Category Archives: Economics

Do You Believe in Fairies

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When I was a lad In London, Peter Pan was always put on during the Christmas holidays in the West End. Perhaps it still is. And there was always excited speculation about which famous actress (yes, we still had actresses in those days) would don tights and a pointy hat and play the part of Peter. Margaret Lockwood was the one when I was taken to see it, and I still remember the thrill of seeing her fly across the stage on a barely visible wire.

Even more vivid is my memory of the terrible moment when Tinkerbell was on the point of death. Her tiny light flickered and Peter begged us all to shout our affirmation of belief in fairies, for it was only that belief which could restore her. Tears streamed down my innocent face as I yelled, “Yes!!!” They turned to tears of joy as her light stopped flickering and came back strong and vital. My eyes are moist as I write, just thinking about it.

And now the global economy is flickering – as China’s growth rate wanes, the Euro Zone flounders, commodity prices droop, and Christine Lagarde frets about indebtedness. And only our belief can save it. Join with me now, I beg you. Do you believe in economic growth? Do you?! I can’t hear you!!!

Tax

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I just received a receipt from the Australian Taxation Office. It included a breakdown of how my tax dollar would be spent. It showed that 39% was dedicated to welfare, of which the aged (including Mrs SG and me) are easily the largest category of beneficiaries.

Another 18% of my tax dollars went to the 2nd biggest expenditure category: health. I don’t want to pick on the aged, but I think it’s safe to assume that we end up taking a disproportionate share of that too.

Given that the aged benefit from a proportion of all the other kinds of expenditure (education, defence, transport, public order etc) I reckon, very roughly, that the aged are getting 30% of my taxes. That seems a lot. I wonder whether the rest of my fellow-Australians can afford us.

Power

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Yesterday I rowed 500m – not on an actual lake or river, but on a rowing machine in a gym. I rowed hard and was panting at the end.  My average power output was 152 watts.

Were I able to row like that for 8 hours per day, six days per week, my output would be equivalent to 5% of the electrical energy that Mrs SG and I consume.

If my efforts were rewarded in cash, at a rate corresponding to the average price we pay for electricity, I would be earning about US$2 per week. Maybe electricity is not so absurdly expensive after all.

So why am I stroppy? Because a calculation like that makes me feel feeble and inadequate!

Corporate Shame

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When I heard the news story about Volkswagen and its ‘defeater’ system designed to cheat US emission testing, I thought I must have misunderstood it. Directors and managers have a duty to maximise shareholders’ profits, but Google’s motto “Don’t be evil” attracts laughter because it’s just too obvious to require formal expression. In any case, the damage that discovery of an offence like VW’s is bound to wreak upon the company would surely be so great as to deter any board from allowing it.

But cast your mind back. Remember the revelations about LIBOR fixing by major banks? Remember Goldman Sachs’ complicity in Greece’s fraudulent entry into the Euro Zone? Remember the tobacco industry’s persistent denial of the harm for which its products were responsible? The list is much longer than this. I invite you to add your own recollections.

Now allegations are being made about similar malpractices by the sugar industry. It’s too early to use words like “crime” or “criminal”, and perhaps in the strict legal sense no crimes have been committed. But there is plenty of evidence that the food manufacturing industry as a whole has a pretty casual attitude to its customers’ wellbeing.

My first ever post was about dieting. I wrote about Mrs SG’s success with the 5+2 diet and I offered 8 rules to follow for a healthy diet compatible with a modern lifestyle. Here they are again. Numbers 6, 7 and 8 will not make me popular with the food industry:

  1. Consume 1,100-1,300kcal/day normally, but no more than 500kcal on 2 days per week (the ‘fasting days’).
  2. 1,300kcal/day is less than the normal maintenance level for an adult, and it may be exceeded on special days when we entertain guests or go out to eat.
  3. Consume 30-50 grams of protein every day, including the fasting days.
  4. Every day consume less sugar than protein.
  5. Eat small amounts of a wide variety of things.
  6. Don’t buy anything without reading the nutritional data and comparing with other products.
  7. Always eat unprocessed food in preference to processed.
  8. Prepare meals in your own kitchen as much as possible. You don’t know what’s in a restaurant or take-away meal.

Duty-Free Liquor Prices

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I’m in Armenia, the land of fine brandy.  At the supermarket today I saw a half-litre bottle of Grant’s whisky for the equivalent of US$9.38.  That’s US$14.07 for a standard 750ml bottle.  The Armenian Government whacks on import duty (10%), excise tax (30%) and VAT (20%) and I suspect that the supermarket still manages to make a profit.  But that fully-taxed retail price beats the typical price in any airport duty-free shop that I know of.

It does not come as a surprise that duty-free shops make mega-super-profits, but can anyone tell me where they go?  Are governments creaming off a tax under another name?  How much goes to the airport owners?  Is the whole duty-free racket a way to give backdoor subsidies to the civil aviation industry?  This would be consistent with the airlines’ exemption from tax on the fuel they burn and the tickets they sell.

Can anyone enlighten me?

Foreign Exchange Spreads

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I’m so sorry.  I came to Armenia on a job two weeks ago and nothing here has made me stroppy yet.  Oh, wait a moment, there is just one thing…

I received a Moneygram transfer in US dollars, which I was paid over the counter in US currency.  I went to change it into Armenian drams and was pleasantly surprised to see the buying and selling rates displayed behind the counter: buying US$ at 475 drams, selling at 481.  That’s a spread of 1.25%.

Now, I ask myself, if an Armenian businessperson can rent and staff a small booth, provide security and make a profit with a 1.25% spread, what’s wrong with Travelex and its ilk?  What’s wrong with my bank, which adds transaction fees to its already healthy spread and has no associated costs whatsoever except a minute amount of electricity to drive a few bytes of data through a cable?

I look forward to a spirited riposte from someone in the banking industry, or the CEO of named-and-shamed Travelex.  I can think of no explanation for the outrageous charges for simple currency transactions that can be described without resort to such words as ‘extortion’, ‘monopoly’, ‘collusion’, ‘profiteering’ and ‘greed’.

 

 

Boiling Frog Syndrome: Manila Traffic

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I’ve just come home from a 3-day business trip to Manila.  I enjoy Manila, but the traffic is horrific and getting worse.  It took more than 2 hours to travel from the airport to my hotel on Tuesday, and a similar time for the return journey on Friday.  Someone warned me that on a rainy Friday afternoon it can even take 5 hours!  That might have been an exaggeration, but many people told me of 3-hour trips.

That should be absolutely unacceptable.  But Filipinos and Filipinas are patient people.  They tend to accept things with a shrug and a wry laugh.  Perhaps this has something to do with their strong Catholic faith – but Poles are just as Catholic and they can be as impatient as anyone I know.

I think it’s the Boiling Frog Syndrome at work.  The traffic gets a little worse every day, slowly enough that people don’t notice the increments, just as a frog can be boiled to death in a pan of water without making a life-saving leap.

We’re all vulnerable to the Boiling Frog Syndrome.  A cup of coffee used to cost sixpence.  When did it break through the $1 barrier?  How long did it take for it to smash through $2?  $3?

What about foreign exchange rate spreads?  What about bank charges?  What about postal charges?  What about bed-and-breakfast tariffs?  We’re constantly being educated to regard ever higher prices as ‘normal’.

Oh-oh, my Stoppiness Quotient is rising fast.  What do you think?