January 19, 2016

How the CBC hurts private businesses

Suppose the federal government established its own fast food chain – let's call it Federal Hamburgers. Food prices are on the rise, argues the government, and many Canadians are having trouble accessing high quality food – hence the need for a public fast food chain.

Federal Hamburgers offers hamburgers to customers for free; the government pays for this by hiking taxes. What will be the effect on other fast food chains, like McDonald's, Harvey's, and Burger King?

Not only would they (along with the rest of taxpayers) be forced to pay higher taxes to fund Federal Hamburgers, but these fast food chains would be unable to compete with Federal Hamburgers. They would begin losing money and eventually go out of business.

This is exactly what is happening with the CBC and private media outlets. The analogy is imperfect – hamburgers are further than broadcasting to meeting the definition of a public good – but the concept is the same. The government, by providing a service, is taking away a business opportunity for private companies (economists call this the crowding-out effect). The result of a public broadcaster is the accelerated death of private media companies.

No doubt newspapers are failing in part because people are going online for news. But the CBC is accelerating the decline, and private media will only sink faster as the Liberal government hands more and more money to the CBC. (Even worse, some people may believe the decline of private media is a justification for more spending on public media, and ignore that spending on public media crowds out private media businesses).

I'll leave you with this Twitter essay from Maclean's magazine's Scott Gilmore:

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