Dairy Farmers or Wolves in Cow’s Clothing

FDR used to say that the American farmer was the backbone of America. Likewise in many European countries the agricultural lifestyle is considered like a cultural legacy worth protecting. Canada has not escaped this neurotic infatuation with farmers. One needs to look no further than the advertising campaigns by Quebec dairy farmers to get an idea of how important to society they believe themselves to be. In Canada a more governmentally coddled group of individuals cannot be found, nor a less politically bullying. Ever heard of a politician getting elected on a promise to tamper with Canada’s agricultural supply management schemes? didn’t think so. In Canada to produce milk one needs to purchase a milk production quota. A quota cost $25,000 dollars in Ontario giving the average dairy farm owner millionaire status based on the sole value of his quotas.

Réjean Ouimet, a general manager at St Albert Cheese in Ontario, believes that the dairy supply management is the “best thing in Canada”. “For a small co-op it makes life a lot easier, as we don’t have to deal directly with producers, worry about transportation or even quality control standards on farms.” That is reassuring. Essentially supply management makes dairy farmers lives easier. They don’t have to compete with each other, they don’t have to compete with imports too much (given tariffs on imports rising above 300% in certain cases), they don’t have to do anything but push a button or two and voila milk is arrived. Obviously their jobs are more complicated than that but their own testimony seems to imply their jobs could not be easier under any other system. So great, the then thousand or so dairy farm owners of Canada are richer, live easier lives than they would have in a free market but at what cost?

The first to be punished by the system are actually dairy farmers themselves, or at least prospective dairy farmers. On top of buying installation, cows, equipment, land and developing relations with processors dairy farmer wannabes must purchase onerously expensive quotas to start up a farm. Forget about innovation in an industry where the middle finger is flown at the face of all prospective entrepreneurs.

The second group of people to be punished are the consumers and not just in one way but indeed twice over. Firstly they must compose with higher prices. Some will argue that the benefit of high prices is less volatility in those prices, one wonders what your average motorist would say if he was to be guaranteed a litre of gas for his car at  $2 as opposed to a price that fluctuates between $1.25 – $1.50 ? He would be outraged and so should milk drinkers. The second manner in which consumers are miffed is in terms of choice and quality. With import duties being as high as 300% on certain cheeses good luck finding cheeses half the quality as in France at anything under twice the price. While it must be admit that certain cheeses from Quebec are quite good, that should bolster the case for free trade as local fromageries could then surely compete against imports.

While the above arguments are traditional when it comes to discussing the disadvantages of restrictive trade policy their is a much more pernicious cost imposed on Canada because of supply management and that cost is diplomatic. It is virtually universally accepted in Canada that NAFTA was a resounding success. Since then Free Trade Agreement negotiation has become something of a political sport. Canada is already on the road to becoming the first nation to have FTA’s with three of the World’s four greatest economies (US, Japan, European Union). Virtually all economists (outside of academically backward countries like France et al.) agree that untampered and reciprocal free trade is in everyone’s benefit. Canada’s dairy farmers are vehemently against FTA’s that imperils their economic rentiers status. Canada has already been shut out of the Trans Pacific Partnership groupe of free trade negotiating countries on the basis of supply management. How many more FTA’s do Canadians want to deprive themselves of to protect the wealth of a small group of individuals?

Why should Canada have more rather than less dairy farmers. Their is an almost perfect negative correlation between per capita wealth and share of population in agriculture, which means the less agrarian a society is the more wealthy it is. Do Canadians really want to be less wealthy? In any case for those farmers afraid of loosing their livelihoods to a liberalized dairy product market, they can be pointed to New Zealand as an example which became a World leader in dairy product exports, since abandonnement of its supply management schemes decades ago! Few industries hurt Canada as much as dairy farming, it’s time Canadian politicians stopped kissing their butts and started kicking them instead.

Education Is Not a Right!

Yesterday February the 23rd Montreal was the scene of yet another student protest. An estimated crowd of eight to ten thousand university and pre-university students descended into downtown and blocked some major traffic arteries causing a great deal of distress for the city’s drivers. The students were protesting the upcoming tuition fee hikes that are set to come into effect between this year and 2017. To give some substance to the debate we will take my current university bill as a basis for discussion. My tuition fees for a full course load come in just shy of 2200 per annum, or roughly ~200 per course. These tuition fees are set to go rise by 5% a semester or ~10% a year until 2017. Now I’ve done some spreadsheet tabulating and here are my results: With non-tuition fees currently going up to 789$ and an estimated 80$ book per class my total bill this semester will be 2285$ (give or take a few cents). Now if inflation were non existent and the student demonstration got what they wanted (tuition hike moratorium) the sum of my 3 year faculty of arts economics degree would cost ~13734$, or so says my spreadsheet. At a minimum wage of 9.90 (Quebec rate) it would take me 40.2 weeks of 35 hours (full time employment in Quebec) to pay for my degree. Now, should the government plan be implemented, we would add a 2.5% inflation rate to non-tuition fees and books and the scheduled bi-yearly 5% tuition increase, my semesterly costs would then be uurgh! 3215.5$. This would come out to an eye popping 19272.75$ for the very same degree! or an equivalent of ~45.9 weeks at a then 12$ an hour minimum wage, 35 hour work week.

Admittedly these numbers are for an economics degree where the student is stupide enough to pay all his fees (apparently they’re not all mandatory) and buys all his books new. I feel these numbers aren’t too much of a stretch from the average student so we’ll keep them for now. If the numbers got a little bit confusing here’s the takeaway. A student has to commit to working full time at minimum wage for the duration of his summer just to pay his studies. The added 6.3 weeks of work over a 3 year bachelors program only amounts to an extra 2.1 weeks of work yearly or ~72 hours. This is no reason to go berserk and wild in the streets and causing 2 hour traffic logjams.  The current student loan rate is prime plus one or 4% yearly which means if you covered that whopping 20k of student costs with a loan, it wouldn’t even set you back 800$ yearly. Funding our education today or tomorrow really isn’t the end of the world. Now some people might argue that certain students have god awful parents who kicked them out onto the street with nothing, forcing these poor yet meritorious people to pay for their on schooling…. Excuse me while I wipe a tear out of the corner of my eye… Not! I’ve worked in the restauration business, variously as a Busboy, waiter, bartender over the past 5 years of my post secondary education to the average tune of 45 hours weekly. Guess what I haven’t dropped out of school. If I’d loved my mother a little more and she loved me a little less I could have taken on that budgetary burden 4 times over without even blinking! Of course my liver would have been in a much less precarious state and life might’ve been a little boring.

If somebody can’t find a job in Montreal that pays at least 17$/hour (over 50% more than the minimum) it is because they are lazy sods! If you don’t have a job that pays at least 17$ send me an email I’ll bloody well hook you up myself! In any case the “student life is a hard life” excuse won’t cut it with me it’s a real joke. Most students at the faculty of arts I attend dress poor so much is true, but when they pull out their 60$ a month iphones and 1200$ MacBooks my pity goes down the drain. And don’t even get me started on the thousands of dollars yearly most of them spend on cigarettes, weed and alcohol.

Now that I’ve vented against the stupider argument that is the student budget, let’s turn our attention to some of the more devious affirmations the tuition freeze crowd make. “It’s an investment for society”. Student union leaders will try and convince the populace that for us to pay their schooling will result in a wealthier society. Let’s think about it for a minute. What are the most expensive degrees one can undertake in Quebec? Law, medecine, engineering. These are really costly degrees that are funded in excess of 75% by the Quebec government, these are also some of the degrees that contribute to making some professionals mightily wealthy. They are also the professionals most likely to leave the province for greener pastures once graduated. An estimated 50% of Med graduates have left the province in the last decade… so much for socially responsible investment eh! Some degrees produce graduates that will never out earn the average Quebecer. Did you think anthropology and sociology students really find jobs that pay 60k a year think again. If professionals don’t out earn the average, they don’t positively contribute to taxation either, they end up being a drag on the provincial budgets for years after graduation. So if a student tells you it’s an investment, tell him it’s most certainly a bad one.

Now some more ideologically fervent students might tell you that some programs provide collateral non-monetary benefits to society. My answer will be brief as this particular line of thinking is most annoying to me. The benefits may potentially exist however the costs aren’t potential or ephemeral they are real and they’re called ‘cold hard cash’ which needs to be taxed out of somebody’s pockets. However this line of thinking leads to the most egregious assertions of them all:”Education is a Right”… I’m sorry I just puked a little in my mouth. A right is something that is god given. Or something that you own that cannot be taken from you. Examples range from property, opinions, thoughts, liberty to exercise your profession, so on and so forth. What these ‘real’ rights have in common is that they stop at someone else’s. You exercising your profession doesn’t stop somebody else from exercising his own. Freedom of speech doesn’t take away someone else’s freedom of speech etc… etc… In other words these rights do not impose limitations of choice freedom or right on someone else that is the key. When somebody says education is a right, he is essentially saying “young people have a claim on societies wealth for the purpose of schooling”. This particular person is telling you he has a right over part of your income, your private property and wealth so that he may enrich himself. Enriching one’s self at the expense of others doesn’t sound like a right to me. In any case even if we all agreed to education being a right, we would simply open the pandora’s box of educational subjectivity. Would going to med school become a right, or simply university broadly? would a bachelor’s degree suffice or would some legitimately claim a right to a PhD? Would students be allowed to block teachers from going on strike, because a teacher’s strike would be seen as a violation of the human right to education? The answer to all of the above is categorically no!

And if that answer doesn’t satisfy you, be reassured that you have a right to buy books any book you lick, or look up Wikipedia. If you want to make education a right go ahead and do it. Just know that education and schooling are two very different things, anyone can have the first without the second but the second doesn’t guarantee the first.

Drummond to Ontarians with Love

Don Drummond ex chief economist at the Toronto Dominion bank, the second largest in Canada, came out this week with a report this week on how Canada’s most populous province could tackle its mounting deficit. since most of my friends are neither Ontarians nor Canadian economic history buffs I feel that the significance of this past week’s event merits a little historical context.

Now this context starts somewhere around the 1800’s but bear with me for a while it won’t be that long. At the inception of Canadian confederacy political and economic clout were concentrated mostly into the two most populous provinces, Quebec and Ontario. These provinces were the bedrock on which Canadian economic growth rested and the springboard for much of Canadian political development. Around the mid 20th century Quebec relinquished its place as a driver for Canadian development leaving Ontario as the sole anvil on which the expansion of Canada could be forged. Business and industry migrated from Montreal to Toronto leading the latter to surpass the former in terms of population, economic output and general clout around the 70’s. As Ontario’s population soared the province became the capital for the financial industry and the center of canadian manufacturing. With its growing presence Ontario played the part of the peace broker in Canadian politics funding welfare programs across the country. 

That’s when things started changing. In the 90’s the cut in transfer payments from the federal government coupled with the pan-Canadian drive for budgetary surplus led to the Harris Year’s at Queen’s Park (unofficial name of the seat of Ontarian government). These years were marked by fiscal consolidation and labour wars with unions. Although mostly recognized as sensible policy actions by most non-union circles, the Harris years created a backlash which ushered in the McGuinty years. This conciliatory leader brought in accrued social spending, bought labour peace and spent his way to three election victories from 2003 till present. This unloosening of the public purse however led to a gaping deficit following the recession of 2009-10. So in 2011 facing an upcoming election and with plenty of deficit and debt accumulation to justify McGuinty called on Don Drummond a well respected economist to propose ways of reforming government expenditure and services to enable the province to return to budget balance by 2017-18 without raising taxes.

A year later here we are, and with the McGunity in government reduced to minority status the Drummond reports has just hit the shelves weighting in at ~320 proposals and 540 pages. To most observers the report while impartially worded comes in as a heavy rebuke to the years of government largess. The headline proposals are to get rid of some of the Premier’s pet projects like supporting alternative energies, all day daycare reform if not get rid of most forms of corporate welfare and finally to steal a page from the Harris playbook and start playing hard ball with the Province’s largest unions.

Unfortunately this is not Italy and the credit markets have not yet come for McGuinty’s profligate head… yet. Hence This technocratic gem of a report will certainly not become law. The government has already announced it will preserve the expensive all day daycare program. Most observers agree the prescription no matter how impartial, how well crafted or how sensible are politically unpalatable for the Liberal Government. So don’t expect Ontario to resume its role of Canadian growth engine anytime soon, much to the contrary expect Ontario to continue to be the drag on confederation it has been for the last 3-4 years, eating up equalization payments instead of funding them.

The picture is gloomy the report itself states that economic growth will not exceed the 2% mark for the foreseeable future and has also stated the deficit isn’t expected to shrink before reaching an all time high and federally comparable 30 Billion C$. So here’s my prediction McGuinty doesn’t fix the finances but let’s them continue on their gradual slide into PIIGS style irresponsibility. So expect to see a Montiesque kind of technocratic government coming in within the next decade to fix Ontario’s rivalry with Quebec for the most shoddily run provinces in Canada prize.