Canada’s Food Price Report warns us that food price inflation will continue throughout 2023, especially for dairy, vegetables and meat, and that a family of four will need an additional $1,000 to feed themselves. This is not a short-term crisis. Many of the crop losses that caused prices to rise were caused by the increase in dramatic floods, droughts and storms, courtesy of the climate crisis, which is just getting started. Meanwhile, politicians on Parliament Hill held committee hearings last week to grill grocery-store CEOs on their part in the sky-high prices.

If you were minister of agriculture, what would you do? Websites are full of advice on how to shop more wisely, but this is not the way to address a food crisis.

1. Form community food hubs

Most of the work needed to increase food security is local, requiring partnerships and planning. Every neighbourhood, county or town needs a community food hub to promote best practices and policies, taking inspiration from the Food Hub Network in British Columbia. Community food hubs are often community-led initiatives that distribute local food to those who need it. Governments could provide start-up grants to launch food hubs where they don’t yet exist.

Through strong partnerships, local governments can work with community organizations to turn vacant urban land into allotment gardens. Local farmers can benefit from the shared distribution systems of community networks; schools can develop year-round food gardens; residents can be encouraged to grow food on public boulevards; fruit-tree gleaning projects can be started; and much more.

In B.C., the provincial government has announced a $200-million investment to spend on a variety of measures to increase local food security and reduce the cost of food.

2. Launch a nationwide grow-your-own-food campaign

Throughout history, people have dug into the soil to grow the food they needed. When hunger demanded it, they terraced entire mountainsides to create new beds. At Kiwi Cove outside Ladysmith, on Vancouver Island, 10 volunteers meet for three hours each Tuesday and Thursday morning from spring to fall to grow food for the Ladysmith Food Bank on a 4,750-square-metre plot of land. Together, they grow almost two tonnes of vegetables total, or 200 kilograms per volunteer, in a growing season. In Montreal, volunteers with Carrefour solidaire are growing vegetables in a plastic greenhouse in the middle of winter with thick snow on the ground outside, raising lettuces, cabbages, bok choy and many other vegetables.

We need a nationwide campaign to persuade Canadians to grow their own food, just as we did in wartime with victory gardens and like efforts launched by non-profits during the early months of the COVID-19 pandemic. A survey by the National Gardening Association showed that Americans could save more than US$500 a year by growing their own food. To encourage Canadians to grow their own food, the federal government could give a $500 grant to any group of five or more neighbours who help each other to convert their lawns into food gardens. In a city of a million people, the government could issue 1,000 grants that would cost $500,000, or $19 million for the entire nation.

To encourage more home-grown food, the government could also remove GST from gardening tools, equipment and bedding plants and set up a fund for garden clubs to help new food gardeners. If the government distributed the grants through community food hubs, this could accelerate the formation of hubs in communities where they don’t exist, as residents (having seen the benefits in other communities) would pressure their government to set them up.

3. Protect farmland

In Ontario, 319 acres of high-grade agricultural land – equal in size to 58 city blocks – are lost to development every day, according to the Ontario Federation of Agriculture. Since the beginning of the pandemic, municipal zoning orders have been used six times in Ontario to rezone farmland for urban use. For sure, we need to build a massive amount of new housing, but there is more than enough land to build two million new homes in the Greater Golden Horseshoe area around Toronto by 2031, without touching the Greenbelt or expanding urban boundaries.

In British Columbia, good farmland has been protected since 1973 through the Agricultural Land Reserve, but 50% of it is sitting empty, not used for farming. In Surrey, B.C., research found that if 3,300 hectares were used for small-scale, human-intensive, direct market production, it could supply 100% of Surrey’s seasonal consumption of 29 crop and animal products, and create 1,500 jobs.

The solution is to tax unused farmland at an annually increasing rate, forcing owners to either start farming, lease the land to a farmer, or sell. This would reduce the market price of farmland and open up opportunities for new farmers. Metro Vancouver has explored various ways of making farmland tax changes, but nothing has happened.

4. Save and distribute the food that’s wasted

Millions of Canadians are food insecure, yet 58% of the food produced in Canada each year is lost or wasted, according to Second Harvest, a food rescue organization. Of this, 32% (11.2 million tonnes) is edible food that could be redirected to support hungry Canadians. That’s 295 kilograms of dumped food per person per year, or 5.7 kilograms a week. We need to eat around 1.8 kilos of food a day, so that’s enough food for three days. Canada’s goal is to reduce the amount of food wasted by 50% by 2030.

France has set a goal to reduce its 5.5 million tonnes of food waste by 50% by 2025. In that country, 32% of food is lost during farming, 21% during food processing, 19% by consumers, 14% by grocery stores and 14% by restaurants. Since 2016, the French government has banned larger supermarkets from throwing away unsold food that could be donated to a charity. In return, they save on landfill fees and get a tax break of up to 60% on the value of the donated food.

But there are some holes in this plan. The French Federation of Food Banks found that every morning, 2,700 supermarkets send food that would otherwise be wasted to 80 warehouses, rescuing 46,000 tons a year. This, however, is just 6% of France’s grocery store food waste, and the system also assumes that struggling people will go to a food bank.

There’s a lot more that the supermarket industry could do, including training its staff and using demand planning to identify likely food waste. The online grocery store Spud offers imperfect produce at 50% of the price and donates what it can’t sell to charities. Since 2009, the non-profit Move For Hunger has delivered 32 million pounds to food banks across the United States and Canada, equivalent to more than 26 million meals, but that’s two million meals a year, or only 5,500 meals a day. And it still requires people to go to food banks. Across Canada, only 4% of the surplus edible food is being redistributed to charitable organizations. That means 96% is still being thrown away or turned into animal feed or biofuel.

In Italy, the city of Milan has launched three food-waste hubs. They look like regular grocery stores, but all the food is donated by local businesses and supermarkets, and families in need can use a prepaid card to buy what they need. Between them, the hubs recover 130 tonnes a year, around 260,000 meals, saving 30% of the city’s food waste.

An app from Too Good To Go, a certified B Corporation founded in Copenhagen, now in 17 countries (including Canada), seems very promising. It enables bakeries, grocery stores, restaurants and hotels to put surplus food in a bag, and consumers use an app to pre-pay for a bag at a third of the normal price. In Canada, it has saved 1.4 million meals through 5,000 partners, helped businesses to earn $5.5 million on food that would otherwise have gone to waste, and helped consumers to save $16.3 million on food they would otherwise have had to buy at full price. What would it take for every store to get on board?

5. Promote and adopt a plant-based diet

There are many reasons why we should reduce our consumption of meat and dairy, chief of which is that the livestock industry accounts for 60% of agriculture’s greenhouse gas emissions,  according to a University of Illinois paper. The reason for including it here is that meat is expensive, and a plant-based diet is a good way to reduce your grocery bills (as long as you avoid some of the more trendy plant-based brands).

One analysis found that the savings for a vegan are $4.50 a day, or $1,500 a year, entirely neutralizing the increased cost of food. A Harvard study put the saving at US$750 a year. Around 2.8 million Canadians describe themselves as primarily vegetarian, and 1.7 million as primarily vegan. That leaves 35 million Canadians who could be reducing their grocery bills by adopting a plant-based diet.

6. Stop food profiteering

Canadians for Tax Fairness reports that Loblaws’s markup increased from 32.5% in 2010 to 46.7% in 2022, and profits rose by 10%. “If they had maintained their 2019 markup, that would have saved Canadians almost $900 million,” economist D.T. Cochrane told the Toronto Star. Loblaws has 27% of Canada’s grocery retail market, or some 10 million Canadians, so that’s $90 per customer – or $1.73 a week. The price of two tomatoes. Not exactly a crisis-solver.

Loblaws’s recent quarterly profits also rose by $529 million, which the company says stems from the growth of non-food sales (such as clothing, personal care products and financial services). But even if it came from increased food prices, it’s only a dollar a week for their 10 million customers: half a cucumber. Parliament held hearings last week into possible grocery store profiteering, but I suspect that this may be a red herring ($1.72 for a tiny 3.5-ounce can of herring) as the evidence seems to show that if they have been profiteering, it’s on a very small level.

On the other hand, a report by Oxfam International found that 62 food capitalists became billionaires during the pandemic, amid record profits for the industry titans, whose wealth increased by 42% while global food prices soared by 33%. A small handful of corporations, including Kraft Heinz, General Mills, Conagra, Unilever and Del Monte, control the market share of 80% of the food products we buy, so governments need to cooperate to take a close look at monopolistic collusion in the industry, to find ways to reduce it.

A new Greenpeace report found that globally, 20 of the world’s biggest food corporations reaped such big profits in 2021 and 2022 that they were able to return US$53.5 billion to their shareholders. The United Nations, meanwhile, has recently issued an urgent humanitarian appeal to raise US$51.5 billion to help 222 million people who face acute food insecurity, including 45 million who risk starvation. Something is very rotten in the state of global food capitalism.

Back here in Canada, those of us who can afford the increased cost of food may not be worried. So, remind yourself: almost one in three Canadians are eating less healthy food because of rising costs. If we are to continue to think of ourselves as a caring people, our ministers of agriculture must step up: this is the time for big moves.

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To Waller, a governor of the Federal Reserve that sets U.S. monetary policy, glacial growth is proof that the Fed’s efforts to tame inflation are working. “Our goal is to rein in demand,” he said, noting that the Fed’s higher interest rates had already dampened consumer spending, slowed home sales and shaken up the tight job market. By mid-2022, the labour shortage had driven annual wage growth above 10% for the first time in 40 years.

Canada has shown similar steel as the annual inflation rate jumped from 1% in early 2021 to 8% by mid-2022. The Bank of Canada hiked interest rates seven times last year: a harsh reality for anyone who recently took out a mortgage with a variable interest rate. Yes, high rates halted the red-hot housing market, but with mortgage costs doubling, fewer Canadians can now afford to own their own homes.

In the United States, activist group Accountable.US has labelled the inflation battle a war on workers. “Apparently, millions of Americans likely losing their jobs under further rate hikes is a sacrifice the Fed is willing to make,” noted Accountable.US spokesperson Liz Zelnick in November. The former policy analyst for the Massachusetts Treasurer’s Office blames runaway inflation on companies taking advantage of COVID and supply chain chaos to hike prices way beyond normal levels. Indeed, by mid-2022, U.S. companies’ gross profit margins rose to 15.5%, a 72-year high.

“The Fed’s ill-advised policy only draws attention from the real culprit behind out-of-control costs: corporate greed,” said Zelnick. “Highly profitable corporations have kept raising prices on working families while rewarding wealthy investors with billions in new handouts.”

It’s not just activist groups saying so. In September, a number of speakers took turns accusing businesses of price gouging at a congressional hearing on “corporate influence on inflation.” The best known was former U.S. labour secretary Robert Reich, who said wages have lagged inflation for more than a decade. Reich said businesses are “raising their prices above increases in their costs.”

And those prices stick, he said, because most businesses “face so little competition. Since the 1980s, two-thirds of all American industries have become more concentrated.”

Reich urged Congress to adopt a windfall profits tax – and beef up antitrust enforcement to discourage unnecessary price increases, concluding that “the major effect of interest-rate hikes is to depress wages and eliminate jobs.”

Apparently, millions of Americans likely losing their jobs under further rate hikes is a sacrifice the Fed is willing to make.

-Liz ZelnickAccountable.US spokesperson

Canadians face similar pressures, but the inflation-relief debate is mostly missing. At the Conference Board of Canada, a leading economic policy think tank, chief economist Pedro Antunes says he supports the Bank of Canada’s anti-inflation medicine. He says the central bank reacted too slowly when inflation began creeping above its 2% inflation target in early 2021. “Inflation was eating away at our purchasing power, because there wasn’t enough production to meet demand.” With the central banks using a fiscal firehose to cool things down, Antunes believes the hard part is now over. The Conference Board now forecasts inflation will hit 3.8% in 2023 before settling around 2.2% in 2024.

Antunes is loath to address business profiteering. He says corporate profits are usually a percentage of sales – meaning that if prices are on the rise, you can expect higher profits than normal.

Not so sanguine is Sheila Block, senior economist with the Canadian Centre for Policy Alternatives. She agrees the inflation wave had many drivers – from COVID to Russia’s invasion of Ukraine – but insists that wage costs have not been to blame. She also notes that corporate profits rose from 12.5% of GDP in 2019 to 16.8% in mid-2022 – near their historic highs. She says Canada’s inflation problem stems not from excess consumer demand, but from a “perfect storm” of international issues and business opportunism.

“I don’t think the Bank of Canada is operating on any ill will,” she says, “but its policies are compounding the negative impacts of inflation.”

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The current bout of inflation started with supply-side disruptions. COVID-19 disrupted everything, especially goods originating in China. Climate-worsened droughts disrupted farming. Then Russian President Vladimir Putin went and disrupted Ukraine. Supply chains broke for critical items such as oil, wheat, fertilizer and microprocessors, causing shortages that enabled producers to increase their prices.

Once inflation had started, some businesses took the opportunity to increase their prices, bringing the second cause: profits-push inflation. This is when companies use their market power to boost their prices. Average Canadian profits, which ran at 5 to 10% between 1960 and 2000, rose to 20%, while corporations enjoyed their lowest-ever tax rate.

The third cause of inflation was the increased price of oil that came with the invasion of Ukraine and seeped into many products. The fourth cause was increased mortgage and rental costs. Prices went through the roof when the Bank of Canada printed money in response to the 2008 financial crisis and then the pandemic, distributing it to the banks – combined with historically low interest rates in a relatively rigid housing market.

Conservatives and Republicans like to claim that inflation is caused by increased government spending, but this is true only when a corrupt or incompetent government prints money instead of raising taxes to pay for its cronies or its wars. In normal circumstances, every dollar that a government spends comes either from taxes or from loans in the form of bonds, and in both instances, money is taken out of the economy to pay the taxes or buy the bonds, so there is no impact on aggregate demand (the total demand for all goods and services in an economy).

Money created by central banks, on the other hand, does increase the money supply, risking an increase in aggregate demand and hence inflation, if supply is constrained. During the early days of COVID-19, central banks also used quantitative easing to buy  government bonds, creating money that was distributed as support cheques. They pumped £895 billion (US$1 trillion) into the U.K.’s $3-trillion GDP economy with the explicit purpose of sustaining aggregate demand, and the Bank of Canada did likewise.

The Bank of Canada believes that it needs to cool demand, enabling supply to catch up, and its way of doing this is to increase interest rates, even if it causes a recession, increases unemployment and makes those essential green investments harder. In The Causes of and Responses to Today’s Inflation, however, the economists Joe Stiglitz and Ira Regmi show that there is no excessive aggregate demand in the United States, that real personal consumption has been largely below trend, and that the U.S. is not facing a wage-price spiral. The close linkage between our economies suggests that the same is true in Canada.

Rather than simply watching as central banks raise interest rates, what should governments do, given that those who suffer the most are those who are only just getting by?

1. Increase wealth taxes

Between 2008 and 2022, the world’s central banks gave US$41 trillion in quantitative easing to banks and corporations, which did inflate asset prices in the housing and stock markets, which is where the money ended up. An analysis by the Institute for New Economic Thinking found that increased aggregate demand in the United States is a fifth contributing cause of the current inflation but that 40% of the increased demand is coming from the wealthiest 1% and 75% from the wealthiest 10%, who made immense gains in personal wealth during the pandemic, mostly as a result of this same quantitative easing, and are now busy spending it.

We don’t need to cool general demand; we need to cool demand by the wealthiest 10%. This is best achieved not by raising interest rates but by increasing taxes on those who are already rich, for whom inflation is not a problem. At the same time, governments should encourage more green investment by developing a sustainable activities taxonomy, similar to Europe’s, favouring lending at low interest for critical items such as affordable housing and climate solutions.

2. Impose a windfall profits tax

When Canadian economist Jim Stanford analyzed profits in 52 Canadian business sectors, he found that compared to before the pandemic, the combined after-tax profits of the 15 most profitable sectors had increased by 89%, while profits in all other sectors fell. The big culprits are the oil and gas companies, followed by banks and financial intermediaries, mining, groceries, and home maintenance companies. Together, they took $143 billion out of the pockets of businesses and consumers (4.5% of Canada’s GDP), causing more than half of the current inflation. This then had a knock-on effect, further increasing prices for food and other consumer goods.

The same thing happened in Britain, where corporate profits were 73% higher in 2021 than in 2019, and in the United States, where the quarterly profits of corporations were 50% higher in 2022 than during the eight years before the pandemic.

These businesses have been able to profiteer from inflation because they do not face enough competition. In Canada’s food sector, five supermarket chains control most food distribution, and at least three seized the opportunity to increase their prices. Industry-wide, their average margins are 75% higher and their net incomes are 120% higher than they were before the pandemic.

If companies knew they would be taxed heavily on their windfall profiteering, they would be less likely to do it. Prime Minister Justin Trudeau’s government has promised a 3% surtax on banks with profits greater than $1 billion, and the NDP has called for a 15% tax on larger companies with higher-than-normal profit margins. In the U.S., Bernie Sanders has called for a 95% windfall profits tax. In Portugal, parliament has approved a 33% tax on windfall profits by energy companies and food retailers, and the Czechs are proposing a 60% excess-profits tax on energy companies. The European Union wants to raise 140 billion euros by taxing the windfall earnings of energy companies to help households and businesses pay their massive gas and electricity bills. To stop future profiteering, governments need to use anti-trust regulations to break up oligopolies.

3. End the affordable-housing crisis

Between 2021 and 2022, apartment rents in Canada rose by an average 11%, from $1,676 to almost $2,000 a month. Rental inflation was 37% in London, 30% in Calgary, 19% in Vancouver and 17% in Toronto. In these cities, tenants are paying $600 to $1,000 more every month. In the United States, mortgage costs have risen by 18.8%, rents by 17.6%. For many mortgage-holders, the higher interest rates are really hurting.

I have suggested solutions to the housing crisis here and here, so I won’t repeat myself. Among other things, we need to control the spread of short-term rentals, and we need a massive increase in affordable home-building. Increased interest rates will make this harder.

4. Reduce our dependency on oil

The solution here is to speed up the transition to sustainable transportation. If you drive an electric car, or if you get around by foot, bike or public transit without need for a car, the price of oil has much less impact. The annual increase in the carbon tax, reaching $170 per tonne by 2030, is essential as a persuasive mechanism. The federal government could advance the 2035 ban on the sale of new gasoline vehicles to 2030 and phase out heavy-duty vehicles by 2035, in collaboration with the U.S.

5. Give workers the pay they need to keep up

Once inflation had set in, workers needed wage increases to keep up, and employers who couldn’t find staff offered more pay, contributing a sixth supposed cause: wages-push inflation. Since 2017, prices in Canada have risen by 20%, however, so low- and middle-income workers whose wages have not increased are actually contributing to reduced demand. Central banks often blame the inflation on workers’ wage demands, rather than the five other causes, which is where it belongs.

Nearly two-thirds of Canadian workers’ wages are falling behind the rate of inflation, according to a report by the Canadian Centre for Policy Alternatives (CCPA); the economist Robert Reich has shown that most U.S. the purchasing power of workers’ paycheques is also shrinking. The CCPA report found that public-sector workers’ wages over the past two years grew by less than the rate of inflation. Last year, healthcare and social-assistance workers got 2.1%, educational workers got 1.6%, and public administration workers got only 1.5%. Underpaid workers are actually dampening inflationary pressure, since their lack of income means they consume less. For the lowest-paid workers, this means less food, less heat and more risk of eviction. It can’t be right to seek to tame inflation by placing the burden on those who are least able to carry it.

6. Invest in immigration, childcare and seniors’ care

Canada has a record number of job vacancies, causing employers to increase wages to attract workers. The solution is to expand the labour market, by increasing immigration beyond the current record level of 450,000 a year, including more investments in training opportunities while accelerating the construction of affordable housing and expanding affordable childcare and seniors’ care, enabling more parents and caregivers to return to work.

7. Help low-income families

Businesses can pass their increased costs on, but families can’t. The lower your income, the more you suffer. Canada has doubled the GST rebate for 11 million low-income families and individuals and offered $500 in rent relief. The U.K. is giving £1,200 each to eight million vulnerable families. Italy is paying up to 5,000 euros to help low-income people cope. In Canada, most federal income supports are indexed to inflation, but provincially, while most minimum wages are indexed, most child, seniors’ and social-assistance benefits are not. Only in Quebec are all five major supports for low-income citizens indexed. In Alberta, the Northwest Territories and Nunavut, none are.

Why do central bankers insist on raising interest rates? Is it because their economists have been trained in neoclassical economics, which teaches that the market always knows best and government intervention is to be discouraged? And yet raising interest rates is an intervention. Or is it because raising interest rates happens to bring more profits to bankers and investors, who have the most power, and dump the pain on low-income workers and families, who have the least? There’s a lot to untangle here.

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