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Author: Michael J. Armstrong, Associate professor of operations research, Goodman School of Business, Brock University
Ontario’s Progressive Conservatives say they support business. During last June’s election campaign, they promised to “open Ontario for business.”
When the new government tabled legislation last month to roll back workers’ benefits, they called it their Making Ontario Open for Business Act. And they’ll soon be posting border signs proclaiming: “Welcome to Ontario – Open for Business.”
While the Conservatives’ rhetoric has been consistent, their decisions have been less so. Since the election, they’ve indeed adopted policies with free-market goals. But their execution has often intruded into what should be business decisions.
Cannabis growers stunted
The most recent example concerns cannabis retailing. The Conservatives initially took a business-friendly approach. In August, they cancelled the ex-governing Liberals’ floundering plan for government-owned stores. Instead, they promised to let businesses sell pot. That seemed like clear support of free-market principles.
But the law they passed on Oct. 17 interfered with market freedom by arbitrarily favouring some companies over others. It limits licensed cannabis growers — but no other firms — to one retail outlet each.
That’s a huge setback for the big growers. Some were planning provincewide chains of perhaps 100 stores apiece. The Conservatives’ decision means the firms with the greatest cannabis expertise are all but barred from retailing it in Ontario.
It’s a puzzling choice. These are Canadian firms producing products in Ontario, often in Tory-blue rural ridings. They’re leaders in an expanding, potentially global, industry. Why stunt their growth at home?
Beer retailing provides another example. One of Doug Ford’s first acts as premier was to trim the minimum legal beer price from $1.25 to $1 per bottle. That fulfilled his promise to allow “buck-a-beer” pricing. Ontario consumers hadn’t seen such prices in a decade.
The move was largely symbolic, even nostalgic. Brewers hadn’t been clamouring to cut their prices to 2008 levels. Only three small firms adopted the lower price. But the change nonetheless removed a small piece of government interference from business decision-making.
But then the premier went further. He promised priority shelf space and promotion for any brewers providing dollar-priced beer.
Producers normally pay for such marketing perks. Premium beer brewers were consequently annoyed at the special treatment for bargain brands. Why should the government subsidize some ales over others?
And if the Conservatives must play favourites, why not pick more promising products? Canadians increasingly prefer craft beers over mass-market suds. According to one market research firm, sales have increased 14 per cent for dark beer and 16 per cent for premium lager since 2008.
By contrast, sales have fallen nine per cent for value-priced beer. Promoting them seems a bit like bringing back coal-fired power plants.
Rebates extended selectively
Then there’s auto retailing. It wasn’t surprising when the Conservatives cancelled Ontario’s electric car rebates. That program had its environmental merits. But it involved taxpayers subsidizing private purchases.
However, the Conservatives again added a preferential twist. During a phase-out period, they agreed to pay rebates on cars already ordered through dealerships. But they excluded orders placed directly from manufacturers; that is, from Tesla.
Tesla argued the solitary exclusion was unfair. An Ontario court agreed. It forced the Conservatives to include Tesla in the rebate phase-out.
Renewable electricity not renewed
The biggest hit to the Conservatives’ business reputation involves another green program. In July they unilaterally cancelled 758 renewable energy contracts, mostly without compensation.
The old Liberal electricity policy was shockingly inefficient. It’s great the Conservatives are replacing it. But can’t they do that without punishing firms that had signed contracts in good faith?
The massive cancellation implies Ontario isn’t a place where contracts are honoured. Using legislative power to deflect compensation claims that might succeed anyway aggravates the heavy-handed image. It signals “investor beware” rather than “open for business.”
It’s not that the Conservatives dislike compensation, if another government is paying. Ford quickly demanded compensation from the federal government for dairy farmers affected by the new U.S.-Mexico-Canada trade deal.
Learn from the feds?
In fact, Ontario Conservatives could learn some lessons from the federal Liberals. Take the new carbon tax that Prime Minister Justin Trudeau announced in October. Ford promptly denounced it, saying it’ll somehow kill thousands of jobs.
But this tax involves Nobel-prize-winning free-market economics. It doesn’t involve governments choosing specific products to either favour or condemn. (Contrast that with Ontario’s choosing which beers to promote.)
Instead, the feds will tax activities based on their carbon pollution. Consumers and businesses remain free to choose what to buy and sell, as in any free market. (Contrast that with Ontario limiting which firms can build cannabis retail chains.)
And the tax money collected will be rebated back to consumers, leaving them no worse off on average. (Contrast that with Ontario’s lack of compensation for green power cancellations.)
Open for which businesses?
It’s disappointing, really. So many Conservative policies have featured free-market aspirations. But those got tarnished by the government’s subsequent meddling in the details.
Mind you, the Tories have only been ruling Ontario for a few months. As they gain experience, and if they listen to feedback, they might develop more consistent policies. But the trend so far is concerning.
Will the Conservatives truly open Ontario for business? Or only for businesses that fit their agenda?
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Michael J. Armstrong, Associate professor of operations research, Goodman School of Business, Brock University , The Canadian Press