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Produce at a west-end Toronto Sobeys grocery store on June 26.Graeme Roy/The Canadian Press

Every good conspiracy theory needs an easy-to-hate villain with nefarious motives and a malignant grip on power, which explains how the federal NDP found the perfect casting for its take on why inflation has ravaged Canadians’ purchasing power – Big Grocery.

Every element was in place: powerful grocery chains that twist the arms of suppliers and elbow aside neighbourhood vendors in a relentless pursuit of profit, all at the expense of hapless Canadian families forced to pay for their rampant corporate greed.

As the NDP tells it, grocery chains drove inflation by marking up prices during the pandemic in order to pad their profits. Corporate greed, not a huge imbalance in global supply and demand driven by massive fiscal stimulus, was the culprit.

A perfect theory, with just one thing lacking: facts. Ever since the NDP started spouting its economic demagoguery, there’s been proof to the contrary for anyone that cared to look, starting with the financial statements of the grocery chains themselves, which showed generally stable gross margins, once the non-food parts of the business were excluded.

Yes, grocery chains undermined their solid case by refusing to provide more detailed breakdowns to Canadians (including to the Competition Bureau as part of a market study the bureau launched in October, 2022). And the bread price-fixing scandal, still under investigation, casts a long shadow over the industry.

But a recent research paper from the Bank of Canada goes a long way toward showing how much the NDP and its progressive supporters have irresponsibly veered into conspiracy-tinged territory. The researchers, of course, do not criticize the NDP. But their analysis of price markups across various economic sectors is nevertheless an effective rebuttal.

As the accompanying chart shows, there was indeed a spike in markups in 2020 and 2021 (for the most part, ahead of the takeoff point for inflation). But the researchers note that the increase is mostly attributable to commodity firms. Unsurprisingly, profit margins spiked for oil companies as crude prices soared after the spring of 2021.

Looking at just the retail sector, a much different picture emerged: markups did rise modestly from 2015 through to 2019, but then were stable or declining during the early years of the pandemic and later, as inflation took off. The researchers conclude there is “little evidence of rising markups amplifying the inflationary impact of rising costs.”

There are caveats. Companies with multiple business lines could conceivably have increased markups above inflation for some units while lagging behind inflation in others. Similarly, individual companies might have boosted markups for some products, while decreasing markups on others.

But those caveats are a world removed from the NDP’s allegation of a shadowy plot by grocers to drive up food prices and thereby impoverish Canadian families. The reason why the party persists in this claim is obvious enough: if greedy grocers are to blame, there’s no need to ask hard questions about the role of (continued) deficit spending in super-charging consumer demand and fuelling inflation.

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To the contrary, the NDP (and the Liberals, for that matter) have used inflation as a justification to spend more, not less. The NDP goes further than its parliamentary alliance partner in demanding a tax on the supposed windfall profits of the industry. And that’s really what’s at issue here: linking the (non-existent) problem of Big Grocery and inflation to the (longstanding) wish of the NDP to hike corporate taxes.

The pity of it is, there is a legitimate critique of the grocery sector, starting with concentration issues that the Competition Bureau flagged last week. More pertinent to the inflation debate is that stable gross margins mean that grocery chains did not suffer much from rising inflation.

Grocery chains managed to pass on, for the most part, the full pain of inflation to their customers. Is that fair? That would be a question worth debating, were the NDP and others not so entranced by a Big Grocery conspiracy theory.

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