By Jack Mintz, June 14, 2022
With inflation squeezing Canadians’ budgets, it took only a minute for politicians to blame price increases on big corporations. U.S. President Biden often accuses food distributors, baby formula producers, shipping companies and gas retailers of price gouging. He continues to push his stalled agenda: tax the rich and corporations to pay for new social benefits and climate-change subsidies.
Not to be outdone, NDP leader Jagmeet Singh argues that inflation is due to big companies jacking up profits. He is the Trudeau government’s junior partner so we should take seriously his proposal to tax corporate profits in order to finance supplementary payments to “those who need it.” Of course, pushing up demand and cutting back investment in this way will only aggravate inflation, not reduce its effects. This wouldn’t be the first time populist beliefs got in the way of sound economic thinking.
Even some bureaucrats can’t refrain from joining the bandwagon that corporations, especially monopolies, are a source of inflationary ills. In a May 26th speech, Matthew Boswell, Canada’s Commissioner of Competition, claimed that “competition lowers inflationary pressures.” This view is dismissed by most economists, including former Obama adviser Larry Summers, who colourfully tweets: “The emerging claim that anti-trust can combat inflation is ‘science denial.’”