An easy lens for understanding most public policy is that of consumers versus producers.
Consumers are all of us. We buy milk, or rides on transit, or songs. Some of us buy a lot and some of us buy only a little, but our purchases are aggregated out over thousands of products purchased multiple times. As a result, the time devoted to thinking about all but the biggest purchases is usually brief. Consumers are interested in keeping prices down generally, but are often price insensitive to particular products for lack of a point of reference.
Producers make – typically – one thing. Milk, or transit services, or songs. They sell one thing into the marketplace and spend almost all of their time thinking about it. They are very, very, very interested in keeping the prices of their items as high as possible. They devote enormous effort to marketing, or increasing the perceived value of an item relative to its cost.
A lot of government policy is devoted to managing the tension between producers and consumers, or more accurately, managing the very high demands placed on them by producers against the broad general interest of consumers that is only weakly felt in the system.
Agricultural subsidies are a great example of this process, and milk especially so. Farmers will purchase a quota for between $15,000 and $30,000 a cow and then sell milk into the system, a complex web of federal and provincial programs.
These systems are designed to keep prices stable and result in keeping prices high. The OECD estimates that Canadian dairy prices are double the world market.
The public policy reason for supply management is basically that the boom and bust nature of agricultural commodities can result in sudden and massive rural depopulation if prices are not made predictable. However, it is also done because it is politically advantageous.
The 15,000 or so dairy farmers are directly and highly interested in maintaining the supply management systems, as they invested literally millions of dollars in buying their quotas over the years and enjoy the benefits of artificially high prices for a products with constant demand. They are powerful proxies for “rural interests” and are perceived to be able to deliver rural seats. Rural seats are massively over-represented in our legislatures.
Consumers on the other hand are relatively ignorant of the nature of what drives the cost of milk. The arcane nature of supply management is dusty and dull. And no political party appears interested in raising the problem, and so risking the wrath of the over-represented rural areas.
So the tail wags the dog because the producers clearly have more interest and information. Consumers don’t really have much of a defence except becoming a milk smuggler and pouring American contraband on their cereal.
The Wheat Board is a more complex example.
Here, it is the producers who are at variance over the continuation of a supply management system. Some farmers, particularly ones located closer to the American border, feel they can get more for their grain on their own, outside of the pool. Farmers further from the border believe this will rob them of their price protection and put them at a transportation-derived disadvantage.
But at no point has anyone successfully made the argument that the Conservative’s changes are driven by concern about consumers. Agriculture Minister Gerry Ritz always presented the changes as being motivated by an interest in putting “farmers first,” although it is more accurately about putting “ some farmers first.”
However, the Harper government should be reconsidering their focus on producers over consumers in this and many other policy areas. The reason is the recent explosion of popular outrage in reaction to the Stop Online Piracy Act in the United States.
When it was introduced, SOPA looked like a typical piece of producer-driven public policy.
Entrenched businesses in the production of music and film were seeing their revenues increasingly reduced by new distribution methods on the Internet. Major lobbies like the Recording Industry Association of America and the Motion Picture Association of America took the producer-side tactic of convincing legislators to picket fence their existing business, that further legal changes were needed to protect their copyrights.
Normally, such a move of producer-driven protectionism would be relatively low profile. A few ad campaigns would be run saying how it would ensure Hollywood continued to make great movies and that would be that.
However, consumers were quickly mobilized in opposition. This was supported by some of the new distribution channels, including Google, Wikipedia and others. The resulting backlash drove scores of Congressional Representatives and Senators to change their position from support of SOPA to opposition.
The backlash was primarily driven by consumers refusing to accept greater pro-producer regulation, and using the Internet to identify the problem, organize and then demonstrate their new-found strength. While there was some fear-mongering and Anonymous-driven nastiness, for the most part it was a protest of average consumers refusing to accept restrictions on their options.
The question some have pondered is if the SOPA backlash was a result of the distributors working to defend their profitable channels, or a legitimate grassroots protest by consumers.
It may be irrelevant. If you do believe that consumers remain relatively pliant, how long will it be before other distributors realize that consumers paying less for their regulated goods will have more money to pay for other things, increasing the margins of – say – retail grocery distributors over those of milk producers? After that, will they begin campaigns to gin up consumer anger over agricultural product pricing to further their own commercial interests?
But my belief is that consumers are actually becoming more fluent in commercial policy and organization, thanks to the Internet.
There have been consumer-driven political activities in the past. Fair trade, Buy American, union label, the Chavez grape boycott and others were powerful forced that altered how companies behaved or marketed themselves. However, these campaigns were difficult, expensive and time-consuming to build. A few (Buy American and union label) were arguably driven by producer-side interests.
The recent move to Internet-driven consumerism changes the cost structure of mobilization, and so makes the playing field more even. It is very easy for average citizens to circulate revealing pieces exposing anti-consumer distortions in the economic system, and for consumer anger to form and vent. In that environment, it will become more and more important to consider consumer impact when debating public policy.
The old strategy of buying off producers groups as proxies for regional communities may fall victim to the rising political power of consumers, loosely organized but organized all the same. The Internet makes the costs of organization so low, and the impact of viral campaigns so powerful, that consumers are suddenly capable of upsetting the producer-driven accommodations in Canada’s public policy.