Nationalizing major food retailers in Canada would put a major dent in foodflation.
The cost of food has become a constant issue for Canadians since the onset of the cost-of-living crisis at the beginning of the decade, an issue created in large part by supply-chain issues and cutbacks caused by the COVID-19 pandemic and international conflict.
With that, Canada has seen major food inflation in particular, starting around mid-2021 before reaching a peak in the second half of 2022 and early 2023 where the inflation rate hovered above 10 per cent. Since then, the rate has slowly tapered off, sitting at around four per cent as of writing.
Still, working Canadians continue to find it hard to put food on the table, as other high costs persist alongside food such as rent due to a lack of housing supply. Even homeowners have gotten slammed with increased mortgage rates due to the central bank changing lending rates 10 times last year in order to cool inflation by slowing down spending and increasing unemployment.
Since the neoliberal era, which took shape in Canada with the Mulroney administration in the ‘80s, there’s a well-documented pattern of market capitalization during times of crisis. Naomi Klein’s The Shock Doctrine was a hit precisely because of its extensive detailing of the following phenomenon: a disaster hits, whether natural or orchestrated by parties seeking to gain power, and what was once democratically controlled is seized by private interests or autocratic powers (often both as was the case in Chile and Indonesia) in the aftermath before anyone can process what happened.
In the case of food retailers in Canada, private control has been there the entire time. However, record profits in the food retail industry at precisely the same time as its highest unaffordability is what led, prima facie, to former Loblaws CEO Galon Weston appearing at a House of Commons committee to defend himself against charges of price fixing last year.
In fact, it was found in 2021 that Loblaw has a market share of 28 per cent among food retailers, making it the largest player in the industry nationally, with Sobeys, Metro, Walmart and Costco close behind. These five retailers controlled over 70 per cent of the industry in 2021 according to these statistics.
If major food retailers in Canada are going to have market shares that resemble those of natural monopolies, why not nationalize them and cut out the profit-seeking middleman to make food more affordable?
A natural monopoly is any industry where the barriers to entry are high and where, due to the inherent aspects of the good or service, it is most efficient and therefore cheaper for there to be one or very few providers in a market. Examples include the post office, water and electricity.
The more competition you add to natural monopoly industries, the worse off the consumer. If different water corporations had to build around one another’s underground pipes, water businesses that enter later in the game would have to charge more to be able to afford the extra pipeage it will take to get around the earlier company’s prime underground real estate.
Meanwhile, that very prime real estate allows the earlier companies, on average, to provide to more people for the least amount of pipeage which makes them more profitable and inclined to buy out the less profitable later players to absorb their limited customer base.
But another issue with privatizing natural monopolies begins to emerge independent of the way it negatively affects smaller fish in those peculiar industries. If an industry is more efficient as a monopoly, that means the big providers have far more ability to price fix because they’ve cornered the market.
This is why industries that tend to be nationalized are natural monopolies; if it’s already something that virtually all people rely on, like water, why have the included costs of paying shareholders and C-suite managers when you can pay less by having it funded through the tax base knowing everyone will feel the benefit in some way?
We all need food to survive, and therefore major grocery retailers needn’t be any different.
As reported by Alex Cosh in The Maple, at the height of 2022’s foodflation “Loblaws posted that it had increased its retail-section adjusted gross profits by 10 basis points to 30.8 per cent, boasting to its shareholders that it had ‘delivered positive financial and operating performance … while advancing [its] growth and efficiencies initiatives.’… It added, ‘net earnings available to common shareholders of the Company were $556 million, an increase of $125 million or 29.0%.’”
Those revenue increases being advertised to shareholders as a massive return on investment are directly reflected in increased prices for basic food goods like eggs, cooking oil and vegetables.
Now imagine if Loblaw was nationalized and posted those quarterly net revenue earnings amidst a period of major inflation. It would be nothing short of a political scandal, and public officials involved in that act of “greedflation” — to borrow the NDP’s neologism — could, and likely would be removed from their positions as they’re far more subject to democratic controls than capitalists under state control.
The reason Weston can doublespeak on inflation, claiming increased prices are the result of global supply chain disruptions — which is partially true — but post record profits, is because they are responsible to no one except their shareholders who themselves only care about turning a profit on their investments.
The other major concern, which is fundamentally a liberal one, is that nationalizing the major grocers would average out the quality of foods as you wouldn’t have higher- and lower-grade grocers anymore.
However, it’s important to remember that while Metro is considered a premium grocer and Food Basics is considered a cheaper retailer with less quality produce, the latter is a subsidiary of Metro Inc. The division between the premium and cheap grocers is, therefore, often made to appear like it’s the result of competition when they’re potentially owned by the same conglomerate. This phenomenon a testament to the fact that Canada doesn’t have anti-trust laws with enough teeth to prevent corporations from owning both high- and low-quality companies in the same industry.
Nationalization, then, would mean you would just bridge the Food Basics-quality produce with the Metro-quality produce in one store where items exclusive to both will still be altogether cheaper than when in private hands. This also means you wouldn’t have to make two trips if you need items of both qualities.
Now, it’s true that perhaps less premium quality food will be available because the average food quality on the shelves of a nationalized grocery store will reflect what’s affordable to the average Canadian household. A democratic preference would be essential to the hypothetical food ministry in charge’s decisions about what level of quality wholesale produce to buy as well as how many units of different quality items.
At this point, one should respond to the liberal fear of “lack of choice in the food market” in the same way one should against increased wait times with universally covered healthcare: Why should net worth be the determinate factor for who gets the best quality essential services on tap in society over the discretion of majority and expert opinion (expert in the case of healthcare meaning doctors)?
Another issue that is theoretically made better by nationalization is excess produce, which under private hands ends up in the trash if it won’t be good in the next day or few days. Without government incentives such as charity-related tax breaks to start programs to send excess produce to food banks or shelters, the way to maximize cost- effectiveness with the for-profit model is to just throw away foodstuffs that will go bad before they can be sold on shelves again.
Canadian grocers are responsible for 1.31 million tonnes of wasted produce every year.
With nationalized grocery retailers, because they’re already in the government’s hands which means the for-profit imperative isn’t paramount, the barriers to setting up bilateral programs with charities, food banks or government programs such as the Supplemental Nutrition Assistance Program are potentially lower based on better incentives and the logistical elegance that comes with these being mostly inter-governmental programs.
If there’s a lesson from the Bush-era, it’s that public-private bilateralism can lead to extremely inefficient subcontracting nightmares which become less transparent the moment private interest is involved.
The idea that Canadians allow unaccountable corporate conglomerates to continue consolidating their power in an industry that’s so essential to the livelihood of Canadians is fundamentally at odds with even basic liberal principles.
And while breaking these corporations up would be better than nothing, considering grocers as part of the commanding heights of the economy in need of state control, and therefore public checks and balances, means nothing less than doing away with the neoliberal logic of depriving Canadians of basic goods and services and selling them at a markup as “benefits.”
