Friday, July 12, 2019

Editorial confusing on benefits of privatization

A recent editorial in the Telegraph-Journal regarding the newspaper’s opinion that the province should privatize both cannabis and alcohol is a bit confusing.
On the surface it’s a pro-privatization, anti-union opinion, one the paper is more than entitled to make; after all, freedom of speech is important to any democracy.
However, it’s how they back up their position that is confusing.
First, let’s give the editorial credit for the things it gets right. The New Brunswick Union is attempting to organize the workers of Cannabis NB. Our application to unionize employees at three stores was unsuccessful, as the labour board favours the approach of organizing all Cannabis NB employees across the province rather than store-by-store.
This is pretty much where logic leaves the discussion, because the editorial omits some key facts.
For instance, look at this statement: The move to unionize, which carries with it the likelihood of higher wages and less retail flexibility is further evidence that the Higgs government must find a better business model, and find it soon.
Assuming unionized employees would seek better wages and other forms of workplace improvements is a given. It also shouldn’t be seen as problematic. As well, this would take place at the bargaining table where both sides work to find equitable deals. As for the less retail flexibility claim, the editorial provides no examples or fact to back it up. It then offers this assumption as further evidence that the government must find a better solution. This is an opinion, not fact or evidence.
Much of the product Cannabis NB ordered from suppliers prior to opening was not delivered, leading to less sales, some stores closing for a few days and layoffs. The editorial characterizes this problem as: ”the underperformance of suppliers who managed to deliver just one tenth of the product the province said it had secured in advance of legalization.”
By stating that the province “said” it had secured the product, the editorial subtly shifts the blame from the private-sector suppliers to the Crown corporation, but this is a reversal of cause and effect.
The suppliers failed to meet the demand and produce enough product, and this private sector failure lead to loss of sales in the important first weeks of legalization. It is quite a leap to suggest that since private sector suppliers failed to meet the needs of a public corporation, the solution is more privatization.
The editorial goes on to state: Premier Blaine Higgs has floated the possibility of privatizing the pot and alcohol retail business as part of a strategy to fix the business model. We think the time is here to make changes. It’s time to move away from the failed concept of government monopolies.
Let’s just assume that last line was written with no hint of irony, by someone who sincerely believes monopolies are only good in the private sector – for example, when running newspapers. Some of the other assumptions here still need unpacking.
Consider the editorial’s leap from Cannabis NB to NB Liquor. NB Liquor is not a failure; it provides millions of dollars in revenue for our province each year in the form of sales and tax revenue. If liquor sales were privatized, the sales stream of revenue would be taken away, leaving only the tax revenue. Are we really to believe that taking away a source of revenue from our provincial government will leave New Brunswickers better off?
The only thing failing in the editorial’s example is logic.
The editorial leaves some other important facts out of its argument. For instance, the foremost goal of legalization was education and safety. As the government’s April 30, 2019 news release stated, “The core focus of the retail model is youth protection, reducing the illicit market, public education and safety.”
Another important fact not stated in the editorial is that Cannabis NB is a new business, which hasn’t been open for a year. Its start-up costs had to be factored in, and even an expert in the field - Jay Rosenthal, president of Business of Cannabis, who was quoted in the Telegraph-Journal on May 11, 2019 - believes changing the model this soon is not a good idea. Mr. Rosenthal concluded, "It's too early to make a sweeping change. I know governments often want to do that, but the measure of success won't be until all these other things shake out."
Among the things that need time to sort themselves out, he said, are supply hiccups and the arrival of edibles, expected to bring profits to any new model, on shelves in October.
The NBU believes this editorial is based on ideology rather than facts. The supremacy of privatization has long been a standard belief held forth in the editorial pages of the Telegraph-Journal. Its proponents think just by privatizing something you end up with savings and efficiencies.
The most recent Auditor-General of New Brunswick report has disputed this claim, as did the Canadian Centre for Policy Alternatives in its 2012 study entitled ‘A Sober Second Look at Liquor Privatization.’
As that report documented, “prices actually increased in Alberta after privatization and in BC, prices in the private stores are higher than in the public ones. So privatization hasn’t delivered lower prices as promised by free-market advocates. This result occurred in spite of the proliferation of liquor outlets in Alberta since privatization which should have increased competition and lowered prices.
“[In] Alberta, where retailers set their own prices, the value-added tax is not practical, so it moved to a unit sold tax – based on volume. Not only is the unit tax less fair (it’s like a flat tax), but it results in lower tax revenue.....The report demonstrates that higher prices have not delivered higher revenues in Alberta; in fact the province lost an estimated $1.5 billion in tax revenue since privatization.”
Until the Telegraph-Journal can back up its opinions with facts, we’ll stick with the opinions of experts and those who have studied the subject at length.