Luxurious lamb

Welsh farmers will need protecting against evil foreign farmer following Brexit.

It’s obvious isn’t it, really?

The poor farmers of Wales will have to contend with the unfair competition from New Zealand farmers once the UK has exited the EU and struck trade deals with its former colonies.

This is indeed an economic tragedy on a scale of which there is no precedent.

Imagine the devastation to the British consumer of cheaper, market-priced food appearing in the supermarkets.

The Welsh Assembly is correct in its assertion that government intervention is required to ensure that no farmer is negatively impacted by this loss of EU subsidies and market protection from superior or cheaper imported products.

Or perhaps we are being sarcastic.

Bill’s Opinion

Why would the Welsh Assembly prioritise a small group of farmers above every carnivorous UK citizen?

The best interests of everyone in the UK who enjoys eating lamb is for them to be able to source a quality product at the best possible price.

Protecting a particular special interest group at the expense of the consumer is a return to mercantilism and the Corn Laws. Of course, this is precisely what the EU has been increasingly implementing over the decades following the UK’s entry into “The Common Market” (that was the name of the entity of which the 1975 referendum confirmed continued membership).

Who benefits? No, who *really* benefits?

Those helpful people at the International Organisation for Standardisation (ISO) have released a new standard, this one is focusing on the cross-border sale of secondhand goods.

Sounds perfectly reasonable, doesn’t it? If we can standardise the sale or donation (for charity, for example) of secondhand goods we can improve health and safety outcomes, reduce buyer disappointment and regret and bring order to an unregulated market.

To read the detail of the standard, you’ll have to buy a copy, but the summary probably tells us enough to judge whether it will be effective and/or of any use.

The standard reflects that there are going to be existing health and safety standards in individual countries which will still apply but this standard seeks to categorise the secondhand goods by their usability and condition.

An example given would be a car; it is presumably important that the starter motor works, whereas whether or not the GPS software is up to date is very much a secondary concern.

The standard is trying to assist the end buyer in making an informed decision and to set their expectations accordingly about the functionality and quality of the product they are procuring. One method the standard suggests is a categorisation of A through to D of the condition and functionality of the goods.

Will it achieve this and is there a more efficient way of delivering the same outcome?

Well…… the people at ISO may not be aware of this but there’s a website called eBay that currently enables consumers to buy secondhand goods across borders. How does eBay provide information to a consumer in, say, London who is buying a secondhand component for a marine Diesel engine from a vendor in Florida?

The answer is, of course, that eBay uses a condition grading system combined with a free text narrative field to describe the product and an option to ask detailed questions about the product before committing to buy. If the delivered product fails to live up to the description provided, eBay has a dispute process that arbitrates between buyer and seller to attempt to find a fair outcome.

Bill’s Opinion

The International Organisation for Standardisation seems to be about 15 years too late; the market has already found a solution to this.

Any country that adopts the standard and applies it at their ports of import can be certain that the prices paid by the consumer will increase.

It should also be obvious that these increased prices will result in lower volumes of sales of imported secondhand goods and a commensurate likely increase in local sales of the equivalent new items. And perhaps that’s the point of this belated push to regulate standardise the secondhand market; the main beneficiaries will be the industries who supply the new items.

Ah, vested interests seeking government intervention again…..

Special pleaders gonna plead specially

In what surely must be an April Fools’ joke, the former CEO of Walmarts complained that Amazon was too big and was putting small competitors out of business.

Which small competitors?

Toys R Us and J C Penny.

No, really he said that with a straight face.

Just a reminder for those not living in a country without a Walmart or one of their subsidaries; Walmart is a retailer with $500 billion annual revenue. It’s also the largest private sector employer in the USA with 2.3 million staff.

Ask the owner of an independent local store in small town USA how they feel about the prospects of a Walmart’s outlet being built in the neighbourhood and you’ll hear opinions not dissimilar to those expressed by Bill Simon;

Let’s examine those claims, shall we?

“Destroying jobs”

If we take a narrow view of the economy, the jobs lost at Toys R Us for example, this statement seems true. However, the products purchased online at Amazon rather than at a Toys R Us outlet are still required to be manufactured (mainly in China in both cases, but let’s ignore that as applying equally), packaged and distributed to the consumer. In addition, the consumers who have saved money by purchasing the same product at a cheaper price will now have the product PLUS some extra dollars which they will spend elsewhere in the economy, thus creating employment.

“Destroying value in the sector”

This is a quite vague statement and leans very heavily on how one defines “value” and from which subjective viewpoint one is looking. From the point of view of the CFO of Walmart, yes value is being destroyed, in terms of balance sheet and share price. In terms of the consumer, value is being created with savings, convenience and increased choice.

Simon’s comments were in response to President Trump’s tweet on the subject;

….which seems to be claiming Amazon is a bad actor for using a government service (the postal service) that happens to be provided at a loss.

Bill’s Opinion

Bill Simon and President Trump should really know better than to spout these economic fallacies. Perhaps they do and are being mendacious.

Simon was perfectly at ease with using the size of the corporation he ran to undermine the business models of hundreds if not thousands of smaller competitors. In fact, what a wonderful advertisement for the creative destruction of the free market that even companies as powerful as Toys R Us, JC Penny and Walmart can have their business models disrupted to the benefit of the consumer.

If President Trump doesn’t like the way the US Postal Service is run or the rules under which it operates, he should probably write a stern letter tweet to himself describing which changes he should make.

Special pleading, especially when using unemployment as a reason, is always at the detriment of the consumer who, by the way, has already unanimously-voted with their wallets.

Have we reached “Peak Elon Musk” yet?

Perhaps it’s a function of the modern news cycle, driven by clicks and speed to publish rather than the traditional print media that produces these archetypes such as Steve Jobs and, recently, Elon Musk.

One can’t log on to social media or news sites without being presented with a quotation meme, spurious story about their management style or genius of innovation.

These must surely be taken with a large pinch of salt; nobody is perfect and, sure these people have been very successful, but not all of it was due to their intellect or perspiration.

Take Musk, for example; his high profile spacecraft business, SpaceX, is partially-funded by Venture capital, but the majority owner is Musk.

Where did Musk make his fortune? His other company, Telsa Motors Inc., which has been the beneficiary of nearly $5bn in government subsidies. He may be good at manufacturing solar panels and lithium batteries but he’s no John Galt. Many of us would probably indulge ourselves in a spacecraft hobby if we’d been given billions of dollars of government welfare.

There are also suspiciously few voices questioning how Musk reconciles the green credentials of Telsa with the massive amount of traditional fossil fuel burned with each SpaceX flight.

The government handouts continue in Australia, a country which loves to fawn over famous Americans as if Übermensch. The state government of South Australia made some pretty poor decisions for ideological reasons over the last few years with regards to their energy supply,  resulting in several disastrous state-wide blackouts last year.

Like a knight in shining armour, Musk made a now famous boast that he could solve their problems with his batteries and, if he’d not completed this solution within 100 days, South Australians wouldn’t need to pay a penny. Again, after being the recipients of $5bn from taxpayers purses, you’ll be pleasantly surprised at most people’s generosity.

There is also the question of how much of the problem the 100MW battery will actually solve? Various reports suggest that it will have an hour’s capacity. What happens in the 2nd hour of an outage?

Also, given that the installation will have a price tag over over $150m, South Australians could be forgiven for asking about the probity of the government procurement process that selected a supplier on the basis of a Tweet?

Bill’s Opinion

Musk is likely a very talented engineer with some excellent innovative ideas. He is, however, even more talented at self-promotion and convincing starstruck government officials into handing over other people’s money.

Nice trick, if one can pull it off.