HERI Committee Report
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APPENDIX G
Books are cultural artifacts. But they are also products that are made and sold like many other products. Because it is often difficult -- some would say impossible -- to disentangle the cultural and commercial dimensions of books, discussions of the book industry often run at cross-purposes. This Appendix tries to clear up the discussion by temporarily setting aside the cultural side of books and examining the purely economic influences on the industry.
The demand for books and hence the size of the market depend on several factors. The average age and level of education of the population are important factors, but these are primarily demographic factors which take time to change; income and relative prices are the classic economic influences, and these can change in the short run.
Charts 1 and 2 show movements in two income series: real Gross Domestic Product (that is, GDP after removing the influence of price changes) and real disposable income per capita (that is, total real personal income after removing income taxes and other non-discretionary deductions divided by the population), from 1980 to 1998.
Both charts show the adverse pressures put on booksellers since the late 1980s. Chart 1 shows the recession that began at that time and took several years for a recovery in the broad income measure of real GDP. Chart 2 shows a potentially negative influence on book sales because per capita real disposable income fell from the end of the 1980s and, despite an increase in recent years, has yet to recover to its 1989 peak.
The other negative economic influence on the demand for books has been movements in relative prices (that is, the price of books relative to the price of alternative purchases of goods or services). Probably the most notable influence on the relative price of books has been the introduction of the Goods and Services Tax in January 1991. With a few exceptions, the most significant being food, the GST was put on almost all goods and services purchased by Canadians. Books thus lost the tax-free status they had long enjoyed.
As almost all booksellers in Canada offer non-Canadian books, the movement of exchange rates, especially that for the U.S. dollar, is an important influence on relative book prices. Since 1991, the Canadian dollar has depreciated with respect to the U.S. dollar, making books imported from the U.S. more expensive; in 1991, one Canadian dollar bought 87 cents (U.S.); in 1998, one dollar bought only 67.5 cents.