Wednesday, 12 December 2012

Economic Freedom helps Consumers

Ontario Progressive Conservative leader Tim Hudak’s plan to privatize retail liquor sales in Ontario—ending the near total monopolies of the LCBO and The Beer Store—is an ambitious step towards prioritizing consumer and retailer interests. And even if his plan relinquishes only part of the Ontario government’s control over liquor, it will result in greater economic freedom.

On this issue, Ontario could learn a lesson from Alberta. In 1993, Alberta privatized the retail portion of liquor distribution within the province. By all accounts, it has been successful. Since then, liquor sales have increased, resulting in higher government revenues while consumers enjoy greater product selection and lower prices. This has been the direct result of a more competitive and freer market—i.e. greater economic freedom. And there is no evidence that crime or alcohol related offences have increased as a result. 

Saskatchewan and Manitoba are both currently experimenting with the same idea. And who can blame them? What province doesn’t want to increase its revenues and cut costs all without causing any of the social ills that modern-day prohibitionists expect?

But, as Gerry Nichols points out in his Toronto Star article on Dec 4, it will be difficult for Hudak to relinquish government control over liquor sales because “well-funded special interest groups have a keen desire to keep the monopoly alive.” 


Nichols’s point is borne out in Saskatchewan. On its website, the Saskatchewan Government Employees’ Union issued a press release decrying the opening of two private liquor stores in the province. SGEU president, Bob Bymoen says, "Alcohol is not just another consumer product. It is a drug that can and does cause serious problems for families and communities. Because of that, Saskatchewan citizens should have a say in how alcohol is sold in this province."

Chanting the same mantra, Manitoba’s government employees’ union opposes liquor sale privatization because it is dangerous. An MGEU press release says, "Alcohol is an intoxicant and it can be extremely harmful if misused or abused. The fact is that regulating alcohol sales is the responsible choice for Manitoba families and communities.”

As expected, these union outcries are shrill, at odds with the interests of the consuming public and small retailers, unsubstantiated by the empirical evidence collected over 20 years in Alberta, and contrary to economic freedom. But each does substantiate Nichols’s claim—the Ontario Public Service Employees’ Union (OPSEU) will likely oppose Hudak’s plan.

VESTED INTERESTS: Labatts, Molson, and Sleeman

But it’s not only the OPSEU that will resist a freer market and greater competition. Hudak will also have to stand up to Labatts, Molson, and Sleeman.

The LCBO is government owned and operated, but The Beer Store is a private organization owned by three major breweries: Labatt Brewing Company Ltd., Molson Coors Brewing Company Ltd., and Sleeman Brewery Ltd. Even though The Beer Store is meant to be a non-profit, the owner breweries are able to restrict competition to the detriment of both the non-owner breweries and the consuming public.

There are two obvious means by which The Beer Store can restrict competition: through fees and product placement.

Non-owner breweries are charged two fees to have their products sold in The Beer Store. The first is a listing fee of $2,650.14, plus $212.02 per retail location where the product will be available. And the second is a handling fee between $3.65 and $4.15 for every case of 24 beers. As ludicrous as it seems, under the current system, non-owner breweries must pay substantial fees to their competitors if they want their product to be available at Ontario’s biggest retail outlet for beer.

The Beer Store can also restrict competition by giving product placement priority to the owner-breweries’ products. And because of the Ontario government’s control over the liquor market, these other producers do not have the option to open their own retail outlets to compete with The Beer Store and its owner breweries.

This government mandated arrangement results in higher prices and a more limited selection for Ontarians while it inhibits the development of a retail industry that would be more responsive to market demands.


Hudak will need to take on both the OPSEU and the private owners of The Beer Store if he wants to give Ontarians the benefits of an Alberta-styled liquor retail industry. In the end, consumers, small producers, and small retailers will thank him because it will be a boon for economic freedom.

This piece was published by Troy Media on December 9, 2012

Monday, 3 December 2012

Put Students First by Permitting Competition in Education

Imagine a world where General Motors has to ask Ford’s permission to bring a new car to market. In such a scenario, GM spends its own resources in research and development, gauging consumer demand, and implementing new procedures for efficient manufacturing. GM’s competitor, Ford, does nothing.

Now imagine that Ford has the legal authority to hijack any of GM’s ideas and claim them for itself. Everyone knows there is something unfair about this. If this arrangement does not drive GM out of business, it will negatively impact upon consumer choice. There are few surer ways to stifle innovation and market-responsiveness.

But this is precisely what Alberta’s new Education Act does. The act continues to require that an application for a new charter school must be first presented to the local school board. The school board has two options if it thinks the charter proposal has merit: it can reject it—only to see students exit its own schools—or it can mimic (i.e. hijack) the application by starting an “alternative program”. Either way, the school board gets first dibs. This is a clear conflict of interests.

This problem is not hypothetical—it has happened at least once already. The All Boys Program in Calgary is based upon an application originally made for a charter school. The Calgary Board of Education (CBE) hijacked the proposal and claimed for itself the effort invested in the application. Adding insult to injury, the CBE implemented the proposal minus some key innovations—such as merit-based pay for teachers. This half-hearted implementation has reportedly undermined some of the program’s effectiveness.

University of British Columbia Dean of Education, Lynn Bosetti, says “local school boards have no incentive to support charter schools”, and that school boards—like the CBE—perceive charter schools as “undesirable competition”. Could this be true? Undesirable competition? Shouldn’t Alberta’s public school system prioritize student needs? Fostering market-based fair competition between charter and government schools would be an excellent vehicle to prioritize student needs. Instead, the act undermines competition to the detriment of student interests.

This anti-competitive arrangement is contrary to entire impetus behind the charter school movement.

In 1994, the Government of Alberta passed legislation creating charter schools by permitting non-profit organizations to operate public schools to increase school choice and parental involvement while adopting innovative instructional methods to improve educational outcomes. Charter schools are supposed to be the testing grounds for the delivery of public education. The problem is that the charter schools have become too successful.

Today, charters continue to operate tuition-free publicly funded schools that, along with private schools, consistently out-rank the majority of government public schools on the Fraser Institute’s annual School Report Card. True to their mandate, the charters have innovated. There are charters tailored to meet specific student needs, including one for English is a second language students, one for at-risk youth, and others that emphasize fine arts, music, and science. The students in these programs flourish.

If enrolment is an indication of meeting market demand, then charter schools are wildly successful. One Calgary charter has its enrolment capped by the government at just under 3,000 students and is annually filled to capacity while approximately 7,000 students wait to get in. For your child to attend this charter, you must apply nearly as soon as he or she is born.

But the strength and value of charter schools is not solely how they have innovated and produced superior results compared to government schools. Another significant success is in empowering parents. When parents have a choice of where to send their child to school, the decision becomes a matter of careful consideration. This creates a new relationship between the parent and the school freely chosen—one that’s markedly different than the complacency and compromise that characterizes having no choice but the local government school. As Sheldon Richman points out in his 1994 book “Separating School and State”, the single most important factor in a child’s educational success is an active, supportive family. By offering parents a choice of school outside of the government’s offerings, charter schools help to accomplish that.

Competition is always better than monopoly for consumers, and the delivery of educational services is no different than any other industry. The legislature has done Alberta’s students and parents a great disservice in the Education Act. By making charter schools beholden to school boards with vested interests, the government is sending a clear message: student needs and educational outcomes are not the government’s primary objectives.

This piece was originally published by Troy Media on December 3, 2012