Let the cash registers ring up the profits

Lana
Lana Payne
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It's a story of finger-pointing, political posturing, and good, old-fashioned greed.
It's the story of the Canadian dollar, our finance minister's wink-wink-nudge-nudge show with the country's retailers and soaring retail profits at the expense of consumers.
Last week, Finance Minister Jim Flaherty met with some of the country's retailers and rapped their knuckles (well sort of) for keeping the price of goods high, significantly over U.S. prices, despite a Canadian dollar that is now above the greenback.
What was really going on here? Was it smoke and mirrors, political bravado or a pitiable act to fool Canadian consumers, who also happen to be voters, into thinking that the Harper government is on their side, the side of the middle class?
If Flaherty really wanted to do something for Canadian consumers, there would have been more than hot air last week.
He could have, at the very least, fanned the flames of consumer anger by highlighting the enormous increase in retail profits since 2002, when the Canadian dollar started its climb into the stratosphere.
Instead, he capitulated to big retailers.
According to analysis by the economics department at the Canadian Labour Congress, 2007 second-quarter profits for Canadian retailers were more than $4 billion, almost double what they were during the same quarter in 2002.
In fact, retail profits have never been better. According to Statistics Canada, retail operating profits reached a record high in 2006, totally $14.3 billion, a 20.2 per cent increase over 2005, which was also a better year than 2004.
The conclusion: prices haven't been dropping as the Canadian dollar has been climbing because retailers have been pocketing a significant part of the difference.

Strong currency
What no one, not even the spin doctors at the Retail Council of Canada, has been able to answer is why prices haven't been gradually declining as the Canadian dollar continued to climb.
The retail council is too busy blaming suppliers. Suppliers say it's the fault of manufacturers or government red tape. Anything to cloud the issue. Just more smoke and mirrors.
Retailers buy goods in U.S. dollars and sell them in Canadian dollars, which should translate into lower costs and lower prices when the Canadian dollar strengthens against its U.S. cousin.
The fact remains that the Canadian dollar did not reach parity overnight. But it is parity that has been the driving force behind consumer anger.
As was recently pointed out by labour leader Ken Georgetti in The Globe and Mail, it's not just consumers who are subsidizing soaring retail profits - so are retail workers, who have seen their average wages decline by five per cent in the last year.
In addition, he pointed out, higher-priced consumer goods and, in turn, record retail profits are somewhat to blame for higher interest rates - high prices can translate into higher inflation, and it has been the policy of the Bank of Canada to deal with any inflation over two per cent by raising interest rates. In other words, even those who don't like shopping are paying a price.
Higher prices. Higher interest rates. Big profits for retailers. And all the finance minister can do is huff and puff.
He has the power to do something about it - something more than a mild chastisement of the country's big retailers. But that means really tangling with the corporate sector.
Instead, he will more likely reward retailers for their bad behaviour and greed by giving them another whopping tax cut - something he and his boss have been promising to do in their next budget.
Canadian corporate profits are massive. Corporations do not need another tax cut. They raked in more than $231 billion in profits in 2006, a 7.3 per cent increase over the previous year. Why not use those taxes to make the lives of Canadians better? But that concept seems to be beyond the current finance minister.
Flaherty went home after his meeting with retailers looking like he'd been whipped. All the vinegar he had going in evaporated in the meeting. By the time he came out, he was singing their tune. Lower prices will take time, he mimicked. "Prices cannot be lowered overnight," he said.

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His best advice for Canadians after the meeting: shop around. What he really meant was, if you want lower prices, go across the border or shop online. Not much help to those of us who'd like to support Canadians working in Canadian retail jobs, but who'd also like some of those profits reflected in the paycheques of retail workers and in lower prices. With record profits, this is not too much to ask.
Flaherty's attempt to fool voters into thinking he was on their side also fell flat.
All he really proved was that he, like every other recent finance minister, is not going to mess with corporate Canada.
Consumers might be voters, but corporate Canada is still pulling the strings.

Lana Payne is a former journalist who is active in the labour movement.
Her column returns Nov. 11.

Organizations: Canadian Labour Congress, Statistics Canada, Retail Council of Canada Globe and Mail Bank of Canada

Geographic location: U.S., Canada

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