Category Archives: economics

Capital Ideas

I walked completely around the Christchurch central cordon a few weeks ago, and over the handful of hours it took I started to wake up to some realities I’ve really been trying to ignore. My city, the country it lives in, and indeed the world, is in the grip of a deep crisis. We are led by a National government that not only underfunds our recovery, but actually wants to cut back further. They are captives of an ideology of government that is opposed to governing.

I needed to get out of the city. Driving out south, mazing through closed turnoffs and bumping over rippled roads, I caught the end of a National Radio broadcast about the World Economics Association. This international organisation, launched in May, aims to break the neoliberal lock American economics has on the discipline. The coverage is illuminating.

Ideas on Sunday interviewed Robert wade, who talks about the lack of change in macroeconomics, and the way that its outdated, ‘respectable’ ideas favour big financial institutions over productive businesses and people. He notes how large international financial organisations have avoided the initial post-crash moves towards regulation, and how the theory economists promote looks after economists, and their classmates (hah! a pun) who went on into finance. Deregulation is founded on the faith that the market best takes care of society – a fantasy that nobody should believe anymore.

Ideas also spoke to Ha-Joon Chang, author of 23 Things They Don’t Tell You About Capitalism, who exposes the illusion that the market pays people what they’re worth, and explains how individual productivity is dependent on social setting. Society, he concludes, therefore has the right to intervene. Individual rewards are collectively determined; pretending otherwise merely privileges those individuals who manage to secure a disproportionate slice.

The final third of the hour is spent with Steve Keen, author of Debunking Economics: The Naked Emperor of the Social Sciences who explains the logical flaws in neoliberalism, well-known for over 50 years, and says that economics has rebuilt the world in its own image – a pseudoscientific, flawed and unfair image, if his critique is to be believed. Neoclassical economists, he says, don’t understand neoclassical economics. Naive, they are like Ptolemaic astronomers post-Copernicus, unaware or unwilling to accept that they are not at the centre of the universe. Unlike astronomers, unfortunately, these economists dominate global education and decision-making, and their provably false beliefs (Keen cites their belief that the level of debt does not matter) create crisis after crisis, which the rest of us have to bear while financiers reap gigantic bailout packages (government intervention in the economy… what?).

I have just started economics at university. In the first week, they introduced and then glossed over the major flaw in market capitalism: markets, it is claimed, are allocatively efficient, that is, they portion out goods and services to those who want them most (and will therefore pay the highest price). In the words of my lecturer Steve Agnew, the problem with this is people have different amounts of money to spend. In other words, markets are only efficient when everyone has the same ability to indicate their preferences. In a world where CEOs make over 500 times the average wage (ignoring the income gap between nations), the idea of allocative efficiency is simply a fallacy. Markets are systematically inefficient, ignoring the needs of the poor and the many, and massively overvaluing the demands of the rich and powerful. Who knew? This is a major problem in economics and apparently solving it will give one instant celebrity among economists worldwide. Well, we’ll see.

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Filed under economics, Government policy, media

Turtles are cute, and it is freezing.

Just you try to deny it. To start with the turtles, the NZIFF* is currently on in Christchurch, so if you feel like getting the warm fuzzies, go see Turtle: The incredible journey. It looks like a feel good film, just in case anyone tries to accuse me of constantly posting depressing news. If you’ve miss(ed) the screenings and need to acquire it through, er…other means, then you can donate to the Save Our Seas Foundation that appears to have commissioned it. You don’t even need a credit card. Yay. Unfortunately I can’t find info about a DVD release date. Anyway, the trailer really did warm the cockles of my heart.

Speaking of warmness (which the living room is currently not), the Greens are currently campaigning for a “Warm Healthy Rentals” bill that calls for minimum energy performance standards for houses. I’ve emailed Gareth and asked him what the Greens would support in terms of specifics, but the basic idea is to legislate basic housing requirements for rental properties. This is not to vilify all landlords, but it is meant to address the HUGE number of unacceptably insulated houses. It’s a real problem in the South Island, where temperatures get below zero quite often over winter. If you’re a fan, send the e-card and join the facebook page to show your support and join in the discussion.

*I forgot to blog about Inside Job, which was a pretty funny doco about the 2008 financial crisis that included interviews with some of the key players. Their faces are so funny when they realise the doco maker is not on their side. Its screenings have finished in Christchurch, but it should come out later in the year again (not as part of a festival probably). Interestingly it’s paid for by Sony, and that means the film is slick and looks totally professional. Cheers to the Dim Post for the heads up.

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Filed under economics, Film/Documentary, Government policy

Story of stuff expands

The first time I watched Annie Leonard’s “The Story of Stuff” I almost cried with joy. Finally, someone was communicating the most important issues of our time with a clear, simple message which also didn’t bore. The cartoons in The Story of Stuff really do justice to the phrase “a picture paints a thousand words,” without leaving you scratching your head about what the pictures really mean, thanks to Annie’s succinct commentary, complete with excellent analogies that give her arguments a common sense vibe. Best yet, she anticipates a lot of the “but what about x” questions that people are likely to have, and offers practical solutions.

Recently I caught a glimpse of “the story of cosmetics” which was great for people who see cosmetics as a necessity because it didn’t just advocate complete boycotting. The story of cap and trade however is probably the most pertinent to all of us, in the US and NZ, because National has implemented the “free permit” scheme too.  Lastly there’s the story of bottled water, which really does present some alarming figures about how big the problem of bottled water has become, and looks at the wider effects of picking up that pump bottle.

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Filed under Climate Change, economics, Film/Documentary, media, Products

Quote of the day

I’m doing POLS essay research at the moment, and found this gem of a paragraph in Leiss, Kline, Jhally & Botterill (2005, p. 38):

Hierarchy, inequality, and power have shaped all societies, but were distinctly patterned in modern society. One of the most astute critics of the new relationships of industrial production was Karl Marx, who marveled at the immense power of the new systems of production, seeing in them as offering for the first time in history the means of unshackling society from scarcity and ameliorating the inequalities and hierarchies of the past. Yet he also argued that the promise of industrialization could not be actualized, because the new relations of production divided people, producing not simply more goods, but social classes and systemic inequality and continual economic crisis as well. The new arrangement of production allowed property and labor to be controlled by a privileged few, whose interests in deriving an adequate return for their capital investment held inordinate sway within society.

Clearly there are other complications, although I still want to give the authors a big bear hug for summarising Marx so succinctly, without making a clearly biased statement. It makes far more sense in the context of the chapter (entitled “from traditional to industrial society”), which does a pretty good job of pointing out the positive and negative aspects of both societies. It’s so nice to read commentaries on Marx which actually seem relevant and useful, as opposed to shallow comments about communism like “well why should I work my arse off when someone else is working for less but getting paid the same.” The hilarious thing is, that comment sounds more like it’s talking about modern capitalism, except the person working less is probably making more money.

PS. I’m not saying rich people are lazy, just observing that the more money a person/family makes, the less they then need to work, because they can let their excess wealth generate more wealth. Obviously not true for everyone, but it certainly gives already well off people a HUGE head start.

quote from “Social communication in advertising: consumption in the mediated marketplace.” 3rd Edition.

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Yet more motivation to shop at farmer’s markets and start growing your own

Finally there is some mainstream acknowledgement of the way fresh fruit and vegetables are priced by the supermarket duopoly – high, and more interestingly, far higher than processed food. Sue Kedgley’s survey only consisted of 75 farmers and the actual markups are hard to extract from the supermarkets (they deem it “commercially sensitive” information), however this only makes the need for an independent investigation more urgent. What’s even more worrying is that a majority of those surveyed are actually selling below the cost of production. The supermarkets have defended themselves by claiming that price differences between their produce and other produce (sold at other greengrocers) is a quality issue, which just goes to show how stupid they think the average person is. While many supermarkets do get higher grades than some greengrocers, the fact that they leave them on the shelf so long, and the fact that it’s so easy for the average person to notice, means that the “quality” you paid for was lost ages ago. However, this is not a call to throw away even more fruit and vegetables that are no longer very fresh. The problem comes down to buying too much at one time.

My partner and I stopped buying fruit and vegetables at the supermarket quite a while ago due to the clear price difference, and started shopping at the greengrocers only 2 minutes walk away. I’ve not only noticed a price difference, but a freshness difference as well. On the rare occasion that I get up in time for the farmer’s market, the freshness and range is astounding, and the fact that there is no middleman between the growers and sellers gives me the warm fuzzies. Prices are similar, but you’re paying for actual quality and contributing to someone else’s livelihood, rather than paying to be screwed over and screwing over a farmer who is stuck between a rock and a hard place.

Best solution though? Start planting your own produce! Sure, we’re in winter, but there are plenty of green leafy things that still grow (and I live in Christchurch, so don’t use the Southern excuse). Or if you’re impatient, start planning and ordering seeds so that you’re ready when spring rolls around.

Also, I have an idea (which you’re welcome to rip to shreds, as long as you reason it out). What if, instead of removing GST on all fresh fruit and vegetables, we removed GST from all fresh (ie. unprocessed) NZ grown organic fruit and vegetables (someone should probably fill me in a little more about the complications of the certification schemes right about…now)? It is pretty well established that much of (although admittedly not all) organic farming is better for the soil, waterways, workers, consumers (as we pay less tax to clean up after the problems that conventional agriculture involve), and farmer incomes. For example, a study conducted in Canterbury, NZ found that economically, ecosystem services in organic agriculture are worth more than they are in conventional fields. To quote the study (ES=”ecosystem services”):

If half the arable area under conventional farming shifted to organic practices, the total economic value of ES would be US $192 million and US $166 million annually for organic and conventional arable area, respectively…conventional New Zealand arable farming practices can severely reduce the financial contribution of some of these services in agriculture whereas organic agricultural practices enhance their economic value (in abstract)

If you’re interested in reading the study but you’re not enrolled at a University, email me. If you are enrolled, check out the study (the whole journal issue is really interesting actually):

Harpinder, S. S., Wratten, S. D., Cullen, R. & Case, B. (2008) The future of farming: The value of ecosystem services in conventional and organic arable land. An experimental approach. Ecological Economics, 64(4): 835-848.

The respective profiles of each of the authors:

National Centre for Advanced Bio-Protection Technologies, PO Box 84, Lincoln University, Canterbury, New Zealand (first two authors)

Commerce Division, PO Box 84, Lincoln University, Canterbury, New Zealand

Environment, Society and Design Division, PO Box 84, Lincoln University, Canterbury, New Zealand

PS. I forgot to mention the proposed Supermarket Code of Conduct which is being proposed in response to the exorbitant pricing. Personally, I don’t think letting supermarkets self regulate is actually benefiting us – it didn’t benefit Britain, for example. Setting more stringent limits on the market you’re allowed to dominate would be a start.

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Filed under Ecology, economics, Food

Fair trade clothing in NZ

Cue Micah clothing, a Salvation Army initiative that is bringing fair trade clothing to New Zealand. It looks like they’re still starting out, as they aren’t yet available in retail stores, and their prices are really reasonable (especially the sale items, which offer tees from $15). I’m keenish to get this economics t-shirt, but to be honest, I’m really not short on tees at the moment. Also, it seems a little unfair to generalise to all economics textbooks, although I recognise the Adbusters reference to Mankiw’s economic textbook (used by most first year macroeconomics students).

They currently have a design competition going, with $250 worth of clothing as the prize, so if you’re visually inclined or even just want something specific on a t-shirt and think it’ll be popular enough, why not try sending them something? I might send them some stuff without expecting the prize thingee since it seems like a worthy cause and I like playing around on Photoshop. If you have any text suggestions, leave a comment.

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Filed under economics, Fashion/lifestyle

The second enclosure movement (Boyle)

Yay for the Internet! I tried to find a better version of one of our readings this week (for POLS403), and at the top of the search results was a FREE (without having to be a Uni student), clear PDF version. Even more impressive is that it’s from the law department of Duke University. In America! The home of IP rights and the MPAA!

Sorry. I get excited about things like that.

If you bother reading (the article really starts to make its point on page 37 if you’re short on time), you’ll get a better picture of why. Boyle’s discussion of the “second enclosure movement” refers to the one happening today – “the enclosure of the intangible commons of the mind” – that is, the evolution of IP, and Internationally binding treaties (such as ACTA). If you’ve ever been the slightest bit interested, Boyle’s article is an excellent introduction to the topic – he outlines the arguments of both sides of the debate with great verve and contemporary relevance.

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