Saturday, 26 November 2011

The March of the Bastards

Another day, another bastard corporation tries to fuck people over. This time, Unilever, SABMiller and Nestle (surprise, surprise) are hawking their uber-advertised, non-nutritious shite to the developing world - to countries that are yet to deal with malnutrition and starvation. Clearly, for the good of the people in those countries.....

This story, I think, raises two points. First, the structure that exists within most major corporations neccessitates not looking out for the interests of humanity. Within most major companies the existence of short-term stockholders means the companies have to ensure good profits each quarter (every 12 weeks!) in order to avoid capital flight. This structural pressure from the stockholders forces a continual short-termism, which promotes, well, basically, finding different ways to screw people. These companies should not be trusted - particularly by governments entering in to "responsibility" deals or whatever the fuck they're called. The companies should be pilloried for their craven self-interest and bastardly ways in the short-term and the system should be reformed in the long-run.

Second, while we decry the use of propaganda in Nazi Germany or the Soviet Union and claim its great effectiveness at "brainwashing" the population, the Western world remains entirely blind to the continual churning of propaganda from corporate machines. These companies manufacture markets, they create desires that satisfy the interests of corporations themselves and not of the people. In this particular case, they are promoting wants over needs and seriously fucking both people and countries over. Advertising will be the fucking death of us.

Sunday, 6 November 2011

Advertising, Coke and the Politics of Food

After walking back from the local shops and thinking about how the cost of a "free" plastic bag must be covered by greater (if only marginally) costs in the shop as a whole, I decided to look around the web for some numbers on how much companies spend on advertising; figuring that the costs of advertising must eventually be born by the consumer (i.e. we indirectly pay to get advertised to). In particular, since generic brands are so much cheaper, I was looking for figures on Coca Cola. It turns out that in 2006, on revenues of $24 billion, a full $2.5 billion was spent on advertising by Coca Cola. Very roughly speaking, then, 10 cents of every $1 spent on a Coca Cola product goes on paying for the advertising that was meant to persuade you to buy the product in the first place. Frankly, I'd prefer to make up my own mind and pay less, but ho hum.

There are wider consequences to the average consumer paying for advertising. The majority of media services are heavily reliant on advertising revenue, even to the extent that they are willing to offer content for "free". So services that we consider "free" - Google, Facebook, Blogger - are indirectly funded by the average consumer buying advertised products - the products have a premium price that allows the companies to spend money on advertising that then funds companies offering free services. Basically, "free" services are paid for by us spending money that indirectly fund campaigns that are meant to persuade us to buy more products. "Free" products, and the majority of the internet, then, is the outgrowth of relentless (and non-socially-productive) mass consumerism, which is kinda depressing for anyone who laments the increasing consumerisation of the world but uses these services.

Anyhow, in the process of looking for this information I came across this website, which deals with the politics of food - - seems well worth a look for anyone interested.

Thursday, 13 October 2011

The National Diet: Fat Wallets and Fat People

Along with a whole host of other disturbing announcements that have been coming from the Coalition government recently, Health Secretary Andrew Lansley has put Britain on a diet. A 5 billion calorie a day diet. This announcement follows Denmark introducing the world's first-ever fat tax. However, unlike the fat tax, which is a clear policy that uses basic economic assumptions to disincentivise the purchase of foods high in saturated fat, Britain's diet (like so many individual diets) is a "ambition". Better still, it is an ambition that will be fulfilled with the help of food and drink companies in a "responsibility deal". That is, a voluntary deal.

Why is it these companies are viewed as benign partners in the war on obesity by ideologues whose entire philosophy is based on self-interest? It is fundamentally contradictory - these companies spend countless billions of pounds promoting their unhealthy foods and their entire business model is premised upon making people fat. They have no incentive to change the current system where both their wallets, and the British people, get fat. They have no incentive to provide and promote food that actually matches the needs of our increasingly sedentary lives. They have the exact opposite incentives, which gives us two choices: either change the incentive structures through taxation, or change the structure of the organisations through strict regulation - the time for gentlemanly agreements with the promoters of crap food is over.

Once again we see craven, gutless politicians unable and unwilling to hurt the corporate bottom line; even when the corporate bottom line is hurting us.

Wednesday, 28 September 2011

50p Tax and Competitiveness

The current Tory-led coalition government, alongside economists, is currently pushing for a reduction in the highest bracket of income tax. Their argument is plain: the 50p income tax rate curtails growth because it works as a disincentive to entrepenuers, investors and talented workers, who would, consequentally, go abroad.

Frankly, their argument is little more than ideological cant and only engages with problems to the extent that solutions are ignored. Thus, I would like to present three points that covers a few of the basic errors in their view.

First, there is no consensus among economists (that is, academic economists) about the optimal tax rate, which is what, when we get down to it, we're actually talking about. The optimal tax rate, which is often explained by way of the Laffer Curve, is the highest tax rate that doesn't work to disincentivise investment, production and, well, work. The problem is that no-one knows quite at what point people become disincentivised (the highest point on the Laffer Curve.) Politicians and economists like to claim that it is lower than where we currently are, but studies vastly disagree and many point to an assymetric Laffer Curve with a optimal tax rate of 70% (although, mostly, it should be pointed out that work on finding the optimal tax rate is riddled with problems.)

Second, decisions to invest or to continue living in a country are, or at least I hope they are, not based solely on tax rates. Even if we were uncompetitve internationally (which we're not) there are many reasons why people would choose to invest or work in Britain. The motivations of people, like people, are quite diverse and not based solely on financial well-being. It may work as a disincentive, but we've got plenty of incentives so that it won't "wreck the economy."

Final point - and it's an important one - is that there are already systems that tax citizens regardless of which country they live in; it does not matter if people choose to go abroad. In particular, the US uses such a system. That's right - the system that many who oppose the 50p tax would like to see us emulate, has the solution. So, the threat to "go abroad" could easily be neutralised by policy change.

So, to sum up, even within economic thinking no-one really knows if a 50p tax rate hurts an economy by disincentising the population, non-monetary incentives exist and, in line with already existing policies around the world, it is an option to tax citizens regardless of state residence. The argument, then, for reducing the 50p tax rate has little foundation, but, in contrast, the argument for keeping the 50p tax rate, maybe even increasing it, is well founded.

Sunday, 18 September 2011

How the Political Focus on GDP Growth is Harming Society

It has long been held, in an unqualified manner, that economic growth is good. That is to say, that increases in Gross Domestic Product (GDP) - which is the aggregated market value of all the final goods produced/sold in a country during a year - are beneficial to society. As such, increases in GDP have become a central goal of political action, and decreases in GDP are seen as signs that an earlier policy was harmful. The logic has some merit to it: increases in GDP equate to increases in the economic activity in a country, if there is greater economic activity there are more jobs and more products, people are thus materially wealthier and there is more work for the unemployed - society is better off.

However, the focus on GDP growth and the logic supporting it is mistaken on several counts. Firstly, GDP was never intended as a measure of the good of society. Indeed, it's inventor, Simon Kuznets, on presenting GDP to the US Congress said that "the welfare of a nation can scarcely be inferred from a measurement of national income." To do so is to reduce the good of society to purely economic, market measures.

Secondly, as a consequence of the first point, that which is outside the market (i.e. not sold) is not considered. Instead, many things which are beneficial to society are not included. So, informal childcare arrangements, family housecare, home-made/grown produce, neighbourhood watches, charity support groups, sports teams, youth groups, etc are not included; are not, by users of the metric, counted as beneficial to society. Equally, many things that are harmful to society - crime, inequality, environmental damage, etc - are also not included in GDP. For example, an increase in GDP could be caused by a few people (say, bankers) getting significantly richer, rather than a more general increase in the welfare of society. Put together, increases in GDP could accompany a reduction in non-market factors that are beneficial to society and an increase in non-market factors that are harmful to society - GDP simply does not reflect them.

Thirdly, GDP growth does not necessarily equate to an increased numbers of jobs. GDP can be increased, without accompanying job growth, by increases in productivity or by the increased production of an expensive primary resource or service. Equally, GDP can decrease while the number of jobs goes up by movements from the production of high-market-value  products to low-value products (such as a company switching from financial services advice to growing potatoes.)

The essential point, then, is that GDP is not a measure of the welfare of society, nor is it a proxy measure. In itself, this point does not matter. However, that GDP growth is a central goal of political action means that the weaknesses of GDP have real world consequences, in that by promoting GDP growth negative outcomes can be encouraged. For example, in Canada the tar sands projects, which are destroying and degrading large areas of Canada and its environment, account for about 2% of national GDP. So, according to the "growth is good" mantra and in spite of any serious lasting damage the projects are doing, the tar sands exploitation equate to an improvement of the national well-being.

If we continue to follow this "GDP fetish", then environmental restrictions, consumer protections, mandatory safety features - regulations that can improve societal welfare - will  persist in being seen as costing GDP growth and thus as harming society, and activites that harm society will carry on to be seen as beneficial. What we will continue to do, then, is to set the cart before the horse - to favour "growth" over genuine progress.

Saturday, 17 September 2011

The Free Market Illusion

In Anglo-Saxon politics there are continued calls to "free" the market from government regulation, particularly in the US. Such moves are intellectually validated by right-wing thinktanks and economists, some of who believe in a free market to such an extent they even cheer when companies shut down; celebrating the creative destruction of the market. According to this diverse mix of rich white men, "red tape" unnecessarily limits the opportunities for business expansion and, as such, economic growth.

However, the argument is false as the free market does not, and can not, exist; the concept is an illusion often used to justify a rampant and destructive form of capitalism. The reason the concept is illusionary, as Ha-Joon Chang (Thing 1) states, is that "the "freedom" of a market is, like beauty, in the eye of the beholder." Put another way, regulations that people agree go unnoticed and so are not regarded as limitations on the markets, whereas regulations that people disagree with are noticed and thus labelled as restrictions on the market. Hence, arguments for the free market are merely utilising an illusion in order to justify one's own political beliefs.

Take private property rights in their current formulation for example. These could be seen as restrictions on the market as if the government instead understood land as communally-owned (as was the case historically) then businesses would, arguably, be freer to utilise a wide array of resources than in the current system, where land is privately-owned and limited to the uses of the owner. Current private property rights are also restrictions on the market in that they decide what counts as property. So, for example, it could be seen as a limitation of the free market in that businesses may not own slaves; that people do not count as property.

Government also limits what transactions are allowed to take place and what services can be offered. So, bribery, assassination or heroin-dealing, for example, could all be legalised if we were to free the market and harness the full wealth-creating powers of the market. Likewise, child labour laws and minimum wage laws place limitations on the market that limit the opportunites for business expansion and increased economic activity.

Interestingly, proponents of the "free market" are yet to express a desire to re-intoduce slavery, legalise assassination, bribery and drug dealing, and allow children to work for pittance wages. The reason for this oversight is that these limitations are not considered limitations at all because they agree with the need for these regulations and so do not notice the continued operation of these laws. On the other hand, environmental protection and health and safety laws (which, frankly, if you go into the history of, are very much justified - just think Victorian work houses) are considered limitations on the free market....because free marketeers simply disagree with such restrictions.

Extending the logic, it would appear that any law or regulation that the government passes can be considered a restriction the free market. As such, a "free" market requires no government and no law - to free the market, one must destroy the state, law and authority. Once anarchy is achieved, then business will be free to pollute, kill, maim and destroy as it pleases, and we will all bask in the warm glow of the market.