Last week, Finance Minister Jim Flaherty met with some of Canada’s leading retail executives, urging them to cut prices in response to the soaring Canadian dollar. That meeting, plus $4, will get you a latte at Starbucks. In other words, the meeting itself was devoid of value.
Most amusingly, this spectacle was convened by a politician who’s more deeply and personally committed to the notion of laissez-faire than probably any other finance minister in Canada’s postwar history. Indeed, the whole idea of free-market economics is that the universal pursuit of naked greed (by individuals and businesses alike) generates maximum efficiency and wealth — some of which trickles down to the common folk. In this vision, we should celebrate greed, not rein it in.
Yet here was the country’s senior economic policy-maker pressing major businesses to do the exact opposite: to voluntarily reduce their profits, as an act of charity to Canada’s long-suffering consumers. What’s more, this odd appeal to community spirit has become standard fare on Mr. Flaherty’s policy menu. He’s invoked similar arguments in other recent debates, too:
Urging Canada’s major banks to voluntarily cut ATM charges.
Urging industrialists to voluntarily invest more in Canadian capital projects, to offset the negative economic effects of a high dollar.
Urging the government of China to voluntarily take up more of the global burden of exchange-rate adjustment, by boosting its own currency.
This last plea was surely the most far-fetched of all. Anyone who believes that the Chinese government sets its economic and foreign policies on the basis of fairness had better not bother taking the foreign service exam — let alone running for Parliament. And yet hoping that banks, global manufacturers and retail giants behave any more charitably is almost as naive. Next he’ll be begging the oil companies to keep gas prices low on long weekends.
If patriotism is the last refuge of a scoundrel, then voluntarism is the last refuge of a finance minister — especially one so philosophically committed to the principles of self-interest. I am a socialist, and even I am not so idealistic as to suppose economic policies founded on appeals to charity will work very well. It takes regulation, incentives and structure to push people and institutions to change their behaviour, not moral suasion.
If Mr. Flaherty is serious about stopping consumer gouging, spurring capital investment and attaining more balance in global markets, then he’ll need much more than jawboning. He’ll have to regulate retail margins to stop the current exchange-rate rip-off — or, better yet, just work to bring the dollar down from the stratospheric levels that caused this problem in the first place. He’ll need fiscal policies that directly reward companies for new investments (rather than cutting corporate taxes on spec, no strings attached). He’ll have to limit Chinese access to our domestic market, until we see some reciprocity and balance in China’s own trade policies.
But Mr. Flaherty and his free-enterprise government have no time for interventionism of this sort. His actions will go no further than verbal admonishment. And these invite the same question that every bully asks of the tormented 97-pound weakling: “Whaddya gonna do about it?”
Mr. Flaherty should know better — and he does. His exhortations have nothing to do with effecting change, and everything to do with making sure his government doesn’t suffer any of the public anger resulting from these and other economic outrages. It’s an exercise in optics, not policy.
Come clean, Mr. Flaherty. Retail super-profits, expensive bank charges and underinvestment by hugely profitable corporations all stem from the same fundamental forces that your government celebrates every day: business profit and power. And you have no intention of doing it any differently.