By Jon Miltimore
New government data emerged this week showing that food prices in Canada continue to climb.
Though year-over-year inflation of consumer prices overall cooled to 3.8% in September, food prices increased 5.8% from a year ago, driven by surging prices of bakery products (up 8%), fresh vegetables (7.6%), pasta products (10.8%), and poultry (6.5%).
Food prices have long been a sore spot for Canadians. Even prior to 2023, statistics showed that some 7 million Canadians, including 1.8 million children, were in households struggling to put food on the table.
As inflation continued to drive food prices upward in 2023, consumer outrage quickly mounted.
“If I’m paying that much, I hope there’s gold in that chicken,” one user responded to a viral tweet in January showing a $37 price tag on a package of chicken breasts.
The episode prompted accusations of price gouging and a high-profile story in the New York Times — but the paper reported that outrage at grocers was misplaced.
“While it’s easy to get angry at the grocer, there’s very little evidence that the grocers are actually taking advantage of the situation,” said Mike von Massow, a food economics professor at the University of Guelph in Ontario.
Food prices have only gotten worse since then, and Prime Minister Justin Trudeau, apparently not a reader of the New York Times, has found the same scapegoat as many others unversed in basic economics: grocers.
Last month, Trudeau threatened to slap grocery stores with new taxes if they don’t find a way to lower food prices.
“Large grocery chains are making record profits. Those profits should not be made on the backs of people who are struggling to feed their families,” Trudeau told an Ontario crowd.
By taking aim at grocers and “record profits,” Trudeau is parroting the rhetoric of some U.S. politicians, including Sen. Elizabeth Warren (D-MA), who has argued that inflation is being driven by “corporate greed.”
The idea that corporations suddenly became greedy in the aftermath of the pandemic never passed the economic smell test, and it was recently rebutted in a Federal Reserve paper.
“Corporate profit margins were not abnormally high in the aftermath of the COVID-19 pandemic, once fiscal and monetary interventions are accounted for,” noted Dino Palazzo, senior economist at the Federal Reserve Board.
Yet politicians such as Trudeau, who less than a year ago criticized the idea of using a windfall tax on grocery companies to lower food prices, have repeated the claim over and over again that greedy corporations are the root cause of inflation. Why?
The answer is simple: the true blame for inflation lies with them.
Pierre Poilievre, leader of Canada’s Conservative Party, hit the nail on the head in a recent interview when he pointed out that the Canadian government’s policies are to blame for inflation — as are those who lead it.
“[Trudeau] prints $600 billion, grows our money supply by 32% in three years,” Poilievre said. “That’s growing the money eight times faster than the economy. No wonder we have the worst inflation in four decades.”
This is the mystery of inflation. (It’s not really a mystery.) Politicians and central banks flooded the economy with money, which devalued the currency.
Basic economics teaches that increasing the money supply faster than an economy can provide new goods and services will result in price inflation, and that is precisely what we’ve witnessed. Indeed, for much of modern history, inflation was defined as expansion of the money supply, not an increase in prices (which is the consequence of expanding the money supply). Henry Hazlitt famously explained the difference in Economics in One Lesson.
“Inflation is an increase in the quantity of money and credit. Its chief consequence is soaring prices,” Hazlitt explained. “Therefore inflation — if we misuse the term to mean the rising prices themselves — is caused solely by printing more money.”
Politicians such as Trudeau cannot, of course, admit it’s their own policies and money printing that are to blame for high food prices. So they hold speeches blaming grocery stores and food producers for the inflation they caused and threaten them with new taxes.
Whether Canadians will see through Trudeau’s crude charade is unclear. What is clear is that Canadian grocers are not responsible for the skyrocketing price of food in Canada. Justin Trudeau and the Bank of Canada are.
About the author: Jonathan Miltimore is the Editor at Large of FEE.org at the Foundation for Economic Education.