Another example of a wartime restriction, though less well-known as
such, is the Canadian Wheat Board (CWB). In 1943, the Mackenzie King government
decided that in order to prosecute the war, it needed control over grain
supplies. Parliament adopted legislation that required all Prairie grain farmers
to market their product through the CWB in the name of "financial
stability, prudent risk management, and certainty of grain supply." Now, a
mere seven decades after Hitler's death, the federal government has at last seen
to reverse that decision. The change is controversial; two months ago, a
majority of farmers voted in a non-binding plebiscite to keep the CWB
as is. Ottawa remains unmoved, however, vowing to adopt the measure
by year's end.
Is the government's position not undemocratic? And why change a
system under which Canada
has become the world's leading producer of barley and sixth-largest producer
of wheat? There is good reason why the CWB should lose its power, and on close
examination, many arguments offered up in favour of the status quo are in fact
powerful reasons to reform it.
That's a Bug, not a Feature
website provides a number of arguments in favour of maintaining the current
system, including the following:
• Decreased returns to farmers
• Economic impact on Manitoba
• Loss of branding
• Decreased advocacy power
These arguments are not reasons to keep the CWB, but rather reasons
to scrap it.
By decreased returns, the CWB means that its exclusive rights on
western grain allow the board to get better prices than if the farmers were
selling individually. As the website explains:
As the only seller of western Canadian wheat and barley,
the CWB generates valuable premiums for Prairie farmers. Under a single
desk, there are no competing sellers to undercut each other's prices to the
same grain buyers [...] Numerous studies by leading agricultural economists
using actual CWB data have concluded that the single desk earns Prairie
farmers hundreds of millions of dollars a year more than they would achieve
in an open market.
This claim is probably true. Sellers can often get better prices by
forming a cartel―witness OPEC, for example. But what this means is that the
CWB's defenders are advocating a mechanism that keeps the price of a basic
staple artificially high. Normally, this is seen as highly undesirable. When it
is the deliberate intention of government policy, that policy is clearly wrong.
rising food prices harm the world's poor above anyone else, is it not
appalling that the laws of Canada are intended to create exactly that result?
The irony of this argument is that the very thing it celebrates―individual
producers joining together to get a better price―is actually illegal
under Canadian law. Under
section 45 of the Competition Act, no person may conspire, agree or
arrange "to fix, maintain, increase or control the price for the supply of [a]
product." The Competition Bureau explains that "cartels are harmful because they
typically result in higher prices for consumers and reduce the incentive for
companies to cut costs and be innovative." Curiously, those concerns suddenly
disappear when it comes to western grain farmers. Of course, the CWB's
activities are authorized under separate legislation and so are not subject to
that prohibition. But the even richer irony is that once the law changes, any
farmers who tried to re-create the single buyer system through voluntary
agreements amongst themselves may well become the target of an anti-cartel
investigation by the Competition Bureau.
The contradiction is blatant: one the one hand, western grain
farmers currently must participate in a cartel. On the other, anyone else
who does so faces draconian penalties: up to 14 years in jail and $25
million in fines. The only difference is that the grain cartel is imposed by
the state, whereas any other cartel would be a voluntary association of
individual businesses. In other words, when the government does it, it's fine.
If anyone else does it, off with their heads.
Economic Impact on Manitoba
The CWB argues that the new, voluntary scheme will hit Manitoba
hard: its website claims that 95% of shipments passing through Churchill's port
consist of CWB grain, whereas private grain companies use other shipping points
for their inventory. It also cites a 2005 PricewaterhouseCoopers study that
calculated that the CWB, based in Winnipeg, adds $94.6 million annually to that
city's economy and $323 million to the province as a whole.