How Canada’s grocery ‘cartel’ doubled its profits as food bank lines grew ⋆ The Breach

Stop Community Food Center has a problem. the toronto food bank unable to keep up with the increasing number of hungry people arriving at its doors, it has been forced to take back the amount of food it gives each person.

The center’s three locations currently serve about 400 meals a day, a 40 percent increase from 2019. During the pandemic, it allowed families to pick up food twice a month, but they were forced to change that practice.

“With the costs of food and the increase in new customers, this became increasingly difficult to maintain, so now we are going back to monthly access per household,” says Maria Rio, director of development and communications for The Stop.

“This puts organizations in a place where we have to choose between serving more people in need or the future sustainability of our programming.”

Inflation has hit Canadians’ wallets hard this year. A recent CBC poll found that one in five people are eating less than they should due to rising costs, while use of the food bank has it shot itself.

For working poor and people on fixed incomes, especially income supports not indexed to inflation—price increases have forced many to choose between food and rent.

Meanwhile, Canadian Center for Policy Alternatives (CCPA) economist David Macdonald found that grocery stores “made $7.3 billion in pretax profit in 2021.”

That’s “more than double what they were making the year before the pandemic,” says Macdonald.

“We see more and more people turning to us for help due to the fallout from COVID, inflation, unaffordable housing, and stagnant welfare rates and wages,” explains Rio.

62 percent of The Stop’s visitors they spend more than half of their income on housing, and 67 percent on welfare. Half of that latter group is in the Ontario Disability Support Program.

“There needs to be systemic changes in public policy that meaningfully address the problems experienced by people living in poverty,” says Rio. “Poverty is not inevitable. It is a policy choice. With bills piling up, debt piling up and people unable to make ends meet, Toronto is in a rapidly deepening crisis.”

Food banks in Toronto and elsewhere have seen increased demand during the pandemic and amid ongoing inflation.

Central bank pause or corporate speculation?

A debate revolves around the source of inflationary pressures. On the one hand, conservative leadership candidate Pierre Poilievre says the problem must lie at the feet of the central bank. His campaign targets Bank of Canada Governor Tiff Macklem, whom Poilievre vows to fire in light of Macklem’s delivery of “highest inflation in 30 years.”

“Justin Trudeau wanted to spend a fortune and couldn’t find the money,” Poilievre said in a statement. recent campaign video. “So he had the central bank print it. More dollars chasing fewer goods drives up the price of all those goods and makes your life more expensive.”

“That’s why you can’t afford gas, groceries or, God forbid, not even a house. It is a transfer of wealth from those who do not have to those who have yachts”.

On Poilievre’s last point, economists on the left will agree: we are indeed seeing a massive transfer of wealth from the poor to the rich. But his explanations of the inflation frenzy—and what to do about it—couldn’t be more different.

For economists like Jim Stanford, director of the Center for Future Work and a longtime union researcher, Poilievre’s solution to Canada’s inflation problems is wildly off the mark. Responding to rising inflation by imposing “monetary and fiscal austerity,” argues Stanford, will leave workers with the pocket of corporate speculation.

Interest Rate Hikes typically reduce business investment, increasing unemployment and diminishing the ability of workers to fight for higher wages. Meanwhile, cuts in public spending weaken the welfare net on which the working class depends while attacking good jobs in the public sector. In this policy response, ordinary people, not the beneficiaries of high inflation, are enlisted to make sacrifices for the “greater good” of the economy.

“If we accept the right-wing argument that workers just have to suck it up and shut up and accept a decline in their living standards,” Stanford tells The Breach, “all we are doing is facilitating a gigantic transfer of wealth from workers to the owners of the energy companies, the real estate developers and the supermarket chains who have really benefited from this”.

Stanford adds that the rise in inflation since mid-2021 is largely tied to the pandemic and the subsequent reopening of the economy.

“Most important have been disruptions in some global supply chains, such as semiconductors and automobiles, credit-driven jumps in house prices, and the oil price shock that followed the Ukraine invasion. “, He says.

Some “demand side” factors, such as rising household savings, have also added some pressure.

But Stanford stresses that corporations are using the panic to boost their profit margins “beyond” what higher gas and supply chain costs would require.

He says it’s “a sign that corporations are ‘taking advantage’ of consumers,” but adds that “that’s the whole point of capitalism: Businesses were invented to make as much profit as possible for their owners, and that’s exactly what they’re doing.”

in a recent talk Also featuring Stanford, Canadian Union of Public Employees economist Angella MacEwan argued that supermarket chains are key examples of this momentum in action.

“Low-income people are struggling to make ends meet with high food prices, but Loblaws saw his net profit increase by 40 percent in the last quarter,” he said, adding that “his profit margin it was almost double. And at the same time they doubled their profit margin, they increased their quarterly shareholder dividend.”

Federal Conservative leadership candidate Pierre Poilievre has tapped into Canadians’ anger and frustration over inflation and rising costs of living. But his political response is misplaced and will harm ordinary people while letting corporations go free. Photo: Pierre Poilievre/YouTube.

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Of course, Loblaw isn’t the only one raising prices. All the other major chains have also squeezed their customers proportionately. The way prices have skyrocketed across the board is due to tight corporate consolidation. Loblaws, Costco, Sobeys, Metro and Walmart account for more 60 percent of food sales in the retail market.

“When one of them raises prices, that allows the others to raise prices as well,” MacEwan said.

These five companies control most of the market share in the grocery sector, a situation known in economics as “oligopoly”, or more severely as a “cartel”, which insulates large corporations from competitive pressure. In a more competitive market, companies might offer cheaper prices or higher wages.

But in an oligopolistic grocery market, the opposite has happened. Instead of cutting prices, for example, supermarket chains collaborated to fix the price of bread for 14 years. And instead of seeing permanent pay raises, his workforce saw a pandemic bonus cut of $2 an hour, by all employers, all in the same week.

Now, amid the inflation frenzy, they are moving in unison again to raise food prices, using “higher inputs” and “supply chain disruption” as a cover.

Get unaffordability under control

For the federal NDP, the CCPA and other economists, an excess profits tax could be a tool when it comes to creating a more effective policy response to inflation. Historically, these taxes have been used during war to discourage war profiteering. They target companies whose profits have grown well above than they would normally grow during a crisis, such as a war or a pandemic.

As the NDP proposes, the tax would be a temporary measure imposed on corporations like grocery stores or energy companies. The money would then help finance redistributive measures, such as social programs, to lessen the financial burden of the pandemic. Not a far-fetched idea: Canada’s 2021 federal budget Really introduced a tax on excess profits, albeit a modest one, on banks and insurance companies.

Some economists also advocate greater interventions in the labor market. Sectoral bargaining and policies that facilitate unionization can have a lasting impact on workers’ finances by gaining them a larger share of the pie. But these changes will take time and effort to win, if at all, giving workers a little respite from today’s sky-high prices.

A more immediate response to inflation would be to index all wages and income support. Currently, social assistance, already scarce in most provinces, is only indexed for inflation in Quebec, New Brunswick and Yukon.

“Wages can and should be increased to keep up with inflation,” says Stanford. “That would protect workers’ real incomes, while addressing the real causes of this inflation: supply chain issues, energy prices, housing costs.”

Still, inflation is just one component of a growing unaffordability crisis: In addition to rising gas and grocery prices, housing costs have skyrocketed for a decade, something Poilievre has made his workhorse. battle.

Although his policies, such as cutting government spending and raising interest rates, would hit the “have-nots,” his program is sure to resonate. While other politicians only indirectly criticize the status quo, his campaign directly validates people’s palpable frustrations, channeling that anger toward specific institutions, bureaucrats, or politicians.

Poilievre’s populist messages put pressure on the NDP and the labor movement to offer a comparable alternative to his program, not only to address inflation, but also the growing unaffordability of everyday life.

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