Quotulatiousness

November 15, 2013

Corporations and social responsibility

Filed under: Business, Government, Law — Tags: , , , , , — Nicholas @ 14:17

In this week’s Goldberg File email, Jonah Goldberg talks about the notion that corporations should operate with an eye to “social responsibility”:

Milton Friedman was famously opposed to the whole idea of “corporate social responsibility.” His argument was that corporations have a single obligation: to maximize profits for shareholders. When CEOs spend money on gitchy-goo feel-good projects, they are exceeding their authority and wandering outside the lines of their job description. I’ve always been very sympathetic to this view. If you asked me to invest $10,000 dollars in your startup company and then I found out you spent $5,000 of it to sponsor a program to teach prison-gang members to settle their disagreements by acting out scenes from Little Women, I’d be pretty pissed. That’s not why I gave you the money. And it’s pretty shabby of you to buy fame and praise for your generosity while spending someone else’s money. Indeed, it’s not much less selfish than blowing it on a three-day bender with the mayor of Toronto.

There are lots of different takes on this argument and, because this is my “news”letter, I choose not to deal with most of them. My problem with the profit-maximizing-über-alles creed for Big Business is that it offers no principled or moral reason for Big Business to stay out of Uncle Sam’s bed. If the federal government can make it rain Benjamins for any business willing to twerk for its amusement, why should GE or Big Pharma or the insurance companies demur?

Of course, some businessmen understand the risks of getting in bed with the government. But, since there’s lots of money to be made, there will always be other businessmen perfectly happy to put on the French-maid uniform and bark like a dog.

Even Adam Smith said, “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” That’s true. What’s even more true is that when government officials and business leaders sit down to talk, the inevitable result is a new “public-private partnership” that uses government force to limit competition from non-whorish corporations. Railroad magnates lobbied for the Interstate Commerce Commission. AT&T asked the government to make them a monopoly in the name of “efficiency” so they could clear the field of competition. Andrew Carnegie wanted government control of the steel industry so he could rely on Uncle Sam to guarantee his profit margins. GE loves Obama’s green-energy stuff, because without the inherent subsidies and regulations, it couldn’t make money off of its green tech.

I have no problem with contractors doing work for the government. It’s better that the guys building roads and bridges work for the private sector. But when big businesses agree to make the country less free, the market less competitive, Americans less prosperous, and the state more powerful just to make a few more bucks for their shareholders, it makes me think that Milton Friedman was wrong. We need a free-market version of corporate social responsibility. We need to equip businessmen with an ethical code that tells them there’s a principled reason not to get in bed with the government. They’d still be free to violate that principle, of course, but if they did, I hope they’d have the good sense not to come running to us to complain that the government has asked them to eat a bowl of dogsh**t.

November 13, 2013

The NFL “closed shop”

Filed under: Business, Football, Law, Liberty — Tags: , , , , — Nicholas @ 10:35

In Reason, S.M. Oliva discusses how the NFL’s exemption from normal labour regulations makes it difficult to assess the rights and wrongs in the Miami Dolphins “bullying” situation:

Many libertarians see nothing wrong with the NFL’s labor system. Even in a pure free market, employers and unions could enter into “closed shop” agreements like the NFL’s CBA. But as we all know, professional sports hardly exist in a free market. The NFLPA itself holds a government-sanctioned monopoly over all current and future NFL players. Indeed, Martin was not even a union member when the NFLPA signed the current CBA in 2011.

More importantly, in a free market any closed shop would face competition from new entrants seeking to exploit the incumbent’s labor restrictions. There’s little risk of that with the NFL given that most of its infrastructure is subsidized by government. This includes not just stadiums built with billions in taxpayer financing, but also player development, as most NFL players are the product of college football programs subsidized by state-run universities.

There’s also the perverse incentives created by federal antitrust law. The collective bargaining process creates an exemption from antitrust law. Without that exemption, most NFL labor policies, such as the draft, would be deemed illegal. Now, that’s hardly a libertarian outcome. But consider the NFL’s position. The more rules and restrictions they can stuff into the CBA, the lower the risk of future antitrust lawsuits. Thus, the exemption encourages the NFL (and the NFLPA) to centralize as much of its labor policy as possible.

That means there’s little motive to experiment with more flexible labor policies. Individual teams can’t offer employee incentives or enforce discipline in any way that conflicts with the CBA. When there are workplace disputes like the Dolphins situation, the bureaucracy acts not to “protect” employees, but to ensure nothing disturbs the government-granted authority of the league and its monopoly labor union.

October 18, 2013

QotD: The hidden problem with regulating prescription drug prices

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

[W]hen negotiating with other governments, pharmaceutical companies operate at a severe disadvantage, not because the governments’ buying power is so vast (the national health-care systems of Canada and many European countries cover fewer people than Aetna), but because the people you’re negotiating with can change the rules under which your product gets sold. At any point they can say, like Lord Vader, “I am altering the deal. Pray that I do not alter it any further.”

But if Canada started paying more, that wouldn’t mean we’d pay less. Drug companies are charging what they think we will pay. The result of Canadians and Europeans paying less is not that we pay more for drugs; it’s that fewer drugs get developed. To the extent that they are harming us, it is in hindering the development of cures or better treatments that we are missing, and don’t even know about.

Unfortunately, this is a classic case of Bastiat’s dilemma. It is easy for each country’s government to see the high prices that people are paying and intervene to lower them. It is hard for each country’s government, much less its citizens, to envision the new medical treatments that they might get if they paid more for drugs. So their incentives are heavily skewed toward controlling the price here and now, even if that means losing future cures.

Drug development is essentially a giant international collective-action problem. The U.S. has kept it from being a total disaster because we don’t have good centralized control of our insurance market, and our political system is pretty disorganized and easy to lobby. If that changes — and maybe we just changed it! — we’ll knock down the prices of drugs to near the marginal cost using government fiat, and I expect that innovation in this sector will grind to a halt. Stuff will still be coming out of academic labs, but no one is going to take those promising targets and turn them into actual drugs.

Megan McArdle, “U.S. Consumers Foot the Bill for Cheap Drugs in Europe and Canada”, Bloomberg, 2013-10-14

September 19, 2013

The LCBO’s new “Ontario Boutique” outlets – doing a Wal-Mart to Ontario wineries

Filed under: Business, Cancon, Wine — Tags: , , , , — Nicholas @ 09:13

In the latest Ontario Wine Review, Michael Pinkus talks about the opening of three new “Ontario Boutique” LCBO stores. These stores are the LCBO’s response to rising demand for quality Ontario wines … opening stores to directly compete with the wineries.

Well it happened; the LCBO opened their Ontario Boutiques to great fanfare on September 12, in three cities: Niagara Falls, St. Catharines and Windsor … three places that have wineries nearby. Three places where the local populace could hop in their cars and within 15 minutes be at any of a dozen wineries in the area. The way we should all view this is the LCBO utilized the Wal-Mart approach to competition: get in there and fight it out with already established businesses. According to reports, they are beautiful, well-stocked and something to see. Now, I’m not questioning whether or not the LCBO was going to do a nice job on these in-store boutiques, heck they have the money to sink into them (yours and mine), I question their location and I question why the Wal-Mart tactics?

[…]

Someone who did get it (Bob) emailed me directly, putting it very succinctly: “The Wine Council’s information shows that the majority of VQA wines are still sold at the wineries. I asked one of their staff why they were putting a new VQA [boutique] in the Glendale store in St. Catharines rather than Toronto, and was told that it was because they sold more VQA wine in that store than any other in their system. Obviously, they are intent on trying to steal as much business away from the local wineries as possible, and therefore to deny the wineries (for the most part Canadian small businesses) as much profit as possible.”

While another reader, Gaye, admitted she has finally seen the light: “I always took your rants re: the LC mildly, as I like being able to shop in the “biggest” importer of wines in the world (sic). But I love Ontario wines, and living in Toronto always bemoan the difficulty of going to Niagara wineries and driving back … for obvious reasons. So I thought these boutiques were inevitable and of course would be in the place most Ontario wine was drunk, Toronto. As your excellent wife said, “a no-brainer”. This is incredible, opening in Niagara Falls? As if our wine was just something to be sold to tourists. Now I’m totally on side.”

June 4, 2013

LCBO intransigence triggers constitutional challenge

Filed under: Bureaucracy, Business, Cancon, Law, Liberty — Tags: , , , , , — Nicholas @ 11:02

This is kinda fascinating:

What started out as a simple privacy commissioner complaint has turned into a constitutional challenge of the validity of the Liquor Control Board of Ontario (LCBO) — and this time the Board has only itself to blame for the brouhaha, proving once again that Ontario’s LCBO is so far out of touch with the realities of today’s world, it’s downright scary. At a time when they should be thinking about transitioning out of the alcohol business, the Ontario provincial government and the LCBO seem to be clinging to its very existence with even more tenacity and verve than before. They’re like the old boxer clinging to past glories who just has to show you the right hook he can still throw — yet only ends up throwing out his shoulder. In the LCBO’s case, the word “Control” won’t be pried away from its “cold dead hands” anytime soon… or will it? In its most recent fight, the LCBO is proving it is a government entity most in need of being on the chopping block — if not the auction block — of government institutions that should be moved over to the private sector.

[. . .]

Why the LCBO has chosen to play hardball over such a trivial matter is incomprehensible; according to reports, the LCBO has decided to appeal the order and has asked that the records be sealed in the process. This seems to contravene common sense. “A government entity has chosen to spend hundreds of thousands of taxpayers’ dollars to fight an order by the Privacy Commissioner whose sole purpose is to make these decisions,” Porter says.

Now fed up with the collection of information, Porter and his team have decided to question the entire existence of the LCBO as it contravenes the Constitution Act of 1867 by challenging the Importation of Intoxicating Liquors Act (IILA) itself — which bans the free flow of goods (including alcohol, wine and beer) between the provinces. The argument hinges on Section 121: “All articles of Growth, Produce or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.” This challenge could, and would if successful, lead to the downfall of the LCBO. Social networks were abuzz with the news about the challenge. Alfred Wirth, president and director at HNW Management Inc., applauded the news on Facebook: “Any progress towards competition among merchandisers is to be appreciated – even if it’s for domestically-produced products. Several years ago, when I questioned why Ontario couldn’t privatize the LCBO, the then Minister of Health said that alcoholic beverages were a crucial health matter which the province had to control. Despite the risk of people (including underage youth) freezing to death during our cold Ontario winters, he did not explain why the sale of crucial winter coats could be entrusted to Sears, the Bay, etc…” While Porter himself posted an analogy to cigarettes: “How about this one. Cigarettes are so dangerous that you cannot advertise them on TV, print, billboards or even display them behind a counter… but they can be sold at any store. Alcohol is so dangerous that it has to be sold at a government store with specially-trained people… but the government itself floods the market with advertising and even publishes a free magazine where 50 per cent of the content is about consuming the product.”

Energy lawyer Ian Blue has joined the Vin de Garde team for the action. I interviewed Blue in 2010 about the IILA, which is now under fire. Here’s what Blue had to say: “The law that gives provincial liquor commissions a monopoly and the power they have, is federal law, the Importation of Intoxicating Liquors Act; it’s highly arguable that the law is unconstitutional. It’s also pretty apparent to government constitutional lawyers, who are knowledgeable in these matters… [If the Supreme Court of Canada] takes a hard look at the IILA, and if they do an intellectually honest interpretation, the IILA probably cannot stand up to constitutional scrutiny.”

In 2009, lawyer Schwisberg commented to me when speaking about the IILA: “The very underpinning of Canada’s liquor regulatory system is unconstitutional. Isn’t that a mind blower?” Blue said: “There is nothing natural or logical about the existing system. It bullies, fleeces and frustrates wine producers and the public… If the IILA were to fall… wine producers could probably make quantum leaps of progress towards a fairer and more rational system of liquor and wine distribution in Canada.”

May 31, 2013

The congenital defect of politics

Filed under: Books, Bureaucracy, Government, Politics — Tags: , , , — Nicholas @ 08:56

Jonah Goldberg talks about a new book from Kevin Williamson:

Kevin Williamson’s new book is quite possibly the best indictment of the State since Our Enemy, the State appeared some eight decades ago. It is a lovely, brilliant, humane, and remarkably entertaining work.

Though he sometimes sounds like a reasonable anarchist, Williamson is not in fact opposed to all government. But he is everywhere opposed to anything that smacks of the State. There’s an old line about how to carve an elephant: Take a block of marble and then remove everything that isn’t an elephant. Williamson looks at everything we call the State or the government and wants to remove everything that shouldn’t be there, which is quite a lot. In what may be my favorite part of the book, he demolishes, with Godzilla-versus-Bambi ease, the notion that only government can provide public goods. In fact, most of what government provides are nonpublic goods (transfer payments, subsidies, etc.), and a great deal of what the market provides — from Google and Wikipedia to Starbucks rest­rooms — are indisputably public goods.

[. . .]

Williamson’s core argument is that politics has a congenital defect: Politics cannot get “less wrong” (a term coined by artificial-intelligence guru Eliezer Yudkowsky). Productive systems — the scientific method, the market, evolution — all have the built-in ability to learn from failures. Nothing (in this life at least) ever becomes immortally perfect, but some things become less wrong through trial and error. The market, writes Williamson, “is a form of social evolution that is metaphorically parallel to bio­logical evolution. Consider the case of New Coke, or Betamax, or McDonald’s Arch Deluxe, or Clairol’s Touch of Yogurt Shampoo. . . . When hordes of people don’t show up to buy the product, then the product dies.” Just like organisms in the wild, corporations that don’t learn from failures eventually fade away.

Except in politics: “The problem of politics is that it does not know how to get less wrong.” While new iPhones regularly burst forth like gifts from the gods, politics plods along. “Other than Social Security, there are very few 1935 vintage products still in use,” he writes. “Resistance to innovation is a part of the deep structure of politics. In that, it is like any other monopoly. It never goes out of business — despite flooding the market with defective and dangerous products, mistreating its customers, degrading the environment, cooking the books, and engaging in financial shenanigans that would have made Gordon Gekko pale to contemplate.” Hence, it is not U.S. Steel, which was eventually washed away like an imposing sand castle in the surf, but only politics that can claim to be “the eternal corporation.”

The reason for this immortality is simple: The people running the State are never sufficiently willing to contemplate that they are the problem. If a program dedicated to putting the round pegs of humanity into square holes fails, the bureaucrats running it will conclude that the citizens need to be squared off long before it dawns on them that the State should stop treating people like pegs in the first place. Furthermore, in government, failure is an exciting excuse to ask for more funding or more power.

May 13, 2013

Ontario’s other quasi-monopoly, The Beer Store

Filed under: Business, Cancon, Government — Tags: , , , — Nicholas @ 09:16

Anthony Matijas discusses the privately owned organization that controls the majority of beer sales in Ontario:

The Beer Store’s employees will not be going on strike because they are not public sector employees. That may seem obvious to some, but according to an independent survey cited by a government report, 60% of people in Ontario believe The Beer Store to be a state-run entity. No doubt they benefit from the confusion, which may placate customers wondering why they pay so much more for beer than districts such as Quebec and New York state, where beer is sold in corner stores. The Beer Store fosters this ambiguity by designing their stores to be about as welcoming as a Service Ontario outlet.

In fact, the retailer is co-owned by three of Canada’s largest brewers, Molson, Labatt’s, and Sleeman, none of which are entirely Canadian companies. Molson merged with Coors of Denver in 2005, Labatt’s is owned by Anheuser-Busch InBev of Belgium, and Sleeman is owned by Sapporo of Japan. Aside from the LCBO, which enjoys a far more modest market share and generally does not supply restaurants and bars — and microbreweries, which are allowed to sell retail beer only on premises — The Beer Store maintains a government-protected monopoly.

[. . .]

Meanwhile, brewers who aren’t part of the beer cartel must pay what they describe as exorbitant listing prices to have their products placed in Beer Store locations and, once they do, their visibility is generally limited to a coaster-sized listing on the wall, often nowhere near eye-level. Anyone who doesn’t live next door to a Beer Store is likely to pass several billboards for multinational swill on the way and, not frequenting an LCBO, one may not be aware of the many local craft beers available. Those who are near-sighted, and have forgotten their corrective eyewear, may just end up walking out of there with a two-four of Coors Light and a sad look in their eyes.

Revoking Beer Store exceptionalism should be a matter all Ontarians could agree upon, regardless of ideology. A state sponsored monopoly defies the free-market principles of conservatives, while special privileges for multinational corporations should not sit well with supporters of either one of the left-of-centre parties. Furthermore, the largely foreign ownership of Canada’s big breweries means that The Beer Store in no way compliments the economic nationalist tendencies of the NDP.

May 6, 2013

A Canadian criminal innovation – cheese smuggling

Filed under: Cancon, Economics, Food, USA — Tags: , , — Nicholas @ 09:58

The CBC reports on a breathtaking news item … imported mozzarella cheese is being removed from the clutches of the supply management system, which will reduce prices by a significant amount:

Pizza lovers could soon be paying less for their favourite pies.

A ruling made this week by the Canadian Dairy Commission could soon allow Canadian restaurants to buy deeply discounted mozzarella cheese.

The commission changed the rules used to classify mozzarella cheese, putting the milk product in its own class and essentially removing it from supply-management pricing. Before the ruling, the price for mozzarella cheese in Canada was artificially high when compared to the world market.

The new class, to take effect June 1, is expected to result in lower costs for Canadian-made mozzarella for restaurants that prepare and cook pizzas on site.

Bob Abumeeiz, who owns Arcata Pizzeria in Windsor, Ont., said the ruling could drop the price of a large pizza by as much as 10 per cent.

Oh, and the cheese smuggling?

High prices are part of the reason some pizzeria owners were turning to contraband cheese, smuggled into Canada from the U.S.

Last fall CBC News learned three men, including one current and one former police officer from the Niagara Falls area, were charged in connection with an international cheese-smuggling network.

The men are accused of smuggling caseloads of cheap cheese from the U.S. to sell to Canadian pizzerias and restaurants.

May 4, 2013

Tax “competition” is a feature, not a bug

Filed under: Government, USA — Tags: , , , — Nicholas @ 08:49

At the Adam Smith Institute blog, Tim Worstall explains that Adam Smith was right about conspiracies to raise prices, especially when we look at governments:

Imagine that you don’t like the taxes that are being imposed upon you. No, go on, just imagine. You as an individual voter don’t actually have much influence over this. Which is why that option of exit is so important. The ability to simply say “The hell with you lot” and leave. We should note that there are very definitely some campaigners who insist that that exit route should be closed off. As, largely, it already is for US citizens. They can leave the US, certainly, but find it very difficult indeed to escape the clutches of the IRS.

Mitchell’s also making a very good Smithian point there. It is indeed true that once businessmen have gathered together for that conspiracy against the public then it is indeed competition from alternative suppliers that is said public’s only method of beating the conspiracy. And so it is with government: we can only preserve a modicum of freedom (and a modest portion of our wallet) if we are indeed free to choose among competing providers of those governmental services.

Which is what much of the conspiracy among governments is all about: seeking to deny us that exit, that protection from their monopoly.

April 17, 2013

New frontier in crony capitalism – public-policy profiteering

Filed under: Business, Economics, Government, Technology — Tags: , , , , — Nicholas @ 08:47

Timothy Carney explains why the big companies that made ordinary incandescent lightbulbs were among the groups pushing to make those lightbulbs effectively illegal. It’s a classic case of using government power to reduce competition and increase profit margins for certain companies:

Absent barriers to entry, light-bulb profit margins had to stay low. GE could make superior bulbs — soft white, etc. — but people are only willing to pay so much of a premium for those. After all, we’re dealing with light here, which is kind of a commodity.

So, where to find barriers to entry? Maybe higher-tech bulbs? LEDs, CFLs, or other bulbs that offer longer life and greater efficiency. GE, Osram, and Sylvania jumped into those high-tech bulbs, got some patents. R&D expenses, higher manufacturing costs, proprietary information — these created barriers to entry and allowed heftier profit margins.

But what if you made a super-efficient long-life bulb — and nobody wanted it? What if you couldn’t convince consumers that these bulbs were good for them? Well, that’s when you thank your lucky stars that you are GE, with the largest lobbying budget of any company in America.

You “heavily back” legislation that will “effectively outlaw … the traditional incandescent light bulb.” Now all consumers are forced to play in the world where you have greater barriers to entry, and thus bigger profit margins.

The negative consequences here aren’t mere Tea Party concerns about “crony capitalism” or, say, freedom of choice. One cost is the erosion of competition. GE in this case has found a way to divorce profit from the delivery of value – and I call it public-policy profiteering.

Sure, these high-tech bulbs have value. But I think consumers, rather than politicians, should be the ones who determine what value they assign to energy efficiency and longevity. So, through government intervention, capitalism starts to resemble the Marxist caricature of capitalism — Big Businesses making profits while denying consumers what they want.

April 11, 2013

Ontario’s LCBO workers vote in favour of a strike

Filed under: Bureaucracy, Cancon, Government — Tags: , , , , , — Nicholas @ 08:50

Michael Pinkus is looking forward to a potential LCBO strike:

Call me an anarchist but I want the LCBO to go on a nice, big, long strike. And by the time you read this newsletter I am 100% sure that the sheeple of the LCBO will have given their bargaining team the go ahead for strike action. Now the LCBO’s contract was up on March 31, 2013 — which means currently the guys and gals roaming, stocking and generally keeping track of the aisles are without a legal contract with the provincial liquor board. I’m not about to get into the nitty-gritty of the contract negotiations, but when I read in the Liquor Board Employees Division (LBED) Bargaining Bulletin: “The offer we received from management can only be described in one word: Outrageous!” — well I just felt that I had to look a little deeper to see how the LCBO was screwing their own people (which is a nice change from the people of Ontario they screw daily).

What outrage would I find on the pages of the LCBO’s proposal? Are they locking the doors and throwing employees out on their ears? Are they proposing actual punishment for selling to minors (like the sting David Menzies did in July of 2012)? Will there be repercussions for doing a bad job, breaking the law, real penalties?

Now I have met, had dealings with, and actually, once upon a time, worked alongside some very good LCBO employees, most of them casual part-timers — but I can tell you that for every one good one there’s two that are lazy, surly and just generally people you don’t want to deal with in a retail situation — and sadly, those are the one’s you are likely to remember. So from the LBED Bargain Bulletin dated March 1, 2013 here are 2 of the 9 crazy demands the LCBO is making of their employees and the Union’s response to those “outrageous” proposals (I highlight my favs, but you can read the full bulletin here):

[. . .]

But who really suffers from an LCBO strike? California, Spain, Italy, France, Australia, Chile, in other words import wines and liquor producers, who can ONLY sell through the Province run monopoly, and they’ll be demanding the LCBO settle so their products get into the hands of Ontarians instead of sitting idly in warehouses collecting dust. Meanwhile local producers could see a boon as Ontarians thirst for wine is not met by the LCBO but instead by in-province wineries. Tourism to wine producing areas should also see an uptick; instead of visiting Grandma on a Saturday afternoon the family would pile into the car (with Grandma) to tour the highways and bi-ways of Ontario wine country. A long LCBO walk could mean that Ontarians finally get the taste for their homegrown wines en masse and will then demand greater access — one weekend away is quaint, but having to make the trek each and every weekend may prove too much. And with that kind of demand we could see movement in this province towards a freer market system with independent and corner wine stores. Maybe the government will get tired of having to pay all those wages, negotiating with an inflexible union and decide to sell off the LCBO — preferring instead to reap the rewards from taxes instead of paying the price of labour unrest … sigh, wouldn’t that be nice?!? As for the employees, the good ones will have no trouble finding a job in the public sector [I think Michael means private sector here], many in the same kind of newly created positions. The others? Well they’ll just go back to ditch digging where they belonged in the first place.

March 29, 2013

If cable company ads were honest, we’d see something very similar to this

Filed under: Business, Cancon, Media — Tags: , , , , — Nicholas @ 10:10

H/T to Joey “Accordion Guy” deVilla for the link.

If North American cable-and-internet providers were honest, they’d produce an ad that went like this. Note that there’s some swearing involved, as is often the case with cable-and-internet providers.

March 6, 2013

QotD: Canada Syndrome

Filed under: Cancon, Economics, Quotations — Tags: , , , , — Nicholas @ 00:02

It’s one of the marvels of the Canadian electorate. Show Canadians a special interest group that uses its government-granted privileges to fleece consumers, and they’ll embrace it as a “national champion,” a “uniquely Canadian way of life” or some equally vapid catch-phrase.

This is from the Wikipedia entry for Stockholm Syndrome:

    Stockholm syndrome, or capture–bonding, is a psychological phenomenon in which hostages express empathy and sympathy and have positive feelings toward their captors, sometimes to the point of defending them.

What we suffer from is the economic policy equivalent. Call it “Canada Syndrome”: a tendency for consumers to identify with the producer interests that are holding them hostage.

Stephen F. Gordon, “Our Stockholm Syndrome about supply management”, Maclean’s, 2013-03-05

February 23, 2013

QotD: “Cultural Sovereignty” (aka piracy)

Filed under: Cancon, Government, Media, Quotations — Tags: , , , , — Nicholas @ 10:52

Canada originally became one of the most wire-cabled countries in the world because of the insatiable and inviolable addiction of English-speaking Canadians to American programming. To salvage a television industry in Canada, the regulators approved the acquisition of American programming by Canadian channels, which would simulcast them with the networks by or for which they were produced. The Canadian channels were authorized to sell and insert their own advertising on those American programs. This practice, outright piracy in fact, was justified by Canadian media executives as an exercise in “cultural sovereignty” when they appeared before U.S. congressional committees.

Conrad Black, “Opening up the must-carry spectrum”, National Post, 2013-02-23

January 28, 2013

Let’s get real reform at the CRTC: eliminate “mandatory carriage” altogether

Filed under: Bureaucracy, Business, Cancon, Media — Tags: , , , — Nicholas @ 08:49

In the Toronto Star, Michael Geist calls for the CRTC to stop the “mandatory carriage” provision that forces cable providers to carry certain channels on their “basic” packages:

Canadians frustrated with ever-increasing cable and satellite bills received bad news last week with the announcement that the Canadian Radio-television and Telecommunications Commission will consider whether to require cable and satellite companies to include nearly two-dozen niche channels as part of their basic service packages. If approved, the new broadcast distribution rules would significantly increase monthly cable bills with consumers forced to pay for channels they may not want.

Two issues sit at the heart of the broadcast distribution rules. First, whether the CRTC should grant any broadcaster mandatory distribution across all cable and satellite providers such that all subscribers are required to pay for them as part of their basic packages. Second, in the absence of mandatory distribution, whether broadcast distributors should be required to at least offer the services so that consumers have the option of subscribing.

[. . .]

While the financial benefits for broadcasters are enormous, the policy represents a near-complete elimination of consumer choice for the channels at issue. Rather than convincing millions of Canadian consumers that their services are worth buying, the broadcasters need only convince a handful of CRTC commissioners that their service meets criteria such as making “an exceptional contribution to Canadian expression.” That is supposedly a high bar, yet it is surely far easier than convincing millions of people to pay for your service each month.

Last year, CRTC chair Jean Pierre Blais emphasized that the Commission’s top priority was to “put Canadians at the centre of their communications system.” The mandatory distribution rules do the opposite. Rather than focusing on consumer interests and choice, the rules place broadcasters at the centre of the communications system by offering up the prospect of millions in revenue without regard for what consumers actually want.

There are few, if any, broadcasters that can be considered so essential as to merit mandatory distribution. Niche cultural broadcasters have a myriad of distribution possibilities and should be forced to compete like any other content creator or distributor. In fact, even broadcasters that position themselves as “public services” can often be replicated by Internet-based alternatives.

I always find it interesting how cable providers usually manage to group their offerings so that you can’t get the group of channels you actually want in the same package. I doubt that this would change even if the regulator allowed the change from “must carry” to “must offer”, however: there’s too much potential profit to the cable companies in crafty packaging strategies. You’ll almost certainly not see the opportunity to pay for just the individual channels you want, as that would be too consumer friendly (and, we’re assured by cable company reps, would kill off lots of niche channels because they wouldn’t get enough subscribers).

Of course, if a TV channel can’t attract enough subscribers, that’s usually a pretty strong economic signal that they shouldn’t be broadcasting anyway.

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