In this episode of the Cory Morgan Show, I sit down with economist Dr. Danny Laroise to talk about supply management and the impact it has on the economy. We discuss the parallels between the current economic and political situation in Canada, and how supply management has impacted the economy in the past and what it means for the future.
00:02:18.780In Alberta, the Progressive Conservatives, under Premiers Lougheed and Getty, they borrowed heavily while pouring tax funds into a series of failed corporate welfare schemes.
00:02:28.340Now, the bubble finally burst in the 1990s for pretty much everybody.
00:02:32.000Debt servicing costs were taking a massive bite from government budgets, while citizens just weren't ready to accept more tax increases.
00:02:39.360So governments at all levels, with every political stripe, had to cut spending. There was no getting around it.
00:03:49.980That administrative sloth, though, does come with a price over time.
00:03:53.560And in 1999, the federal government returned to deficit budgets,
00:03:56.520and in Alberta, it took till 2008, but deficit financing has returned here as well,
00:04:01.360and we haven't managed to produce a balanced budget since.
00:04:03.900Low interest rates, they allow governments to get away with deficit financing for a time,
00:04:07.760but as we're seeing today, the rates don't stay low forever. What goes down must come up. Just
00:04:13.400servicing the federal debt alone is going to cost an estimated $34.7 billion in 2022-2023.
00:04:20.960That's assuming interest rates stop rising, of course. And every province is flushing money
00:04:25.320down the toilet on debt servicing, too. It's interest costs, guys. It's money on the credit
00:04:29.060cards that we could really spend in better places. Now, the Trudeau government, this is what got me
00:04:33.360going on this, recently called for departments to find $15 billion in savings. I thought,
00:04:37.760wow, are they finally going to do like Kretchen and be responsible liberals and do some cuts?
00:04:42.480But no, then they quickly pivoted to say, oh, we're not going to cut $15 billion in spending.
00:04:46.860We just want to find those savings and we'll shift it to other departments.
00:04:49.580In other words, they won't even talk about cutting the spending.
00:04:52.320The hard reality governments and citizens need to face is that governments spend too much.
00:04:56.820And yes, I'm including citizens in that statement because, hey, we're the ones who keep turning to the government for every service or problem.
00:05:04.060People want every pet project funded, every foreign cause supported, and every industry subsidized, or they'll take their votes elsewhere.0.59
00:05:10.660I know it doesn't apply to everybody. It applies to enough of them.
00:05:13.300Whether we like it or not, people tend to vote for whatever politician blows the most sunshine up their butt at election time,
00:05:19.180and they tend to shy away from politicians offering a realistic fiscal platform.
00:05:24.760People won't change their demands of governments until they start directly seeing the cost of spending, but we are starting to see it now.
00:05:30.060Deficit spending is fostering inflation, while taxes increase to try and keep up with the spending.
00:05:34.720The rising cost of living is hurting everybody, along with the taxes.
00:05:38.600Taxes alone right now eat up 45.3% of the average family's income.
00:05:43.280While food, clothing, and shelter only make up 35.6%.
00:05:46.160Citizens are loath to admit it, but they can't hide from it forever.
00:05:49.800When enough people realize the government is the largest expense in their life,
00:05:53.280and they just can't afford it anymore, they're finally going to start demanding cuts.
00:05:56.760The question with spending cuts and austerity isn't a matter of if they're going to happen,
00:06:01.380it's a matter of when. I mean, the laws of economics are as immutable as those of gravity,
00:06:05.480and the spending will have to be brought back into check eventually. We just can't keep living
00:06:09.700on the credit cards. The longer we wait to cut spending, though, the harder it's going to be
00:06:13.940when those cuts come. An increasing segment of the population has become dependent upon government
00:06:18.320jobs and programs, and that segment's going to suffer when the government's spending starts
00:06:22.440contracting. It's going to be ugly as they try to adapt. But the sooner the better. We're on a slow
00:06:27.920motion collision course with an inevitable fiscal reality check. The sooner we can ring the alarm
00:06:33.760bells, the better. And right now is the time. We've got to start reining and spending and reducing
00:06:38.260future pain. Right now it feels like the warnings are falling on deaf ears, but hopefully citizens
00:06:42.500start to get the wax out and start listening soon. Because when the citizens move, the politicians
00:06:46.680will follow. Eventually they always do. All right, that's what's got me going today. Just some
00:06:52.380dry economic topics, but it's important stuff. Let's get on to the other news because a bunch
00:06:56.000of stuff's been breaking and check in with our news editor, Dave Naylor, and see what else is
00:07:01.120going on out there. Hey, Dave, how's it going? Good day, Corey. I'm well, yourself?
00:07:05.240Pretty good. Nice day. Oh, it was a beautiful day. I was driving in this morning going down
00:07:10.540Deerfoot and this, you know, in the back mirror, all I see is this rental car zooming by me like
00:07:16.440about 140. I took a quick look. I thought it might be Christian Freeland, but I don't think
00:07:21.600it was. I think she's back in Ottawa. Well, she'll make sure that she's chauffeured again from there
00:07:27.560on forward. Maybe this is why she doesn't have a car, Corey. She lost it through speeding
00:07:32.840suspensions and all that sort of good stuff. Well, I wish she would be as ambitious about
00:07:38.220managing our budget as she is about making it fast on the highways. Indeed. As you say, Corey,
00:07:44.620really busy last hour. I'll lead off with some international news.
00:07:50.600Evgeny Prigozhin, the leader of the Russian mercenary group Wagner, has been killed after
00:07:57.240his plane was shot out of the skies in Russia. You remember, Corey, he rebelled against Putin and
00:08:03.920all his troops were marching towards Moscow when he suddenly decided to stop and go into exile in
00:08:11.200Belarus. And we all knew his days were numbered, but I certainly didn't have him being killed by
00:08:16.560a Russian missile. I had him falling out a window in the office, the office bingo. So that's a big1.00
00:08:23.640breaking international story. Closer to home, the Liberals, as you know, were having their
00:08:28.680cabinet retreat in lovely Prince Edward Island. Trudeau today issued some more word salad on the
00:08:36.440the housing crisis, Pierre Polyev, leader of the opposition, came out afterwards and was very strong
00:08:43.660and gave some actual possible solutions to the housing crisis. So we've got that up there now.
00:08:50.480The CRA, which is normally used to suing people, is in fact being sued themselves in a class action
00:08:56.980lawsuit by people who had their identities stolen during a massive breach of CRA computers a year
00:09:05.760or so ago. So that is up there now. OPEC, we always knew there were a bunch of slimy people,
00:09:14.620but the former head of OPEC has been arrested in England and charged with bribery. So that shows
00:09:21.520you the type of people that they are. And the International Weightlifting Federation has decided
00:09:29.420that they need to change their rules. This is after a Canadian male weightlifter recently won
00:09:34.980a championship by entering the female side of the competition, and he won by lifting
00:09:41.000more than 450 pounds more than his nearest competitor.
00:09:43.700So the federation said, well, that's enough of that.
00:09:47.020We're going to change that and change our policy.
00:09:50.040So it's going to be women versus women and men versus men.0.94
00:09:54.380We've got a story up there on Jordan Peterson, everybody's favorite psychologist.
00:09:59.660Court in Ontario ruled today that the regulator can send him for sensitivity training
00:10:06.120over some tweets that he sent out a while ago.
00:10:10.820And our energy expert, Sean Polzer, has got a story that Canadian oil output
00:10:18.000So drill, baby, drill, oil as well.0.58
00:10:21.880And a couple of stories that we're working on will be up shortly.
00:10:24.800a voice from the past you remember calgary uh catholic bishop fred henry uh cory uh he's
00:10:32.840retired now but he came out he wrote a letter saying he's demanding the feds uh find out if
00:10:38.240even one residential school child uh is missing and uh and murdered perhaps uh all those years
00:10:46.200ago and uh some people around colonna are going to be happy because they've been given the all
00:10:50.620clear to go back home after the latest wildfire. And I'm sure they're all anxious to get back home
00:10:55.780and see what damage was caused, Corey. I'm certain they are. I can't imagine. I've never had to be
00:11:00.740evacuated before, but it's got to be stressful and terrible. I'm glad, you know, with all these
00:11:04.680fires and these evacuations and everything that's happened, still a surprising amount. I mean,
00:11:08.720it seems like we're erring on the side of caution because, you know, the fires haven't swept through
00:11:12.820any really densely populated communities yet anyway. So I'd rather they erred that way myself.
00:11:18.400well after what happened on maui a couple weeks ago it's obviously better safe than sorry
00:11:24.160that's right all right dave well thanks for the check-in i'll let you get back at it and
00:11:29.180i'll talk to you after the show thanks gory that is our news editor dave naylor and this is when
00:11:34.640i like to remind you look at all those stories dave is busy he's got stuff constantly coming
00:11:38.460up there it's coming up as it breaks lots of opinion and all sorts of content on there guys
00:11:43.060the reason we stay independent is where i nag you this way shake the cup and ask for the money0.95
00:11:47.280is because of subscribers. $9.99 a month, $100 for a year. It's just, again, we never thought
00:11:53.040twice about subscribing for a newspaper in the past. Well, that helps us keep going. We don't
00:11:57.240take government funding, and the government has, you know, we can't even share our content on Meta
00:12:02.620and some of those other sites now. The battle is going on, and you guys have been great. To those
00:12:06.080who have already subscribed, thank you very much. We really appreciate it. And if you haven't already,
00:12:11.240come on, guys, get on there and share us. That's part of the other thing, too. This ridiculous C-18,0.62
00:12:16.000this stopping of links for news sites. The problem is it's harder to reach out and get to new people.
00:12:21.900It's harder for them to find us in the first place. After that, they can come directly to
00:12:25.400the site, which is westernstandard.news. But share on Facebook. You can share it. You can share it on
00:12:32.320X, formerly Twitter, and all those sites. And this is how we can beat the government regulation
00:12:36.800and allow independent media to keep going and keep those stories rolling out there. And there's a lot
00:12:41.440going on. So yeah, that's interesting in Russia. It was almost an office pool. I mean, this was a
00:12:47.600guy who stood up to Putin with that Wagner group, the mercenary. And the only question was when he0.72
00:12:55.380was going to die and how. It sounds like they didn't even bother trying to sugarcoat this.
00:13:00.060They just shot him out of the sky. Usually they try for an accidental death of poisoning or maybe
00:13:04.940choking at a fancy Russian restaurant, but no, this time they just blew him down. There's not a
00:13:09.360good retirement plan, working for Russian oligarchies and other such places like that.
00:13:17.540Let's see. So yeah, you know, the talk, the talk, the starting monologue, the things that are going
00:13:23.700on, it's cost of living. You know, we're all hurting right now. As we said, Polyev is coming
00:13:28.540out. He's talking about the housing. I mean, people are having a heck of a time finding a home. I can't
00:13:32.940imagine how, what it takes for a young person to get that down payment together, you know, get your
00:13:37.220credit up to speed. The whole works. I mean, getting in on a house right now, way out of
00:13:41.760control or renting, of course, the rents are going through the roof. Everything is going up. And again,
00:13:46.840there's a lot to be discussed. It's a lot of it comes down to oversized government. That's what
00:13:50.460I started the monologue with. A lot of it comes to bad policy, over-regulation. I mean, that's
00:13:56.200a lot of it, whether it's home construction, like Polyev has been talking about, or whether
00:14:02.140it's in food production. And I'm, you know, sort of segueing into my guest here, because this is an
00:14:06.460area. I've talked about it on the show before, but we don't talk about it enough. And we've got
00:14:10.680a supply managed system in Canada. And I'll kind of lead and save him some of the explanation.
00:14:16.360You know that the bottom line is dairy, poultry, eggs, they are all tightly, tightly controlled.
00:14:23.020You can't produce over a certain amount or even start producing in some cases, unless you have
00:14:27.720a government issued quota. Those quotas have become a commodity in themselves. But what they
00:14:31.940do is artificially, I mean, some would say keep the price stable, but they also keep the price
00:14:36.100high. We pay some of the highest prices when compared to comparable countries for those sorts
00:14:40.280of food items than anywhere else. And those are going up. This isn't protecting us when times get
00:14:45.380tough. And it's one area I think, we'll see, we'll talk to my guest about that, where maybe some
00:14:51.120quick changes can help make some things affordable for Canadians from the government right away. So
00:14:55.820let's bring them in. As I said earlier at the start of the show, it's Danny Leroy, he's an
00:15:01.020associate professor of economics. Boy, that's a tongue twister at University of Lethbridge
00:15:05.680and specializing in agricultural economics. So thank you very much, doctor, for joining us today.
00:15:13.260Oh, you're welcome, Corey. I'm very glad to be here.
00:15:16.620So you kind of heard me starting out in there. Maybe if you could expand a little. I mean,
00:15:20.980what is Canada's supply management policy and maybe a little bit of why? Why was it brought
00:15:26.060in i like to think the intention was good very good intentions uh supply management was uh
00:15:33.820first introduced in canada uh in the uh in the dairy industry in the late 1960s the early 1970s
00:15:43.420and the aim of the uh of the program was to enhance and stabilize the returns to raw milk
00:15:50.620producers. At the time, there was a lot of price variability in raw milk, and people who
00:15:59.020produce milk tended to be in parts of the country where alternatives weren't very good in terms of
00:16:06.060production of other commodities. So it was a way of providing assistance to individuals engaged
00:16:14.780in agricultural activities in challenging areas.
00:16:21.040The idea behind how it works is that prices for producers are determined based on cost
00:16:31.140of production formulas so that producers have, most of them, have an opportunity to
00:16:37.920earn a living and a return on their enterprise.
00:16:42.720I said this was first introduced in dairy in the late 1960s early 70s. Eggs became supply managed
00:16:50.240in Canada in 1972, turkeys in 1974, chickens in 1978 and broiler hatching eggs in 1986. So there's
00:17:01.920five commodities in this country that are strictly controlled in terms of their production and the
00:17:07.840the prices that producers receive. Okay. So, I mean, at this point though,
00:17:13.380do we need these policies? I mean, I have seen some papers put out and studies
00:17:18.100showing that we're paying quite a premium for those products in Canada when perhaps,
00:17:23.640you know, if those policies were lifted, we could see some reductions in some of our food costs.
00:17:28.800Well, it's an interesting way you phrase that. You use the royal we, do we need this?
00:17:33.800Well, there are some producers that do. Right. Over the course of the last 50 or more years, many intergenerational farms in the supply managed area, they've become quite dependent on the continuation of this program.
00:17:52.000right uh it enables supply management enables them to sell uh a product into uh into a protected
00:18:00.900market privileged market at a price that they know that they're going to receive if they meet
00:18:06.000the specifications in terms of quality and quantity right there's so there's um they don't
00:18:11.880have to worry about some of the risks that other producers face in terms of marketing their
00:18:18.000commodity right they don't face the same price risk for example that raw milk producers or egg
00:18:25.240producers or poultry producers they don't face the same price risks as a as a producer of cattle
00:18:30.440or or grains or oil seeds do in in Canada now there would be some advantages right if these
00:18:39.980policies were were removed or were changed one of the things that is a pretty clear
00:18:51.340fact about economic science is that whenever there is free trade between individuals each
00:18:57.260counterparty to the transaction wins right so if it were possible to remove the impediments
00:19:03.420between willing buyers and willing sellers there could be more wealth created in markets for raw
00:19:08.780milk, eggs, turkey, chicken, and so on. So, I mean, if we moved away from it, I mean,
00:19:15.620it was a bit of a trend. A lot of nations brought in supply management policies during that time as
00:19:19.740well. New Zealand, Australia are examples we hear about a lot. I mean, you can't just flick a light
00:19:24.520switch and say, okay, we've stopped the policies. It would disrupt the producers terribly. I mean,
00:19:29.640quotas became a commodity, even an artificial one. So they would need to be bought out or
00:19:34.340eased out of the system that's also that's also a political question right uh so the choice of
00:19:40.020subsidizing somebody to to help them exit the industry is is also a form of a subsidy but this
00:19:46.980was used and you're correct it was used in places like australia where the supply managed system
00:19:53.460that once existed was phased out over a period of time and consumers helped to finance that
00:20:00.740So in view of helping farmers transition to a more open market, there is a surcharge levied
00:20:09.540on consumers at retail level that helped finance the transition for primary producers of raw milk
00:20:17.540in Australia. So this enabled them to move with, I guess, less financial pain for the producers
00:20:30.640But it's a great example of Mansur Olson's, you know, the logic of collective action.
00:20:36.320In these circumstances, there's a small number of beneficiaries who have a very concentrated self-interest
00:20:42.080in maintaining the status quo, where the costs are dispersed, on the other hand, over a large number of people.
00:20:49.320So you were mentioning in the introduction, you know, we pay higher prices.
00:20:52.980Canadians, depending on where you're located, pay higher prices for for supply managed products in the grocery store, like butter, for example.
00:21:02.180That's one that's been in the headlines a lot and fluid milk and so on.
00:21:06.860Yeah, we we do. We do pay some higher prices for that.0.90
00:21:11.040But most people are more concerned about their mortgage payments.
00:21:16.540So, yeah, maybe I'm paying 50 cents, 75 cents more for a gallon of milk at the grocery store.
00:21:23.960I'm not going to get too much in a twist about that.
00:21:26.360Whereas a dairy producer, a raw milk producer would if supply management was terminated, right?
00:21:32.100There's a big impact on their enterprise compared to a few dollars a week for a family of four consuming groceries.
00:21:43.240Yeah, well, it's always though that case gets made.
00:21:45.400it's just a cup of coffee a day it's just a little bit here a little bit there but that's
00:21:49.560suddenly we find that we're but but that adds up it adds up right um and it also adds up for the
00:21:57.000for producers themselves right so when you're insulated from from international competition
00:22:03.080uh you don't fit you don't have the same incentives in terms of changing your business and
00:22:08.360in terms of processors in Canada, producing the products that consumers want, right?
00:22:16.640If you're selling into a protected market, you don't face the same incentives as others
00:22:21.000who compete not with just their next door neighbors and other processors or producers
00:22:29.720domestically, but it's international competition.
00:22:33.080So one takeaway is that while people often say, well, supply management has been put in place to help support and protect the farmer in Canada against foreign competition.
00:22:48.140In fact, these barriers to trade protect farmers in Canada from their fellow Canadians and the decisions that they would make in terms of the goods that they would produce if they were left free to do so.
00:23:01.920if there weren't impediments to international trade.
00:23:04.820Well, right back to the beginning statements you said,
00:26:08.800So the best course of action is to to dump a little bit.
00:26:12.720Now, in this particular case, the timing, I suppose, was very bad because, you know, just coming through the pandemic and prices for commodities or prices for groceries were quite high.
00:26:29.460And this poor fellow has to dump his milk because he's produced too much of it.
00:26:34.300So it was the optics weren't very good, but he was making a point.
00:26:38.800You certainly, and I mean, you know, social media gives a new way to make a point rather than
00:26:43.020just say, or transferring the oral stories like I did with my wife, for example.
00:26:47.620So, I mean, getting a little into the political side, though, and that, you know, that's the dairy
00:26:51.760cartels, if you want to call them such, are very, very effective political lobbyists. They influence
00:26:57.460parties of all stripes. They protect that supply management system very jealously. Do you think
00:27:05.040there's ever going to be a political will to start easing out of it. I interviewed all of the
00:27:10.260conservative leadership candidates back when they were running for the leadership, and only one of
00:27:14.120them said he would challenge the supply management system, not another. The others were all terrified
00:27:17.900as soon as it came up. They'd rather not touch it. No, one of the things that we do know in this
00:27:22.120country is that, to their credit, they have one of the most effective lobbying organizations around,
00:27:29.120right uh and that this is manifest itself in in some of the subsidies that the producers are now
00:27:36.880receiving because of uh trade agreements the federal government has signed with the european
00:27:43.440union with the trans-pacific partnership and more recently the canadian u.s uh free trade agreement
00:27:51.200NAFTA 2.0 right producers of supply managed commodities are are receiving subsidies for lost
00:27:59.040market share uh as a consequence of of signing these agreements when in fact there's very little
00:28:06.080evidence to suggest that uh that there has been market share that that they've lost
00:28:12.400new zealand and the us are currently uh they've got a case that uh the amount of access that's
00:28:19.200that's that has been set aside isn't being filled right so raw milk production this past may was set
00:28:29.840record level so that you know we're producing as much as as we have ever have in this country of
00:28:37.200supply managed commodities uh there's never been fewer primary producers of supply managed
00:28:42.640commodities there's fewer than ten thousand raw milk producers now in this country there's fewer
00:28:48.080than 500 dairy farms in the province of Alberta. And there's about a couple of thousand primary
00:28:56.880producers of the other supply managed commodities. So in terms of the politics, getting back to your
00:29:01.520point, there's maybe 12,000, 13,000 producers of supply managed commodities that wield enormous
00:29:10.480political influence. Well, and that's another aspect. I mean, some people, defenders of the
00:29:15.520supply management policy said it helps protect the family farm now i wouldn't necessarily blame
00:29:19.360supply management but at least evolution and economies of scale i mean it used to be over
00:29:23.840a hundred thousand producers i believe a couple decades ago and now it's contracted down to
00:29:28.000as you said about 12 000 so they are becoming just of necessity larger corporate enterprises
00:29:34.400the romanticized family farms is long gone yeah i agree with you well we'll see if we can start
00:29:41.600solving you like i said a lot of people when you you talk about supply management though the eyes
00:29:44.960glaze and then they tire and as there's not a lot of will on the ground necessarily from the public
00:29:49.680but it is something that's costing it is and i i think it's important to remember all the people
00:29:55.680involved right uh there there are beneficiaries of the continuation of this policy and there are
00:30:02.560people that do stand to lose at least in the short term uh so um one of the things that's really
00:30:09.280important in economics is that there isn't this royal we there's you and i and each of us make
00:30:15.200our own decisions with respect to what we produce what we consume and whom we we interact with
00:30:20.960i'll have to avoid triggering you with that uh we term
00:30:25.760appreciate the correction and it's a good very valid point so uh before i let you go where can
00:30:31.840people find your stuff i know you've done some work with the fraser institute and you're at the
00:30:35.440university of lethbridge uh do you write for other publications or anything like that i do on
00:30:40.240occasion if you do uh if you want to find me online go to the university of lethbridge department of
00:30:46.240economics um i coordinate the agricultural studies program here and uh as you mentioned at the outset
00:30:54.000one of the my areas of interest is uh agricultural production marketing and trade and that's
00:31:00.720That's certainly, it's very important in Canada with supply managed commodities.
00:31:06.400And of course, in southern Alberta, where we are, it's particularly important for beef and for grains and oilseeds and crops grown under irrigation.
00:31:16.200Lots of issues in agriculture and agri-food and lots of opportunity.
00:35:37.020You got to remember, these associations are populated and managed by the nutless.
00:35:41.820I tell you, I know this from working in the oil field.
00:35:45.360Because, you know, when you get these professional associations, even in the energy sector, private market,
00:35:49.940and they get these industry associations and they got to hold a conference once a month or do this and do that,
00:35:57.160you don't send your best and brightest to sit on the boards of these associations.
00:36:00.460You send the brother-in-law you were forced to hire because, you know, get him out of my hair, he's a moron, and he'll put him to work doing something else.
00:36:07.660Unfortunately, when the oil companies are sending their dead weight all to these associations, then these associations, of course, tend to be dominated and populated by morons and cowards and things such as that.
00:36:19.440Get the woke guy out of your boardroom and stick him out, you know, spending some time with your professional association.
00:36:24.500That's great until that association turns on you.
00:36:27.120And that's what happened with Peterson.