Browse > Home / Archive by category 'Economics'

| Subcribe via RSS



Battle lines are drawn: this is the mother of all fights

By Angela Harbutt
November 10th, 2011 at 10:44 pm | 12 Comments | Posted in Economics, Nannying, Personal Freedom

A huge chunk of the corporate world will be taking a very sharp intake of breath right now as it is announced that Australia is to become the first country to seek to strip private legal companies of their trademarks. 

The Australian government has today effectively passed a bill that will mean from December next year, all cigarettes will be sold in olive green packs, with no trademark brand logos permitted on any packaging. Companies will be able to print their name and the cigarette brand in small, prescribed font on the packets together with stark health warning messages and pictures, which will cover 75% of the front of the pack and 90% of the back.

Tobacco companies have vowed to fight the new legislation in court. And rightly so. Can you imagine Coca Cola allowing the shiny red can and swirly brand name to be removed and replaced by an olive green can, with warnings of addiction and early death plastered all over it, without challenge? Or Cadbury giving up its purple bars of loveliness, or Tanqueray its distinctive green bottles without a fight? No I don’t think so. They would rightly argue that their branding is about product differentiation and brand share, that they have invested millions in their trademarks and will challenge any body – including governments – that seek to take that away.

And whilst once the fast food, confectionery and drinks industry stood as far away from the tobacco industry as they possibly could (with fingers crossed muttering quietly “please not us next, please not us next”). “The times they are a changin”.

Taxation, the original weapon of choice of Governments seeking to discourage tobacco consumption, returns increasingly to the alcohol industry, and  is now the insidious stick with which to beat the food industry (think Danish fat tax).

Nor will it stop at just tax. Where health lobby groups have succeeded with tobacco – so they will follow for alcohol, fast food, chocolate and every other indulgence we enjoy.    We already see that great old anti-smoking chestnut- the cost to the NHS -appearing with increasing frequency …  “the cost of obesity to NHS”  or the “£3bn cost of alocohol to NHS every year” .

So too have the scare tactics – the headlines that  get ever more hysterical … the “obesity pandemic“… “Fatty foods Addictive like Cocaine“… “Binge drinking on the rise” (never mind that according to the governments own statistics, alcohol consumption is actually falling).

We are already see signs of anti-tobacco-style attacks on food distribution ( health lobby groups arguing for a ban on siting of “fast food outlets” near educational facilities) and advertising (Diane Abbott’s criticism of Coca Cola and McDonalds sponsoring the Olympic Games) etc.

So sure as night follows day  it’s only a matter of time before it will become “widely accepted” that many of our pleasures and indulgences are in fact wicked evil addictive substances and that we are not responsible consumers but the” hapless and the exploited” that need protecting for our own sakes.

It’s a tiny step from there to the decision that it’s the branding of the fizzy drink, bottle of booze, bar of chocolate, or burger that’s the problem – and stripping away the trademark, packaging design and strap line – is not just desirable but necessary.

And whereas now we have politicians stating “If this legislation stops one young (Australian) from picking up a shiny, coloured packet and prevents them becoming addicted to cigarettes then in my view it will have been worthwhile,” we we soon hear them saying this instead…

If this legislation stops one young (Australian) from picking up a shiny, red tin of Coca Cola  and prevents them becoming addicted to fizzy drinks then in my view it will have been worthwhile” .

And the consequences of travelling blindly down this health evangelist’s path will be brands competing on price, not quality, not health; a duller, less imaginative and exciting world; counterfeiting criminal gangs having a field day; and we the people accepting that we know nothing about anything and that “Government knows best”. When we all have Soviet style cola rationed to us by our “benign” governments we can all praise them and thank them for saving us from ourselves.

I am sure that we all ate more vegetables in the Middle Ages -and probably in Soviet Russia too-  they are just not ages I want to return to, nor regimes I wish to live under. There is an alternative. We can say NO MORE. This is a line in the that has been crossed…Companies have rights. People’s pensions and life-savings are tied up in these companies and their brands. Trademarks can’t be dismissed on a whim.  Intellectual Property Rights can’t be casually cast aside.  And perhaps most importantly …We are adults – not children. And we whilst we say yes to informed choice, education, and help to those who want it…we say no state control.

THIS is a battle that we cannot allow tobacco to lose.

Tags: , , , , , , ,
'

Of God And Socialism

By Leslie Clark
November 2nd, 2011 at 6:21 pm | 6 Comments | Posted in Economics, The Human Condition

In the spirit of Christian harmony, the Archbishop of Canterbury has joined the Pope in publicly stating his support for a ‘Robin Hood Tax’. This is perhaps a curious development given the plush residence and sartorial garments of the latter whilst the former leads an organisation once described as ‘the Tory Party at prayer’. I digress.

The Archbishop’s intervention is very much in response to the continued presence of those incoherent trustafarians outside St. Paul’s and the upcoming G20 summit in Cannes.

In his FT (£) article he claims that “many people are frustrated beyond measure at what they see as the disastrous effects of global capitalism…” Of course, I acknowledge that the Archbishop isn’t calling for the downfall of capitalism a la Karl Marx but the notion that an ethical and moral interest in the financial world stipulates greater government intervention or taxation is wide of the mark.

Indeed, one shares the sentiments of those who bemoan the privatisation of profits and the nationalisation of losses (crony capitalism if you like) but the idea behind the financial transaction tax – “Robin Hood Taxes would take from the richest in society and give it to those who need it” – is economically illiterate. It is built on shaky foundations as the wealth of the rich in society is not derived by exploiting the poor.  Although capitalism may not leave individuals perfectly equal, it is perfectly moral. Indeed, some may say that it is the most impressive anti-poverty device ever created – despite what Oxfam contend.

Supporters of the Robin Hood Tax must understand the absurdity of George Osborne declaring Unilateral Financial Disarmament in the absence of a global agreement. All that would do is place the UK banking sector at a competitive disadvantage for the sake of indulging in populist attacks on bankers. And anyway, such a tax will simply be transferred to the consumer.

In a period of entrenched hostility towards capitalism, only the foolish would neglect the tremendous amount of good generated by capitalism. It is the only economic system that maintains individual liberty whilst at the same time raising living standards. The system may be driven by self-interest but as Adam Smith says in The Theory of Moral Sentiments, that does not negate the empathetic qualities of the individual:

How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.

Maybe those Christians who believe in the morality of capitalism can take comfort in that as well as the old saying, ‘there are only two places on Earth where socialism can work; in Heaven where they don’t need it and in Hell where they already have it’.

Leslie Clark is an atheist.

In a society of saints

By Tom Papworth
October 25th, 2011 at 11:05 am | Comments Off on In a society of saints | Posted in Economics

Over at the Adam Smith Institute, Dr. Eamonn Butler has a review of Tom Palmer’s new book, The Morality of Capitalism. Summarising one chapter, Dr. Butler explains that

The Chinese economist Mao Yushi [presents] an interesting paradox. If we were all completely benevolent – looking out for the interests of other people rather than ourselves – we would have just as much conflict as capitalism is said to give us. We would be fighting shopkeepers to charge us more and reduce their quality. The arguments would be just as red in tooth and claw, but the incentives would all be to reduce value rather than to create and increase it, as capitalism does.

Perhaps. But managing conflicting priorities is not the only reason that we need a capitalist system; nor does the existence of a conflict in a community motivated by other-interest suffice to justify capitalism. A deeper understanding of the role of markets is required.

To read the rest of this article, and to comment, visit the Adam Smith Institute website.

"Lord! Tell us how to allocate resources amongst the various second and third order productive processes in a rational manner, for only you have the ability to synthesise dispersed knowledge without the signals provided by market-prices!"

Tories call on David Brent to save the UK economy

By Tom Papworth
July 27th, 2011 at 8:12 am | Comments Off on Tories call on David Brent to save the UK economy | Posted in Book Review, coalition, Conservatives, Debt, Economics, Liberal Democrats, Liberal Philosophy

Politics makes strange bedfellows; coalitions especially. In the 1970s the Liberals made a pact with socialists despite socialism being the antithesis of liberalism; in 2010 the coalition finds us in bed with Conservatives despite the Tories opposing liberalism for centuries.

Coalitions therefore require us to remind the voters how we differ from the parties with which we are aligned in government. This week a new report from the Conservative-leaning think tank Civitas reminds us of one crucial difference: the Tories have always opposed free trade.

Reviving British Manufacturing: Why? What? How? appears to be a throw-back to a former time, when the Tories banned wheat imports to protect the interests of their landed backers. Between fawning praise for Margaret Thatcher (“No one doubts Mrs Thatcher’s commitment to a market economy, [Er… Yes they do – Ed] but she was no market fundamentalist and her pragmatic patriotism is often forgotten“) Civitas suggest that the UK should indulge in one of the most fundamental economic blind-alleys in the Handbook of Bad Government: protectionism.

The reason that Civitas cite for this bizarre and dangerous policy is the UK’s balance of trade deficit, which measures the net flow of payments for goods and services into/out of an economy. Civitas argues that “We already have a balance of payments problem… With the annual trade deficit in goods now at a new record of £97.2 billion… only radical Government action will prevent Britain’s permanent decline as an industrial society“.

In fact, they later admit that the real trade deficit is £46.2 billion, but that they are choosing to ignore the trade-surplus from services. This is an absurd confidence trick, which ignores the fact that the UK’s comparative advantage is in services (Yes, even financial services! – try to contain your disgust). This attempt to make us focus only on one part of the economy is risible: I suspect that if one ignored manufacturing and focussed solely on services one could argue that China is running a trade deficit; if so, the politburo do not appear too bothered.

Even accepting that there is a trade deficit, this does not matter. As Milton Friedman noted, £100 billion is only of use to foreigners because it enables them to buy £100 billion worth of British goods. The pounds themselves are useless to them: “they cannot eat them, wear them, or live in them. If they were willing simply to hold them, then the printing industry – printing [pounds] – would be a magnificent export industry… [that] would enable us all to have the good things in life provided nearly free by the” nations foolish enough to swap perfectly good goods and services for paper adorned with the Queen’s face.

In fact, many foreign nations seem quite prepared to do that, and worse: they then lend the money back to the UK. This has created twin problems: on the one hand, it enabled us to buy even more of the good things in life (such as the public services spending splurge from 2001 to 2010), but only by borrowing against our future and that of our children. Secondly, it kept our currency high and theirs low, thus making our exports less competitive and theirs more attractive, and so exacerbating the balance of trade problem.

The solution, one might therefore think, is to stop borrowing the money. If they can’t lend it to us, they will have to spend it in the UK, and so we will achieve equilibrium in our balance of trade (but with a weaker pound). However, if you are a Tory think tank, there is an alternative: protectionism.

“the Government should encourage an increase in manufacturing output by about £10 billion per year”, the report argues, (why not £11 billion? 12 billion? What’s so special about £10 billion?), but crucially, this should not be done through promoting exports (itself dodgy, but now is not the time), but by import substitution: “exporting is costly… in the short run … it will be much easier to focus on the home market and out-compete importers.”

Import substitution is economic madness: not even Labour recommends this sort of thing anymore. It completely ignores the Law of Comparative Advantage(aka. the Ricardian Law of Association) and indeed undermines the whole basis of trade, which is specialisation and the division of labour.

And what are the four industries that Civitas wants the UK to specialise in over the next few years? Where should we focus our efforts, expanding domestic supply by throwing up walls to prevent cheap foreign imports?

In a companion essay, Civitas cite four particular industries that might not strike the average reader as particularly promising: Paper; Glass; Steel and Motor Vehicles. Admittedly, we have some good companies operating in each of these industries, but the idea that Wernham–Hogg paper merchants will become engines of the British economy is hopelessly naive.

Add to this the suggestion that Britain should establish a “Ministry for Economic Growth, focused purely on reducing the trade deficit through increasing production” (where to begin with this one?) and a tacked-on side-swipe at the European Union and you have a classic piece of Tory wonkery.

In 1962 Milton Friedman argued that “It is not too much to say that the most serious short-run threat to economic freedom… is that we shall be led to adopt far-reaching economic controls in order to ‘solve’ balance of payments problems. Interferences in international trade can seem innocuous: they can get the support of people who are otherwise apprehensive of interference of government into economic affairs… yet there are few interferences which are capable of spreading so far and ultimately being so destructive of free enterprise.”

Tags:

Greece Is The Word

By Leslie Clark
June 24th, 2011 at 10:31 pm | 3 Comments | Posted in Economics, EU Politics

How to solve a problem like Greece? Former queen of daytime chat Fern Britton was flummoxed on the BBC’s Question Time on Thursday night. And like David Mitchell, I don’t really know either. However, on the wider issue of the durability and endurance of the European Single Currency – and to evoke that quote widely attributed to Mark Twain – some obituaries are prematurely written. Even as early as the turn of the Millennium, the late Milton Friedman prophesied its demise.

But claims of the Euro’s death have been greatly exaggerated. The current membership may change slightly with the most damaged economies perhaps opting to revert to their former national currencies, or in another scenario we could see the emergence of two monetary unions: a ‘Debtor €’ comprising the Med countries and a ‘Creditor €’ including Germany and other low-inflation states.

Personally, I’ve felt largely ambivalent on Euro membership. The fanatics for and against frequently bore me and the whole debate is couched using hyperbolic language. Nonetheless, I don’t think the Euro per se is intrinsically flawed or irredeemable. In the case of Greece, Europe would have been a lot better off if it had stuck rigidly to the rules set out at Maastricht, thus avoiding premature or inclusive membership.

Greece consistently breached the 3% deficit limit even prior to the current crisis and went unpunished despite the legal duty to comply with convergence criteria. Their unreformed public sector and high and unstable rates of inflation should have raised eyebrows prior to Eurozone accession. It is widely recognised that they were economical with the actualité and massaged the figures in order to meet entry requirements, something acknowledged by the former ECB Chief Economist Otmar Issing:

When I worked for the ECB, I suffered every time countries didn’t meet the criteria. Greece cheated to get in, and it’s difficult to know how we should deal with cheaters…There should have been better monitoring, better scrutiny and more sanctioning. This crisis wasn’t unavoidable.”

As in any other private members club, individuals are obliged to abide by the rules. Accepting EMU rules, devaluation or inflationary monetary policy were no longer avenues the Greeks could go down. They did nothing to lower their public debt but instead went on a spending binge. It does not seem fair or just that taxpayers’ money is being moved from countries who stuck (by and large) to the respective criteria to those who did not.

European leaders should not use the Greek crisis purely as a catalyst for more integration which would only further embitter sceptical national populations but rather to end the slack monitoring of the fundamental rules of the club.

Other Member States should not end up with a hangover for a party they did not attend.