The Intergalactic Price of Being Canadian

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I can’t believe it. Canada’s national newspaper, the Globe and Mail, the Canuck equivalent of USA Today just called the entire Canadian population, and I quote the headline, “suckers.” (Thanks to my pal Don Hicks for passing along the article link).

Amazing. Here’s the link to the story by a very brave and insightful writer, Neil Reynolds. He is picking up one of the themes of my recent blog about the problems with living in Toronto, and by extension living in Canada. One of them was why we have currency parity with America, but everything here is higher priced. A quick for instance is Jackie Huba’s 2007 book Citizen Marketers: US price is $25. Canadian price is $31. Why?

Similarly, Mr. Reynolds is talking about is the high cost of American goods in Canada, which is completely out of line with the cost of getting those goods here. The Canadian public has been royally ripped off by a bad system for years.

He quotes several strudies of the phenomenon of the so-called “border factor.” These economists

“looked at the prices of identical goods on each side of the border and accounted for all the possible costs, leaving the mysterious “border factor” as the only variable. On the U.S. side, this was the equivalent of the cost of shipping the goods an additional 47 kilometres. On the Canadian side, they found product prices were higher by the cost equivalent of shipping goods an additional 108 million kilometres – or 141 round trips to the moon. Unbelievable, indeed. What’s happening here? In what way can the U.S.-Canada border, all by itself, defy fundamental laws of economics? In its own analysis of this mystery, the Federal Reserve Bank of San Francisco decided that consumer prices are often set by factors that have little to do with actual cost – factors that operate independently of exchange rates.”

So what are these mysterious factors that defy economic rules and confound economists? Why it’s that usual suspect: Mr. Culture, of course!

“What explains the extraordinary divergence in retail prices between the U.S. and Canada? Put it down, in the end, to a deeply entrenched Canadian willingness to pay more for many goods than they are worth. Put it down to consumer laziness. Especially now, Canadians can pay much less by crossing the border or by ordering direct from the U.S. Most Canadians, though, won’t. Merchants will continue to price to the market – to charge what people will pay. This is why we will keep paying intergalactic prices – whether we have parity or beyond.”

Intergalactic prices: 141 round trips to the moon’s worth of price jacking. Mr. Reynolds starts scratching away at the surface of the deep dark Canadian secret in his article, but I can pick up my trusty shovel and keep right on excavating.

I wrote a few days ago that “the Canadian dollar broke through and made it to parity with the US dollar for the first time in 30 years. But have we seen the significant savings of the Canadian dollars’ climb?” No way. In fact, the savings have not been passed on to consumers. They’ve been kept by Canadian businesses.

I asked, Why? And then answered by own question. Because of complacency. Consumers are complacent. Content with what they have. Happy to pay exorbitantly more for their flat screen TVs and salty snacks than their neighbors in Buffalo New York. And come on, Mr. Reynolds, we can’t expect people to drive to the USA to do their shopping. For big purchases like that HD plasma screen TV, the government forbids it. And practicality demands it. And when you order from the USA by mail, guess what happens? The government tacks on big customs and duty bills that make the savings moot. I learned that as soon as I moved here.

The Canadian government favors business interests over consumers. And that’s a cultural issues as well as a political one. You would have thought that the “socialist” Canadian government would have regulations to protect consumers from price-gouging, but apparently they don’t or they won’t enforce them. I can tell you that buying a home here was like the Wild West. No disclosures, no enforcement mechanism. Nothing. Buying a house in Illinois was far, far, far more regulated and tightly enforced. And the consumer benefited (and by extension, we’re all consumers).

Canadian Businesses are happy to overcharge, and keep on over-charing. And why shouldn’t they? It’s a caveat emptor, take-it-or-leave it nation. They aren’t competitive in the way US companies are. They don’t drive down prices. There are probably too many smaller local players, and they are just too familiar, and all-too comfortable to really compete. There are no Canadian-spun Sam Waltons and Richard Bransons who enter fat industries and cut prices to the average consumers’ benefit. Why would they? The government does nothing. The people let them. So why wouldn’t Canadians pay intergalactic prices?

Are any Canadian politicians interested in this issue? Any business people? Any consumers?

Wake up. Wake up! Suckers!

One Response

  1. Greg Dunlop October 17, 2007

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