As Canada gets ever closer to signing a free trade and labour agreement with the European Union, where free enterprise is alive and well despite a much more comprehensive social net than we have here, I'm piqued by something.
It seems incredible to me that the Conservative Party, the party that wants to reduce government regulations to the point where it's free reign for pollution, product safety standards and resource extraction has a different attitude when it comes to other parts of business. Consider:
Exhibit A: On March 19th of this year, Manulife Insurance dropped the rate on a five year term on a 15 to 25 year mortgage to 2.89% from the then prevailing 3.09%. (Note to American readers -- there are almost no mortgages in Canada that have the same rate for the entire amortization period, you have to reset the rate every six months to five years depending on what term you select, often based on where you think rates might move down the road.)
Within two hours, thanks to a call from Slim Jim Flaherty, the Finance Minister, the rate went back up to 3.09%. He said he would have none of it. Surprisingly the loudest criticism came from the ND's leader Tom Mulcair, a socialist, who said that Flaherty was interfering with the free enterprise system.
Tom was correct and still is. Let's be honest, the posted rate is almost never the final rate. Banks, trust companies, insurance -- they'll compete for your business. Get a good mortgage broker, who gets a percentage from whomever "wins", and you'll find even your home bank bidding against itself. In this situation, the final rate might have been 2.5% or even lower. Is Jim suggesting he should have the right to interfere with this side of the business as well?
Moreover, as long as the rates offered are above the Bank of Canada rate (the rate banks charge each other) and the discount rate (what the government charges on direct loans to banks), is it really the government's business to dictate what we should pay to borrow money? Especially when we have payday loan companies that charge well over 600% per year, way above the legal limit of 60%? (Many states set the cap at 25%, and some provinces -- Ontario not being one of them -- has a limit of 17%).
Exhibit B: On May 16, Telus offered to purchase troubled Mobilicity for a fair chunk of money -- $380 million -- to stop the troubled mobile carrier from going bankrupt. Then on June 4, Christian Paradis blocked the sale saying that Telus violated a five year moratorium on the big telcos buying up smaller players.
That would be fine, except that Mobilicity is on tenterhooks, quite literally. And if it were to go under, a lot of people would lose access to bandwidth. They'd have to go with someone else, hope their phones could get unlocked -- or else face the cost of getting a new phone, a new contract, etc. The five year rule was meant to give the new carriers time to build up a customer base. The Big Three instead have gotten more innovative in pricing and made it more difficult for the new guys to have a chance. Even two of the biggest cable companies, Shaw and Videotron, are going to sell their spectrum without even setting up cell divisions in the first place -- they see no point.
In this case, the company (Mobilicity) should have the right to determine its buyer, even if it's one of the Big Three. It's no different than if I come up with a software that has such a huge market that I need a partner to distribute it. Do I take on the partner, or sell it all together? Or should I be told, no you can't -- you have to fend for yourself even if you're so overwhelmed you have to shut down?
Even more bizarre, the feds have delayed the next spectrum auction, for 5G, until next year. Why? Canadians should be able to get higher speeds and the sooner the better. The new code of conduct should help this, as well as lower prices -- but the kind of attitude that stifles business and consumer choice is contrary to this.
Free enterprise? Hardly.
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