undisputed champion in collecting federal grants, bailouts and interest-free loans. Over 50 years, according to an analysis by the Montreal Economic Institute, Bombardier received a cumulative “$4 billion in public funds”.

In just the last calendar year, the Trudeau government has signed two subsidy agreements that would dwarf that $4-billion figure several times over. In the spring, both Stellantis and Volkswagen agreed to build EV plants in Ontario in exchange for federal subsidy packages that could cost as much as $18.8 billion (plus another $9 billion from the Ontario government).

And that new $18.8 billion liability on the books doesn’t even account for the massive ramp-up in the corporate welfare everywhere else. To name just a couple: In 2021, Air Canada got a $5.4 billion loan package. And the Trudeau-founded Strategic Innovation Fund gets about $1.5 billion per year in handouts to green energy companies.

November 24, 2023

More than 1,500 new jobs thanks to federal and provincial subsidies … except the jobs are for South Koreans

Filed under: Asia, Business, Cancon, Government — Tags: , , , , , — Nicholas @ 03:00

Tristin Hopper applauds the great job creation scheme that the federal and Ontario governments have put in place … if you ignore the inconvenient fact that most of the newly created jobs aren’t even going to Canadians:

When the Ontario and federal governments greenlit one of the biggest corporate subsidy payouts in Canadian history last summer, their main pitch was the deal would create jobs.

“The governments of Canada and Ontario are partnering to attract once-in-a-generation projects that will anchor our auto manufacturing sector and keep good jobs in Canada,” reads the opening line of a July 6 joint statement announcing a record-breaking $28 billion in government “performance incentives” to secure two foreign-owned EV battery factories in Southern Ontario.

The subsidy-per-job ratio was never great. Even according to the most optimistic estimates of government spokespeople, the two factories — one operated by Volkswagen, the other by Stellantis — would create about 5,500 jobs. Per job, that’s roughly $5 million in lifetime subsidies and tax credits.

But now, it appears that many of those jobs may not even go to Canadians.

Last week, during a visit by South Korean Ambassador Woongsoon Lim to Windsor, Ont., a social media post by the Windsor Police casually mentioned that “1,600 South Koreans” would soon be arriving in the community to staff the Stellantis plant, which is set to open next year.

    With the new LGEngergy Solutions battery plant being built, we expect approximately 1,600 South Koreans traveling to work and live in our community in 2024.

    — Windsor Police (@WindsorPolice) November 16, 2023

The CEO of NextStar — the Stellantis joint venture operating the factory — hasn’t confirmed the 1,600 figure, but said in a statement that the “equipment installation phase of the project requires additional temporary specialized global supplier staff”. He added that the company was “committed” to hiring Canadians to fill the 2,500 full-time jobs at the completed plant

The revelation has sparked a wave of confusion and finger-pointing among the very officials who, mere months ago, were championing the plant as an unalloyed triumph for Canadian manufacturing jobs.

When the subsidy arrangement was first announced in July, Ontario Economic Development Minister Vic Fedeli called it a “historic deal” and “a great agreement” that “protects the thousands of jobs quite frankly that were at stake”.

November 27, 2021

Americans fear the power of “Big Oil” and other cartels. Canadians rejoice under the buttery thumb of “Big Dairy”

Filed under: Business, Cancon, Food, Government — Tags: , , , , — Nicholas @ 06:00

Jen Gerson hates Canada’s supply management “system” with the heat of a thousand suns. And she’s perfectly right to do so:

Former federal Conservative Party leader Andrew Scheer, paid tool of Big Dairy, chugs some milk during a Press Gallery speech in 2017. I’ve called him the “Milk Dud” ever since.
Screencapture from a CTV video uploaded to YouTube.

Many of you readers have listened to the likes of me complain about supply management over the years, but for those of you whose eyes glazed over until you started to notice your rent money disappearing into your grocery bill, here’s a very quick primer.

The supply management system insulates eggs, dairy, and poultry from the vicissitudes of the free market, assuring established farmers in these few sectors a guaranteed return to produce a pre-ordained supply of these products. The federal and provincial governments oversee the system via various dairy commissions.

Some government involvement in dairy has been a feature of our agricultural system since the late 19th century, however the system as it exists today came into effect in the ’70s. It consists, broadly, of three policy mechanisms. Prices are set internally to assure farmers receive a healthy profit for their labour, farmers are protected from competition though ruinous import tariffs, and then supply is managed via a quota system.

As one might expect, this has created extraordinary economic distortions, assuring that a container of milk in Canada is radically more expensive than an identical product south of the border. (Yes, American milk is subsidized too, although less than it once was. And from a consumer’s perspective, so what? If the Americans want to subsidize cheap milk to send north, all the better for shoppers.)

In order to keep production at a steady level, the system has to keep newer, cheaper players from entering the market, and this is accomplished via a quota system that has led to absurd economic incentives and outcomes. According to this report from the Canadian West Foundation from 2016, the quota was valued at about $28,000 per cow. That means that the value of the right to own one milk-producing cow far outweighed the actual value of the animal — and someone seeking to start a dairy farm would need to pay for millions of dollars worth of quota in addition to cows, land, food, and farm equipment.

The quotas themselves are a multi-billion dollar racket; this is roughly akin to the way a license to run a taxi costs hundreds of thousands of dollars in some cities, many multiples of the value of the car itself. When a government creates a regulatory system that imposes artificial scarcity, the value of the thing regulated radically increases.

Since the supply management system was introduced, much of the agriculture has consolidated; this, combined with the value of the quotas they possess mean that most dairy farms — far from being quaint, picturesque family homesteads — are multi-million dollar operations, with farmers themselves making six-figure profits after paying their own wages.

The system has also proved a obstacle in multiple free-trade deals, arguably making it difficult for other agriculture sectors to compete globally.

And who pays for all of this?

Well, of course, you do.

April 1, 2020

QotD: Government spending in theory and practice

Filed under: Economics, Government, Quotations — Tags: , , , — Nicholas @ 01:00

Modern economics explains to governments how they and their crony capitalist mates can steal from you while pretending they are doing you good. And before we go any farther, here is something you should know before you listen to another word from anyone in government: Government spending never creates a net increase in employment. Government spending only creates jobs in one place at the expense of jobs somewhere else, and does it by giving money to the government’s best friends to run projects no firm, based on profit and loss, would ever undertake. And if the project is loss making, which government projects almost invariably are, it has taken the economy backwards — that is, people in general invariably become less well off than they otherwise would have been had these projects not gone ahead — even if those to whom the government has paid money are better off, which they almost invariably are. Government spending, unless there is a genuine and calculated return above the cost, is a ripoff, and it is you who are being ripped off. They pick your pockets and pretend they are doing you good.

Steven Kates, “Classical economic theory and the American recovery”, Catallaxy Files, 2018-01-15.

September 17, 2019

QotD: Rent-seeking

Filed under: Economics, Government, Quotations — Tags: , , , , , , — Nicholas @ 01:00

[Progressives] should also be delighted by public choice scholars’ development of the theory of privilege-seeking (or “rent-seeking“). It’s an old observation, really: when the state’s personnel have favors to dispense, people in the private sector will invest resources to obtain them. Such favors are by nature impositions on third parties. They may take the form of cash subsidies, taxes and regulations that hamper or quash competition and raise incomes in a non-market manner, and other devices. But the principle is the same: private- and government-sector individuals collude to use the state’s coercive power to obtain what they could not obtain through voluntary exchange for mutual benefit. It’s a theory of exploitation the good-faith left should embrace.

By the same token, the state’s personnel, seeing opportunities to sell favors, are just as likely to initiate the privilege-seeking process. In this sense, public choice scholars are right when they see the political arena as a series of exchanges. The big difference with the marketplace, however, is that in the political arena the largest group of people is forced to participate.

The bottom line on privilege-seeking, which should interest the left, is this: the people with the greatest access to power will not be those the left cares most about, but those who run Boeing and ExxonMobil and GE and Lockheed Martin. Wealth transfers will tend overwhelmingly to be upward.

Sheldon Richman, “TGIF: What the Left Should Like about Public Choice”, The Libertarian Institute, 2017-07-28.

August 20, 2019

Jonathan Kay listened to the whole SNC-Lavalin report so you don’t have to…

Filed under: Business, Cancon, Government, Politics — Tags: , , , , , — Nicholas @ 03:00

Update: Apparently the Thread Reader App only picked up the first couple of entries (it worked fine when I queued it up for publication yesterday). Here’s the text version:

I just listened to the entire ethics commissioner’s report on the SNC-Lavalin scandal while driving back from Maine. I loaded up the text in my VoiceAloud app, hit play, and the audio kept me going for 3 hours, all the way into central New York State, along the I-90….

As with any narrative, you begin to identify with certain characters. In my case, it was @Puglaas. I found it especially maddening the way everyone around her kept babbling about finding a “solution,” which was their settled euphemism for bullying her into helping SNC…

The level of condescension exhibited by everyone in and around the PMO toward @Puglaas was breathtaking. These Liberal dudes always kept pretending that they just wanted to make sure she had enough “information,” as if she were a law student, not the AG of a G7 nation …

At the same time, it was breathtaking the way SNC Lavalin was essentially able to turn the entire PMO, and major ministries, into its personal lobbying operation. Texts, emails, calls, in-person visits… it was like SNC-Lavalin had Trudeau’s PMO on retainer, like a law firm ….

I hadn’t realized SNC was able to mobilize, or attempted to mobilize, not one, not two, but THREE former SC of Canada justices on its behalf. This is the sort of blurring between corporate & govt operations that u expect in banana republics (or in the Irvings’ New Brunswick)…

The fact trudeau & those around him still pretend this is about “jobs” is…I don’t even know the word for it. The ethics comm essentially called it a lie. This was about partisan politics. How can JT say he “accepts” the report without coming to terms with this core finding?

When this scandal & election is done, we need an inquiry that gets to the bottom of the larger issue here: how a single quebec corp, one heavily impugned by its own action, was able to essential create legislation to help itself, got trudeau to ram it thru on a budget omnibus…

And then spent weeks pulling every lever in ottawa to try to override our constitutional system of govt so they could get off the hook for alleged crimes, culminating in the actual reconstitution of cabinet. SNC turned our govt into a joke. And trudeau still sez it’s about “jobs”

If yr attitude is that u dont want to educate yourself about this scandal, bcuz the only thing that matters is hating @AndrewScheer (an attitude some ppl have candidly expressed) pls reconsider. Even if u vote Liberal, the scandal exposed problems in our system that need fixing

Conservative governments have no doubt been equally solicitous to big well-connected firms. Leftists *especially*, the same ones dismissing this scandal bcuz it interferes with their elxn narrative, should be horrified that corporations are treating @Bill_Morneau & PMO as puppets

The fact that all of these Libs can bleat “jobz jobz jobz” with a straight face isnt just a symptom of the amoral cynicism of politics (tho it is that). It reflect the fact that we canadians expect that big corps will get coddled like this. We need to end it

If youre @AndrewScheer or @theJagmeetSingh, it’s fine to rake the Libs over the coals for lying to us. But all politicians lie. Tell us how you’d fix the system structurally to ensure that the PMO isn’t acting as a pro bono hanger-on to a major corporation

And if you’re a progressive activist of a certain age, go back & look at all the things @NaomiAKlein @Sheila_Copps Judie Rebick etc warned us about during the free trade battles…corporations dictating terms to elected govts. Well, guess what ? That’s what’s on display here…

In fact, one of the most tragicomic subplots here is the Libs running around in full panic bcuz SNC was about to have a board meeting the next day… Yes, that’s right: Trudeau’s PMO prioritized important legal decisions on the basis of some company’s board meeting.
Because Jobz.

What’s more, the full-court press on @Puglaas in the shadow of these meetings was itself based on another lie: Libs knew SNC HQ couldnt abandon quebec (till 2024) bcuz of representations made to Caisse in regard to purchase of a UK sub. Bullshit layered on bullshit
#BecauseJobz

I keep coming back to @Puglaas, & how she must have felt. How many cdns have been in a job where yr boss & his minions tried to pressure u to find an unethical “solution,” to help the boss keep his own job? then when u did what was right, u get turfed 4 not being a “team player”

This isnt just about Trudeau. One galling episode described is a meeting in which @Bill_Morneau pontificates to @Puglaas about how she doesnt have enuf “information” about econ effects of possible SNC crim conviction. @Puglaas asks Morneau if he’s done a study on it. Answer: no.

We talk a lot about toxic workplaces for women. hard not to see how the dudes who Trudeau assigned to push @Puglaas around on this file aren’t guilty of this. Their strategy was to make her feel ignorant bcuz she did the right thing. The PMO gaslit their own justice minister

There are several female Liberal MPs whom I have come to know and respect, such as @juliedabrusin @cafreeland @JulieDzerowicz. It is mortifying to watch them being forced to line up in defence of this.

As for SNC itself, I don’t really blame it for doing what it did. If u were running a company and knew you could dictate terms to a govt, why not? The lesson to other CEOs would be that if youre accused of a crime, just threaten to lay ppl off and move your HQ. Problem solved.

final note…u can see y the Libs are going hard with demagoguery about @AndrewScheer being white supremacist-adjacent. A traditional leftist claim was that Tories would sell out to corporate interests. That’s a hard claim for Libs to make now. bcuz the Libs have already done it

It’s been a day since I wrote this thread, & some commenters are saying the SNC scandal shows Trudeau & the Libs are unscrupulous people. But I dont think that’s it. I have met some of these protagonists, and have found them to be *more* public-minded than the average citizen…

As noted in a response to @staceylnewman, the problem is that politics changes ppl. There’s a chilling quote in the report, from a meeting, where a Lib says to @Puglaas (paraphrasing here) “It doesn’t matter how great our policies are. We need to get re-elected to implement them”

To me, that sums everything up: The means justifies the ends, bcuz the ends (the “good” side wins power, & the “bad” side loses) are taken to have existential importance. That’s the myth that leads all politicians astray. If JT just admitted this, I bet many would forgive him

August 2, 2019

Doug Ford’s sudden onset “Winegate” scandal

Filed under: Business, Cancon, Media, Politics, Wine — Tags: , , , , , , — Nicholas @ 03:00

Ontario premier Doug Ford is now taking flak for promoting an Ontario winery after his party accepted what some Toronto media reports characterized as a “generous” donation from the winery’s owner. How generous? Are we talking millions? Tens of millions? A thousand dollars. Toronto media considers $1,000 to be enough money to sway the provincial government and at least one local media outlet encouraged its readers to boycott the winery. But that turned out to be only the tip of the iceberg from a media investigation point of view: Ford’s ultra-cheesy “Ontario News Now” party propaganda channel had given Ford’s endorsement to at least four other mega-corporations whose political contributions may have gone as eye-wateringly high as $2,000! Torontonians may never have heard of these corporate puppet-masters who clearly now control Premier Ford’s every waking moment, but as Canadians have never seen corruption on this scale before — nearly ten thousand dollars in political contributions!! — they’re demanding all the usual things that media-ginned-up protests tend to demand.

At the National Post, Chris Selley wonders why the Ontario Progressive Conservatives are acting just as badly as the Liberals they replaced:

When it comes to Canadian politicians and money, it might be difficult to explain to a foreign visitor exactly what’s kosher and what’s not. Ontario Premier Doug Ford got some bad press this week for having promoted the Pelee Island Winery in one of his impossibly cheesy “Ontario News Now” propaganda videos, just weeks after the winery’s owner, Walter Schmoranz, donated $1,000 to Ford’s Progressive Conservatives. In isolation, it didn’t look great. If it’s a coincidence, as the premier claims, then it’s the sort of coincidence a government wishing to claim moral rectitude should endeavour to avoid.

Viewed in the broad landscape of Canadian politics, however, it all seems rather overblown. Politicians regularly stump for certain products and businesses, after all, implicitly at the expense of others. More to the point they routinely give businesses free money without asking us, and not out of the goodness of their hearts.

According to David Akin’s indispensable @ottawaspends Twitter feed, the federal government doled out $723,000 to wineries and winery associations this year and last. The Nova Scotia Winery Association hoovered up $522,000 of the total, plus another $175,000 back in 2012. Perhaps it would be cynical to observe that the riding of West Nova, home to the Annapolis Valley wineries, is notorious for changing hands between the Liberals and Conservatives. Whoops — too late.

Here in Ontario, meanwhile, between 2013 and 2018, the province and feds collectively gave away at least $1.1 million to wineries and $1.5 million to breweries, plus $140-odd million more to an endless queue of cap-in-hand distillers, mushroom farmers, meat processers, goat dairies, sugarmakers and bakeries. Pelee Island Winery isn’t on that list, incidentally, which might put the premier’s non-financial contribution — quid pro quo or not — in perspective.

All that taxpayer dough got handed out under a program called Growing Forward 2, which was an “initiative that encouraged innovation, competitiveness and market development, adaptability and industry sustainability in Canada’s agri-food and agri products sector.” That’s a fancy way of saying “corporate welfare,” which can be unpopular in Canada when it comes to bailing Bombardier out of its latest fiasco or buying the Weston clan new freezers, but which is entirely uncontroversial when it comes to smaller, less obviously villainous businesses — especially if they happen to be farms.

April 8, 2019

Comparing the economic performance of China’s private versus state-owned companies

Filed under: Business, China, Economics, Government — Tags: , , , — Nicholas @ 03:00

If you’ve been following the blog for a while, you’ll know that I’ve long been skeptical of any official economic statistics coming out of China. The reasons for my skepticism are that vast areas of the Chinese economy were owned or controlled by the state and reporting from those entities was performed through layers of officials whose positions and personal well-being depended on those reports being as positive as possible. In a capitalist system, announcing false production or profit figures will eventually be detected (sometimes not as soon as we’d like), and the company loses the trust of customers, suppliers, and banks, making survival much more difficult. In a state-owned organization, everyone in the hierarchy has a vested interest in false information not being uncovered or reported. In a private firm, you could lose your job … in a state-run enterprise, you could be shot or sent to a “re-education camp” along with all your family. The incentive to lie is much stronger when your risks are that high.

Tim Worstall comments on a recent report that compares the performance over time of Chinese private companies, privatized state companies, and companies that are still state-run:

That China has relaxed the governmental grip upon industry in recent decades is true. That China has become very much richer in recent decades is also true. The two are not a coincidence, there’s causality there. However, we hear often enough that it’s the residual control over industry by the government that drives that success. Sure, OK, so the bureaucracy doesn’t specify prices or detailed actions but the general guidance provided by a politically driven bureaucracy explains the outperformance.

Except it doesn’t. Those former state industries still enjoying that government guidance perform worse than the free market firms sadly lacking it. State planning is keeping China poorer than it need be, not aiding its growth.

The report he’s commenting on:

Changing the tiger’s stripes: Reform of Chinese state-owned enterprises in the penumbra of the state
Ann Harrison, Marshall W. Meyer, Will Wang, Linda Zhao, Minyuan Zhao 07 April 2019

The conventional wisdom that privatisation of state-owned enterprises reduces their dependence on the state and yields positive economic benefits has not always been borne out by empirical work. Using a comprehensive dataset from China, this column shows that privatised SOEs continue to benefit from government support in the form of low-interest loans and subsidies relative to private enterprises that have never been state-owned. Although there are clear improvements in performance post-privatisation, privatised SOEs continue to significantly under-perform compared to private firms.

Much of China’s economic growth has been driven by the emergence of a vibrant private sector, today accounting for approximately 60% of GDP and 80% of employment. Conventional wisdom holds that privatisation of state-owned enterprises (SOEs) reduces their dependence on the state and yields positive economic benefits including enhanced firm performance, productivity, and innovation. The pro-privatisation argument is that the state either cannot monitor managers properly or chooses not to pursue efficiency because state interests take precedence over financial results (Boardman and Vining 1989, Vickers and Yarrow 1991, Shleifer and Vishny 1994). Empirical work, however, has produced mixed results on privatisation. For example, DeWenter and Malatesta (2001) found that, among the 500 largest firms globally in 1975, 1985, and 1995, private enterprises had significantly lower costs and higher profits than SOEs. Yet, when they examined a sub-sample of privatised firms, they found inconsistent results – performance increased post-privatisation, while leverage and employment increased mainly pre-privatisation. Market returns from privatisation also differed across countries, positive in Hungary, Poland, and the UK but insignificant elsewhere.

Our research on privatisation in China (Harrison et al. 2019) is unique in several respects. We analyse an extremely large sample of industrial firms, more than 3.5 million firm-years from 1998 to 2013, drawing on the Annual Industrial Survey conducted by the China National Bureau of Statistics. We compare privatised firms with firms that remained state-owned and firms that had never been state-owned. Most importantly, we compare both the performance and dependence on the state of privatised firms with firms having no prior state ownership. Overall, our results indicate selective performance gains from privatisation – privatised firms have greater productivity and are more likely to file patents than firms remaining state-owned even though their return on assets barely improves. The performance effects notwithstanding, privatised firms remain dependent on the state. Subsidies, concessionary interest rates, and loans granted to privatised firms remain at nearly the same levels as those to SOEs. Privatisation changes the behaviour of firms but not firms’ dependence on the state.

A graphical portrayal of the differing performance of the three types of Chinese companies from the report:

Return on assets of state-owned enterprises, privatised state-owned enterprises, and privately-owned enterprises

January 30, 2019

The high cost Canadians pay to support our oligopolies

Filed under: Cancon, Economics, Politics — Tags: , , , , , , — Nicholas @ 03:00

In the National Post, Andrew Coyne compares the Liberal and Conservative parties’ respective claims to lower the cost of living for Canadians, and points out some examples that neither party is willing to address:

For example, there is the notorious system of agricultural quotas known as supply management — a price-fixing ring the government not only approves but organizes and enforces, whose effect is to double or even triple the prices of such basic food items as milk, cheese, eggs and chicken. For all their pretended concern for affordability, all parties and every MP, with the sole exception of Maxime Bernier, are publicly, nay fervently in favour of it.

But while the farm cartel gets a lot of ink, there are plenty of other examples. Canadians pay among the highest wireless telephone fees in the world, for starters — maybe even the highest — as study after study has found. The latest report from Tefficient, a European consultancy, found Canada’s carriers take in more revenue per gigabyte of data than their counterparts anywhere else in the world — 23 times more than in Finland.

Similarly, Canadians pay among the highest air fares in the world. The travel website Kiwi. com recently found flights from Canada on a full-service airline cost roughly five times as much per 100 kilometres as flights from the United States. The situation was a little better for domestic flights, where costs were only twice as high as in the U.S. The makers of Hopper, the travel app, note it is typically cheaper to fly from Vancouver to Hawaii than from Vancouver to Regina, though Regina is 3,000 km closer.

Finally, there are Canadian bank fees, also — you guessed it — among the highest in the world, particularly for mutual funds. What is the common thread among these three industries? All are highly concentrated oligopolies: three big wireless carriers, two big airlines and five big banks dominate their respective markets.

Rather than compete as vigorously as they might for Canadian consumers, these quasi-cartels are permitted, in effect, to harvest them. They do so, again, not only with the tolerance but the active participation of the government. Foreigners are effectively precluded from competing in any of them, whether by foreign-ownership restrictions or outright prohibitions on competition — foreign airlines may not fly from one Canadian city to another, for example.

None of the parties currently boasting of their desire to make life more affordable for Canadians proposes to change a line of this, either. Whatever else may be in (artificially) scarce supply, in Canadian politics there’s never any shortage of rank hypocrisy.

December 20, 2018

Remy: It’s Beginning to Look a Lot Like Christmas (EV Tax Credit Edition)

Filed under: Business, Government, Humour, Media — Tags: , , , , , — Nicholas @ 04:00

ReasonTV
Published on 19 Dec 2018

Government plays Santa Claus with your tax money.

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Have a Tesla on your Christmas wish list? Don’t thank Santa — thank Tom in Ohio.

Parody written and performed by Remy. Video by Austin Bragg. Music tracks, background vocals, and mastering by Ben Karlstrom

LYRICS:

It’s beginning to look a lot like Christmas
Everywhere you go
Folks with six-figure salaries
Are shopping in galleries
With a gift card paid by Tom in Ohio

It’s beginning to look a lot like Christmas
Roadsters all around
And while Tom can’t afford a car
He’ll buy part of one for John
Cuz somehow that’s allowed

Well a black Model X and a tax credit check
Is the wish of Connor and Ken
And a dark Model 3 that is partially free
Is the hope of Bobby and Ben
While Tommy takes the bus and eats Vienna sausages

It’s beginning to look a lot like Christmas
Hear those sleigh bells ring
But what else could you expect
With a tax code so complex?
Ensuring just these things?

Yes a car with aplomb that’s, in part, paid by Tom
Is the wish of Victor and Von
A sedan that can drive and takes years to arrive
Is the hope of Lenny and Lon
While Tommy pinches pennies never flushing number one

It’s beginning to look a lot like Christmas
Soon the credits end
But the funniest sight to see’s
When typical for DC
They’re renewed again
Everything’s renewed again

December 19, 2018

QotD: Maple-flavoured corporate welfare

Filed under: Business, Cancon, Government, Quotations — Tags: , , , — Nicholas @ 01:00

There’s that word: “investments.” That’s what Canadians — Ontarians and Quebecers, certainly — have been trained to expect in these situations: An elaborate mating dance culminating in a greasy press conference where corporate leaders hail bold new provincial and federal “investments” in the company and its workers and its world-beating widgets. Critics are assailed as uncaring and testily reminded that every jurisdiction subsidizes the widget industry.

Traditionally, this is later followed by outrage when it emerges the company has used taxpayers’ bold investment to pay out lavish bonuses or dividends. In the fullest version of the performance, the company just pulls up stakes and leaves town anyway — sometimes having fulfilled its stated obligations, sometimes not, but always leaving behind a bad taste and a per-employee subsidy rate that makes no sense in hindsight.

If the company is Bombardier, it might extract lavish subsidies from government for an airplane project on the theory the Canada needs an aerospace industry, then turn around and sell the project to a foreign competitor for basically nothing.

Chris Selley, “A reminder that governments don’t ‘invest’ in businesses. It’s just corporate welfare”, National Post, 2018-11-28.

December 5, 2018

The true lesson to be learned from GM Canada’s economic plight

Filed under: Business, Cancon, Economics, Government — Tags: , , , , , — Nicholas @ 03:00

Andrew Coyne tries to encapsulate the key economic concept that should be taken away from the GM Canada collapse:

Think of it this way. Governments have proven more than ready in the past to pay whatever the auto companies demanded to hold onto threatened jobs. If there were any chance whatsoever of buying the plant’s reprieve, no matter how foolishly or expensively, can there be any doubt they would have? That they did not — apparently GM waved them off — tells you how hopeless the plant’s prospects really are.

Many have recalled that the closure of the Oshawa plant comes less than a decade after the Canadian operations of GM and Chrysler were bailed out with $14 billion in federal and provincial money, $4 billion of which was never recovered. The lesson some have drawn from this is that GM is a devious ingrate, which may be fair comment but is not especially helpful. The real lesson is this: when you try to buy jobs with public money, the jobs last only as long as the money does. In the end, all you will have done is to lure people into taking or staying in jobs that were long since doomed.

Like most of economics, this is wholly alien to popular wisdom. There is a rich vein of commentary to the effect that the laws of economics are effectively optional, something we can resist by force of will: we can either bend to “market forces,” or we can “stand up” to them in some fashion. But in fact the latter option is entirely imaginary, at least in the long run. You can perhaps lure plants and jobs your way at the outset with subsidies and other goodies. But the only assurance they will stay is if it makes economic sense to the company to keep them there.

If not, then all you have won with your subsidy is the right to go on providing more subsidy, which is a fairly accurate description of Canadian automobile policy in recent decades. The workers whose jobs successive governments boasted of creating or saving were effectively hostages; as in all hostage-takings, the payment of ransom only stimulates further demands for ransom. Until one day when the money runs out, and the workers whose jobs were supposedly saved find themselves abandoned. This may be many things, but one thing it is not is compassionate.

November 30, 2018

“Infrastructure” is a Canadian word meaning “jobs for the boys”

Filed under: Cancon, Government, Politics — Tags: , , , — Nicholas @ 03:00

H/T to Colby Cosh for the link.

November 15, 2018

Amazon’s HQ$2Bn decision

Filed under: Business, Economics, Government — Tags: , , , , , — Nicholas @ 03:00

If you had any doubt that the Amazon HQ2 competition was about anything other than trolling for economic bribes, this should banish the thought:

Amazon is getting some prime real estate.

In exchange for more than $2 billion in economic incentives, the online shopping giant will locate a pair of new corporate headquarters just across the Potomac River from Washington, D.C., and just across the East River from Manhattan. Tuesday’s much-anticipated announcement of the locations for Amazon’s “HQ2” also included details — which had previously been kept from the public — about the economic incentives that successfully lured the Seattle-based firm to the east coast’s political and economic hubs.

Amazon says it will invest $5 billion and create more than 50,000 jobs across the two new locations, with at least 25,000 employees at each of its new corporate campuses, to be located in Virginia’s Crystal City and New York’s Long Island City. Nashville wins a consolation prize: a new supply chain and logistics center that promises 5,000 jobs in exchange for $102 million in economic incentives.

In New York, Amazon will receive $1.2 billion in refundable tax credits through a state-level economic development program and a cash grant of $325 million that’s tied to the construction of new buildings at the Long Island City location over the next 10 years. In Virginia, the state is ponying up $573 million in tax breaks tied to the creation of 25,000 jobs, and the city of Arlington will provide a cash grant of $23 million over 15 years funded by an existing tax on hotel rooms.

Yes, the numbers are staggering — New York state’s pledge of $1.52 billion for 25,000 jobs works out to more than $60,000 in taxpayer support per new job created — but Amazon appears to have selected New York and the D.C. area based on more than just how many zeroes local officials agreed to put on the giant cardboard check.

After all, New Jersey offered Amazon $5 billion (with another $2 billion from Newark), and Maryland offered $8.5 billion. Yet Amazon passed them both over to pick their neighbors.

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