Our Stockholm Syndrome about supply management

Why our debates about international trade miss the point entirely

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.

Adam Smith, Wealth of Nations, Book IV, Chapter VII

This point is incredibly obvious to anyone who spends any amount of time thinking about the issue, but you will find almost no trace of it in Canadian public debates about international trade, including the latest over the Comprehensive Economic and Trade Agreement with the European Union. Trade agreements are always about “concessions” in which foreign suppliers are grudgingly given — or, more often, indignantly denied — the right to sell Canadians goods and services at prices lower than what we pay now. Let’s be clear here: lowering the price of consumer goods and services has the exact same effect on household welfare as an increase in incomes. But I defy you to name an elected politician who will list “the ability to buy cheaper stuff” as the most compelling reason to support free trade: more than 200 years since Adam Smith wrote that paragraph, our trade agenda is still written by and for producer interests.

We’re stuck with a system in which producer interests — most notoriously the dairy cartel that operates under the name of “supply management” — hold the rest of us hostage. Dismantling the dairy cartel is an act that would significantly increase consumers’ buying power, but this is a measure that the  Conservatives have all but ruled out under any circumstances, and the NDP has made maintaining the cartel a condition for supporting any sort of trade agreement.

Why would the two major parties (a Liberal Party of Canada under Justin Trudeau will likely join them) stubbornly insist on sticking to a policy that makes consumers worse off at the expense of producers? Because it’s a popular position. It’s one of the marvels of the Canadian electorate. Show Canadians a special interest group that uses its government-granted privileges to fleece consumers, and they’ll embrace it as a “national champion,” a “uniquely Canadian way of life” or some equally vapid catch-phrase.

This is from the Wikipedia entry for Stockholm Syndrome:

Stockholm syndrome, or capture–bonding, is a psychological phenomenon in which hostages express empathy and sympathy and have positive feelings toward their captors, sometimes to the point of defending them.

What we suffer from is the economic policy equivalent. Call it “Canada Syndrome”: a tendency for consumers to identify with the producer interests that are holding them hostage.