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Crying Over Milk

By Editor
August 8th, 2015 at 11:50 am | No Comments | Posted in Economics

A reminder that this year’s milk price crisis is principally the result of the ending of previous market rigging. Harsh as it is on the dairy farmers, there are simply too many of them producing too much milk, too expensively, in relation to demand for milk from consumers. They are not inefficient, or at least most are not. There are just too many.

A ‘consumer’ campaign to raise prices, in that regard, is pointless. The idea behind it is that retailers, their margins protected would then pay local farmers more. That is unlikely other than on premium speciality products that already command higher prices. Principally retailers would just enjoy higher profits. Competition for the provision of milk from across the EU would remain unchanged.

There’s no reason to think that combatting that with a ‘buy British’ or ‘save our farmers’ campaign would be any more successful for milk than any of the other attempts for similar products. Do you care if the cod in your fish finger was caught by a British trawler?

It could additionally turn nasty with retailers and importers being bullied, a tactic familiar to the agricultural sector in France. Some of the MP and candidate tactics clearing shelves in shops at the moment, are some distance from les moutons enflammé. But the principle is the same, to intimidate free trade into submission. Bugger the customers. It is largely criminal and nasty producer racketeering, not a glorious expression of public concern.

What has to happen, and is going to happen, is that a large number of dairy farms need to close or consolidate. That is going to be very brutal and unpleasant for the failed businesses, but it is no kindness to pretend otherwise with ‘look at me I’m campaigning’ faux-empathy.

Nor is it any worse for farmers than any other changing industry. Bar the exception that European Governments, including our own, have made the transition more jarring than it needed to be by rigging the market for so long. Something familiar to former miners, dockers, and soon postal workers. Thanks politicians… good job.

Politicians today then might then consider more emphasis on the transition support for those leaving the market. And a little less histrionic poujadism, which will leave those who will need to get out far less ready to change. Beware of politicians bearing campaigns. They are not always your friends.

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Public policy failure

By Alex Chatham
June 19th, 2015 at 2:30 pm | No Comments | Posted in Economics, Public Sector Reform

Lord Bob Kerslake, the author of a report in housing in London, has said that the failure to build enough homes “has been the biggest public policy failure of the past 50 years”. It is refreshing to hear someone admit that public policy can fail. Normally, commentators and policymakers talk about market failure. This is normally a cue to proposal State intervention. Lord Kerslake appears to be thinking along these lines, which is a shame. It would be better to admit that public policy has failed and that it is time to let the market function properly.

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The Uber free market

By Alex Chatham
May 28th, 2015 at 2:30 pm | No Comments | Posted in Conservatives, Economics, freedom, Nannying

For some in the Conservative party, Boris Johnson is the libertarian saviour waiting in the wings to take power and reshape Britain. After all, the London Mayor recently told licenced Black Cab drivers that they had to accept the success of Uber because that is how a free market works. Liberals should applaud this championing of the market. For those who don’t much like markets, remember people collectively send price signals that tells suppliers what is and isn’t wanted.

Odd then that the same Boris Johnson has decided to put a cap on how many mini cabs operate in London. He has decided, no doubt based on expert advice, that we have too many. It might be worth reminding Boris that this is a free market and it is the people who should decide how many cabs offer their services to Londoners.

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Barlow Is Not To Blame!

By Sara Scarlett
May 13th, 2014 at 11:35 am | No Comments | Posted in Economics, Tax, UK Politics

I can’t quite get my head around the outrage over the Gary Barlow tax avoidance (note: not tax evasion) story. Margaret Hodge MP has actually suggested that he should give back his OBE! What a joke!

Let us be under no illusions. Loopholes exist because politicians put them there. Holes in the tax code are created by politicians and politicians alone. Politicians are fully responsible for them and could get rid of them if they wanted to.

For politicians to heap all the blame on Barlow is incredulous. The thing about loopholes is this: why would anyone pay more tax than the tax code says they are legally obliged to? Shouldn’t we be more outraged by the politicians who have been poking holes in the tax code for years? The more complex and convoluted the tax code becomes the more it becomes a Swiss Cheese that is easy for the rich to navigate – they can afford expensive accountants – but a nightmare for individuals and small companies.

The outrage directed at Barlow is a very sad thing because it is a distraction from a proper discussion about tax code reform and the people who are responsible for the disastrous state the tax code is in.

If Baristas Were Like the RMT…

By Sara Scarlett
March 14th, 2014 at 11:23 am | No Comments | Posted in Economics

Mark Steel fundamentally fails to understand how competition works, or in that regard where Bob Crow got his power from – the absence of competition in London for fast travel.

Suppose as Mark wishes the Pret-A-Manger and Starbucks baristas organised like the RMT, shutting down their respective chains on the public grounds that the steamed milk dispensers represented a serious health and safety threat to their members, while negotiating behind the scenes for more pay and pensions. Their employers might give in from time to time, and wages would rise.

Their employers would also stop investing in new shops. Practically because free cash was now going into current staff benefits and pragmatically as their London outfits were now less cost effective than stores elsewhere. Why invest in jobs in London if you can make better returns for shareholders investing in Birmingham or France? Prices in turn, in London would rise, leading to customer defections to Costa Coffee and Eat. That is those customers prepared to remain loyal despite the shops being closed for large parts of the year.

In time there would closures and headcount reductions. Presumably followed by more strikes and vocal denunciations of the boss class on the BBC. Campaigns would be launched urging consumers to pay more for their coffee and sandwiches in solidarity with staff already earning 2-3 times what they do. The campaigns would be ignored. Labour MPs would claim the Government has betrayed the barista community leading to the destruction of a once great British service industry.

On the Underground meanwhile none of these levers are available. Buses are not a practical alternative for many routes, nor do they have capacity to cope with the increase in trade during a network strike. Cars and taxis are even less useful, the conflation of all three leading to gridlock. In the long-run automation is an alternative to over-paid staff.

Bob Crow’s success then was to note the power imbalance between tube workers and their customers and extract rent from them for as long as possible before the inevitable, much like a mafia boss pending the end of prohibition.

That model happily cannot work in many areas of life, not even many public services, where alternatives can exist. What does work is what most of the working world has which is the free movement of labour from bad employers to good, and the facility to be rewarded for the effort you make using the skills you have, through negotiation and reason, and without strife.