Did you know; that in January 2010 57 million cans of Heinz soup were sold in the UK, a rise of 11 million cans over the same period in 2009?
If soup was used a measure of economic performance, then an increase of 20% year-on-year sales would indicate that the recession is over; but there might be more to these head-line figures than appears at first sight. My mind wanders to pictures of the soup kitchens operating in the Great Depression of the 1930s, doling out hot soup to the unemployed. Perhaps the consumption of more soup is an indication of belt tightening and moving down market in choices of easy meals. I suspect that sales of tinned caviar will not have seen a corresponding increase.
Soup has the reputation of food for the poor (or cheapest starters on the menu) because it is so cheap and easy to produce, consisting mostly of water. It seems odd that such a stream of waste metal and the associated carbon emissions in moving the cans from factory to consumer is tolerated.
People like the convenience of opening a can of soup. Fresh soup takes more effort. Ingredients need to be chopped and then cooked. Powdered soup is another option but it is always second best - to the can. Fresh ingredients have to be bought; cans sit on the shelf awaiting their moment of consumption for months or years. A fresh and easy option would be a small pack of herbs to drop into a pan with chopped seasonal vegetables, but we are not prepared to wait the time.
If we pause and think about it, the can is obsolescent technology from a past era when keeping food fresh was a challenge. The time has come to regard canned food as old technology. There may be certain specific foods that require being canned; or specific arduous conditions such as military operations where the can remains the best option. But even the military would not waste logistic capacity on canned soup.
Monday, 22 February 2010
Monday, 15 February 2010
Economics or Fashion?
Economists delight in working out the figures to support a rationale business case. If the proposal makes money (or saves money) enough to offset the expenditure then it is a sound investment. Anyone who lives in the real world – which is most of us – knows that there is more to life than rational economic decisions.
I committed to fitting solar Photovoltaic (PV) panels to my roof before the government announced the PV feed-in tariffs. I made the decision on the basis that this is what each building must have if we are to start to reduce carbon emissions. My decision was based on wanting to show leadership and ‘walk the talk’ to back up my calls for change. For me, it was not a rational economic decision, although I did have a suspicion that energy prices will climb high over the years ahead and that the expenditure might be a good hedge against such circumstances. The pay-back period, based on current energy prices, went way beyond the expected life of the system (30 years). It made no economic sense – but I wanted to fit PV despite this.
The UK government has now announced the feed-in tariff. Householders will be paid 41.3 pence per KW for retrofitted (36.1 pence for new build) starting from 1 April. The pay-back period for my system is now less than 20 years (based on current energy prices). There is now a robust business case to support a decision I took on a non-economic basis. Will that mean a flood of people following my example? No, people are not rationale in the way that economists assume for their calculations.
There is still deep-rooted opposition to PV panels on roofs despite the fact that they are a sound investment. What is needed is fashion change. When it is fashionable to have PV panels on the roof then people will invest in them to keep up with the Jones. Mine are hidden away out of sight on the side of the house and the generation meter hidden in the garage. Not much showing off to be had, but when I drive my electric car I can claim, with some justification that I am driving with zero emissions. That gives a certain warm glow inside that I am doing the right thing, but also, on this occasion, I am now behaving according to rationale economic analysis.
I committed to fitting solar Photovoltaic (PV) panels to my roof before the government announced the PV feed-in tariffs. I made the decision on the basis that this is what each building must have if we are to start to reduce carbon emissions. My decision was based on wanting to show leadership and ‘walk the talk’ to back up my calls for change. For me, it was not a rational economic decision, although I did have a suspicion that energy prices will climb high over the years ahead and that the expenditure might be a good hedge against such circumstances. The pay-back period, based on current energy prices, went way beyond the expected life of the system (30 years). It made no economic sense – but I wanted to fit PV despite this.
The UK government has now announced the feed-in tariff. Householders will be paid 41.3 pence per KW for retrofitted (36.1 pence for new build) starting from 1 April. The pay-back period for my system is now less than 20 years (based on current energy prices). There is now a robust business case to support a decision I took on a non-economic basis. Will that mean a flood of people following my example? No, people are not rationale in the way that economists assume for their calculations.
There is still deep-rooted opposition to PV panels on roofs despite the fact that they are a sound investment. What is needed is fashion change. When it is fashionable to have PV panels on the roof then people will invest in them to keep up with the Jones. Mine are hidden away out of sight on the side of the house and the generation meter hidden in the garage. Not much showing off to be had, but when I drive my electric car I can claim, with some justification that I am driving with zero emissions. That gives a certain warm glow inside that I am doing the right thing, but also, on this occasion, I am now behaving according to rationale economic analysis.
Monday, 8 February 2010
Fixing the Global Economy
From a superficial glance, the global economy is looking much better. World leaders have given the economy a big boost with massive stimulus packages. Shares prices have recovered and if the size of bank bonuses is an indicator then the banking system is back in good health.
A quick fix was needed to prevent economic meltdown. Now that apparent stability has returned we need to take a long hard look at the economy - and society. People are starting to question capitalism and so they should. There are fundamental problems that can only be fixed by a major overhaul.
When the economy was booming people were reluctant to look beneath the figures. Now that the gearbox of the global economy has started to make some ugly noises we need to look deep inside at the mechanics. The return to stability may be little more than the actions of a bent second-hand car salesmen who has tipped sawdust in the gearbox to dull the noise. Such a short-term fix leads to a massive bill in the future.
We need to examine the purpose of finance and bring it back to support the real economy and society. This may mean taking apart the gearbox, cleaning it, fixing it where necessary and reassembling the pieces.
A quick fix was needed to prevent economic meltdown. Now that apparent stability has returned we need to take a long hard look at the economy - and society. People are starting to question capitalism and so they should. There are fundamental problems that can only be fixed by a major overhaul.
When the economy was booming people were reluctant to look beneath the figures. Now that the gearbox of the global economy has started to make some ugly noises we need to look deep inside at the mechanics. The return to stability may be little more than the actions of a bent second-hand car salesmen who has tipped sawdust in the gearbox to dull the noise. Such a short-term fix leads to a massive bill in the future.
We need to examine the purpose of finance and bring it back to support the real economy and society. This may mean taking apart the gearbox, cleaning it, fixing it where necessary and reassembling the pieces.
Monday, 1 February 2010
Being Responsible for the Future
The stated aim of the World Economic Forum that closed in Davos yesterday was to:
“Improve the State of the World: Rethink, Redesign, Rebuild”
The discussions demonstrated some rethinking, but there little evidence of agreement over a coherent redesign, and therefore no shared vision of how to rebuild the world economy.
Not surprisingly, there was a lot of talk about banking and bankers, but the three issues that struck me from the final session were more fundamental than problems in the financial system. These are issues that reach right into the heart of the principles with which we manage the economy.
First, were reports of the call from President Nicolas Sarkozy for the need to add a moral dimension if we are to be able to save capitalism. I interpret this to mean that capitalism is not in itself a problem, but capitalism without a moral compass is. A number of speakers echoed this theme.
Second, there was a discussion over the relationship between stakeholder value and shareholder value. The business leaders at Davos seemed to accept (partly as a consequence of the financial crisis) that a narrow focus on shareholder value is not sustainable. If business neglects the needs of a range of stakeholders, and thereby loses the support of society, then the business will suffer.
Finally, a brief vignette caught my attention. The point of view represented was that the bail-out of the financial system had made the situation worse. The world economy was pictured as a car that has been prevented from driving off a cliff. However that car was now racing downhill even faster than before. This summons up a vision of the world economy charging into an even bigger car wreck as stimulus measures are withdrawn.
The results coming out of Davos are inconclusive. I offer my interpretation of the deductions that follow from the discussion. We need a moral compass; stakeholders are important and we must steer the economy onto a safer track. That means being responsible for the future, putting people before profits and in doing so retreat from a narrow focus on growth as the prime measure of progress. This is my conclusion, but it is unlikely to be the conclusion that we will read in the final reports coming out of Davos.
“Improve the State of the World: Rethink, Redesign, Rebuild”
The discussions demonstrated some rethinking, but there little evidence of agreement over a coherent redesign, and therefore no shared vision of how to rebuild the world economy.
Not surprisingly, there was a lot of talk about banking and bankers, but the three issues that struck me from the final session were more fundamental than problems in the financial system. These are issues that reach right into the heart of the principles with which we manage the economy.
First, were reports of the call from President Nicolas Sarkozy for the need to add a moral dimension if we are to be able to save capitalism. I interpret this to mean that capitalism is not in itself a problem, but capitalism without a moral compass is. A number of speakers echoed this theme.
Second, there was a discussion over the relationship between stakeholder value and shareholder value. The business leaders at Davos seemed to accept (partly as a consequence of the financial crisis) that a narrow focus on shareholder value is not sustainable. If business neglects the needs of a range of stakeholders, and thereby loses the support of society, then the business will suffer.
Finally, a brief vignette caught my attention. The point of view represented was that the bail-out of the financial system had made the situation worse. The world economy was pictured as a car that has been prevented from driving off a cliff. However that car was now racing downhill even faster than before. This summons up a vision of the world economy charging into an even bigger car wreck as stimulus measures are withdrawn.
The results coming out of Davos are inconclusive. I offer my interpretation of the deductions that follow from the discussion. We need a moral compass; stakeholders are important and we must steer the economy onto a safer track. That means being responsible for the future, putting people before profits and in doing so retreat from a narrow focus on growth as the prime measure of progress. This is my conclusion, but it is unlikely to be the conclusion that we will read in the final reports coming out of Davos.
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