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On July 24, the Bank of Canada announced that the interest rate would be lowered for the second time to 4.5%. While this is welcome news, high interest rates are just the tip of the iceberg that threatens to sink Canadians during the current cost of living crisis.
Neoliberal economists claim that raising interest rates is the only tool to combat inflation, but that’s not the end of the story. It’s clear that oil, gas and food profiteering – or “greedy inflation” – has been a major factor in the cost of living crisis. This can’t be fixed by raising interest rates. It only punishes Albertans who are struggling to put food and shelter on the table and rewards the big players in the corporate sector.
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As Canadian workers struggle to make ends meet, big grocery stores have been inflating their profits. They say their sticker prices have skyrocketed because of rising costs and supply chain challenges. But Canadians aren’t fooled. A recent Mintel survey found that 83 per cent of Canadians say grocers and food producers are using inflation as an excuse to raise prices. Loblaws, for example, is projected to make about $2.19 billion in profits in 2023. Compare that to its pre-pandemic 2019 profits of about $1.13 billion, a staggering 93 per cent increase in just four years.
And where does this money go?
In 2023, Loblaws chairman and icon of Canadian greed Galen Weston said, “The profits we make, we reinvest in this country to create more stores, more services and more jobs.” Nothing could be further from the truth. According to a study by Canadians for Tax Fairness (CTF) and economist DT Cochrane of the Canadian Labour Congress, Loblaws reinvested only 1% of its profits in 2020-22.
The CTF study also shows that Canadian companies use more than two-thirds of their profits to pay dividends to shareholders and buy back shares, driving up stock prices and further inflating the already ridiculous salaries and bonuses of executives like Per Bank, the new CEO of Loblaws, who cashed a $22.1 million paycheque last year (not to mention his one-time $18 million signing bonus).
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It is therefore not surprising that a majority of Canadians, 58 per cent, support the boycott of Loblaws.
Moreover, Canada’s oil and gas barons are doing like bandits. It’s estimated that for every dollar spent on inflation, 25 cents goes to mining, oil and gas profits. Canada’s five largest oil and gas companies posted record profits in 2022, at $38.3 billion. That’s more than double their profits of $16.9 billion in 2021.
As we spend more and more summer days choking on wildfire smoke (in 2023, Edmonton recorded the most hours of smoke on record, 291 hours), and as wildfires rage and destroy large parts of Alberta’s treasures like Jasper National Park, these profits seem even more insane. Why should the public foot the bill for the damage caused largely by climate change caused by fossil fuel extraction?
It is clear that more must be done to curb the greed-flation that is affecting Alberta families and that businesses must bear the cost of the damage they are causing to our communities.
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One of the most important measures against price gouging and excessive profiteering is the introduction of a federal excess profits tax, a measure that is desperately needed. An excess profits tax is a special tax levied on business income above what is considered “normal income.” It is a highly effective tool for reducing income inequality, redistributing windfall gains (unexpected profits due to exceptional circumstances), reducing the incentive to engage in price gouging, and generating government revenue.
For example, last year, the Parliamentary Budget Officer estimated that a 15 per cent tax on oil and gas companies generating more than $1 billion in profits per year would generate $4.2 billion in government revenue over five years. This revenue could fund the public services and infrastructure that all Canadians need to prosper.
The Bank of Canada has changed its interest rates, which is a small step in the right direction. However, the federal government has the power to introduce a policy today that will make much greater progress on affordability. And it knows that an excess profits tax is necessary, but instead it bows to the powerful lobbyists of big oil and big grocery stores and refuses to act.
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Our political leaders may not have the political courage to take on the corporations and billionaires that are blocking our path to a sustainable future, but we don’t. Join us today in demanding an excess profits tax so that the corporations that are the architects of these crises are the ones paying for the solutions.
Laura Kruse is Director of Communications and Organizing at Public Interest Alberta.
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