WILLIAM WATSON: WHISKY, TOBACCO, BUTTER AND LIBERAL CAPABILITIES
As spring clicks over into summer, some green shoots in search of a column:
Whisky worth its weight in butter: More than 1,000 cases of Crown Royal were lifted from an 18-wheeler in Ontario last month. The wholesale loss was more than $100,000 but what caught many people’s eye is that the shipment’s retail value was estimated at $500,000. A 400 per cent mark-up is a nice business to be in. Maybe we should let Amazon into the liquor business. It manages with much lower margins.
Most of the mark-up is tax, of course. Thus does government increase the incentive to steal. The thieves won’t get the full $500K. They’ve got to undercut government liquor stores at least somewhat. But if Crown Royal cost a fifth what it does, it wouldn’t be such an attractive target for theft. The same with cigarettes, another product made artificially expensive by government policy. Butter, too. Yes, people have been hijacking butter lately. Also maple syrup, as last year’s Amazon Prime series, The Sticky , dramatized. Quebec’s supply management of maple syrup creates stockpiles as big as the mark-ups, ripe for hijacking.
Credit where credit is due: Kudos to the Liberals for deciding to reach our NATO commitment to spend two per cent of GDP on defence, not in five years, but by next March. It’s about time we honoured our international commitments in something other than climate. Our allies certainly think so.
And if you want a rapid increase in spending with no accounting for its budgetary effects until most of the money is out the door, we’ve elected the right people. This Liberal generation has been spendthrift in ways its Chrétien-Martin predecessor was not. Conservatives have had their fingers crossed that Mark Carney will be a throwback to that earlier, tighter-fisted generation of Liberal. Fingers crossed for tighter fists can be painful, but we live in hope.
Not to grumble now that the government is doing the right thing, but spending lots of money really fast, as it’s about to do, seldom brings good results. Think COVID. Perhaps that might have been discussed in the election campaign had the Liberals mentioned they planned to bring the target forward five years.
Smart shoppers don’t target percentages: Basic economics says you shouldn’t actually allocate arbitrary percentages of your income to different purposes. Instead, you weigh costs and benefits. The way the world has changed over the past decade means that even after we get to two per cent, the benefit of the next dollar spent on defence will still be high, not to mention higher than the benefit from spending it on whatever the next best purpose is, public or private. But will that still be true at five per cent, which is where some in NATO want to go? Not even the U.S. is near five per cent, though it’s pushing hard for its allies to get there — before itself exiting the organization. Would 3.5 be optimal? Let’s get to 2.5 and reassess.
What you buy with the money is also important, of course. With drones swarming through the skies and over and even under the oceans, the big sitting targets that dominated Cold War militaries no longer look so awesome — even if buying them is a way of spending money fast.
Costs are not benefits: Getting to two per cent is not actually the goal, of course. The Russians and others we wish to deter don’t fear balance sheets. What counts is not how much we spend but how much military stuff we have, how many skilled people we have to use it, and how strong our mettle and resolve are. At best, hitting spending targets is a way of signalling determination. If we can’t even do that, how tough will we be in actual combat?
Costs not being benefits is important in other areas, too. Yes, if we go gung-ho on infrastructure, that will employ lots of construction workers. But that’s a cost of the projects, not a benefit. Those workers could be doing something else. We give up that something else by going for infrastructure instead. It better have less value than the infrastructure.
A clear danger in quickly ramping up infrastructure spending across the country is that construction costs rise, creating bottlenecks, especially if policy impedes the rapid entry of new workers to the industry. That’s good for current construction workers but bad for the country.
Take the cap off ability: This point isn’t actually economics but for economy of language: With the government emphasizing defence, Ottawa will have a second buzzword to go along with “catalyst,” namely, “capability.” Defence people love talking about capabilities. “We don’t have that capability yet. But we need that capability.” Mostly when people say “capability” they mean “ability.” The first definition of “capability,” when you look it up, is “ability.” Having the capability to do something just means having the ability to do it. Not having the capability means not having the ability. Why not just stick with ability? Be tight-fisted: save three letters every time we express that thought.
But you know what’s coming, don’t you? An Ottawa focused on “catalytic capability.”
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2025-06-12T10:15:37Z