Misguided policies impact business
There is a widespread belief among some segments of the population that businesses control governments and can dictate policies that favour them.
But when you look at all the misguided policies adopted from non-governmental organizations (NGOs) and various activist groups, you wonder who has the most clout.
The latest fad is the fight against obesity. Some 'solutions' adopted by governments in North America and Europe include pop, sugar or fat taxes, serving size regulation, etc. A few weeks ago, the Ontario Medical Association came out in favour of taxes and graphic warnings on food with no nutritional value.
Most of the time, no consideration is being given in these schemes to the impact on business and the overall economic consequences.
New York City's new regulation banning any sweetened beverage over 16 fluid ounces is a case in point. As related by its co-founder in the Wall Street Journal, the most popular product of the Honest Tea line of beverages is its organic Honey Green Tea, which falls under the regulation because it is sweetened and is sold in a 16.9-ounce bottle. The company selected this serving size because it was standard for nearby bottlers.
Honest Tea can now either take its tea out of the New York City market, or it can retool its entire production line, all because its product is marginally larger than an arbitrarily set threshold.
Denmark decided last week to scrap the only "fat tax" in the world, implemented only a year earlier. The tax had little effect on eating behaviour, but it brought higher prices on all kinds of food, including some that did not contain much fat. It also put a huge strain of small businesses such as butchers and cheese producers who had to adapt their range of products after taxes hit some more than others. It increased administrative costs for retailers and other businesses. And it cost Danish jobs by encouraging shoppers to go to Germany and Sweden to take advantage of lower prices.
Some might think these economic disturbances are the price to pay to reduce the level of obesity. But the evidence for that success is slim.
In any case, the impact of policies on business should not be just an afterthought. No policy can be considered sound and effective if it brings about large disturbances in economic activity.
Michel Kelly-Gagnon is president of the Montreal Economic Institute (www.iedm.org). The views reflected in this column are his own.