Occam’s Razor Rules

It is snowing in London this morning and there is a bitter wind, more suited to January than March. Our economy is also cold and bitter. We cannot change the weather, although in the long term we can and will change the climate, whether we want to or not and whether we believe it or not. We can change the economy, although the way to change it into something that is more benign and brings more prosperity is not clear. As with the environment, politics interferes with doing what is right for the economy.

Such is the Nature of Progress

The World Meteorological Organization is an Agency of the United Nations. It has published data which shows that in 2011 the atmospheric content of carbon dioxide in the world was 390.9 parts per million which is two parts per million more than the atmospheric content of carbon dioxide in 2010. In 2011, concentrations of atmospheric methane (of which 60% is as a release of human activities) reached a record high of 1813 parts per billion. Carbon dioxide measured at Mauna Loa Observatory, Hawaii in December 2012 was 394.28 parts per million. Nitrous oxide also reached a new record high of 324.2 parts per billion.

Economic Growth Coffee and Taxes

Germany has announced that it expects its economic growth next year to be very small; it will probably be at the same level as that of the United Kingdom. These are difficult times and although economic growth is one measure of difficulty, it is not the only measure. Much depends on what the growth is and which sector is affected.

Some economic growth is merely the adoption of a new fashion or a new technology. When I first travelled to the United States it was impossible to get a decent cup of coffee anywhere. Coffee was served as merely a slightly flavoured and weakly coloured hot water. It was something that you had to accept and understand that this weak brew was how the Americans liked their coffee.

Later the concept of what Americans called “gourmet” coffee” (proper coffee to Europeans) caught on and the fashion grew.

Chains of aggressively marketed coffee shops grew up, led by Starbucks, out of Seattle. They carried out their business aggressively, swallowing competition by securing the best sites and using their wealth to market their products. They drove out of business many small family run coffee shops, so that the economic growth that arose as a result of the gourmet coffee shop chains was to a large extent illusory, because it came at the cost of economic recession caused by the small family run businesses being closed by the competition. Having grown a successful business Starbucks franchised coffee shops and ensured that they arranged their affair using devices such as transfer pricing and royalty payments to their own associated companies located in tax havens to avoid paying corporation tax in places like the United Kingdom.

That made the UK branch of Starbucks unprofitable, so that the profits were made in places that had very low rates of tax.

We were told that despite billions of turnover in the United Kingdom Starbucks did not pay any corporation tax, and the folk of the United Kingdom thought this unfair and improper. They started to boycott Starbucks and Starbucks as a result saw that they were losing business. Starbucks announced that they would voluntarily pay small amounts of corporation tax, even though they were not liable for it.

The Cost of the Olympics and The Recession

Britain is now out of recession and that is good news. Preliminary figures show a third quarter growth of just 1%. Some commentators put the growth down to the Olympic Games ticket sales, but I have no doubt that the tickets sales were of a lesser amount than the lost dales in the retail industry in London and the construction and maintenance industry slow down during the games which was caused by the games taking place in London.

There is other good news; there have been more people in employment and despite the impossibility of small businesses securing finance  from their banks, businesses are managing somehow, although with difficulty.

It is clear that we need to employ people in making things, installing things and servicing things if we are to secure our economic future. It is also clear that we must learn the lessons of the recession, caused by bank and hedge fund speculation. Someone has calculated that people are now £1800 a year worse off than they were in 2008. Most of that money has gone into the pockets of the bankers and hedge fund operators. That is no way to run an economy.

As our economy grows we must ensure that we direct money and therefore growth into the production of things, rather than the production of another giant casino which will impoverish those who are not wealthy. That is the lesson we must learn.

Mr Monbiot’s mistake

George Monbiot is arguing that “they bailed out the banks in days. But even deciding to bail out the planet is taking decades.” Unfortunately Mr Monbiot’s is accurate but perhaps not in the sense that Mr Monbiot writes.

Low Growth and High Inflation: the economic realities

At the moment the world’s economy (or most of it) is showing two main features. The first is there is very low growth, and the second is that there is relatively high inflation.

The Financial Crises and the Gold Standard

First it was Iceland, then Ireland, then Portugal followed by Greece. Confidence in the financial markets of many nations’ ability to repay their borrowings has been shattered. The latest nations to have their financial stability threatened are Italy and Spain. In China at least 10% of the internal lending by the Chinese State to local authorities will have to be written off as a bad debt. The Euro is in danger, and the mighty US dollar is threatened by the choice that the US government must make – either increase the budget deficit or cut back on Federal hand outs.

Economic growth and climate change

There has been a deafening silence on the dangers of climate change. We have become obsessed with economic change. Even news of wars, earthquakes and potentially dangerous nuclear disasters, only hold out attention for a short while. The edifice of how we live and what we should reasonable expect is evolving. Every generation until now believed that their children would have a better longer and healthier life and usually they were right. Now we face the reverse being true.

Economic prosperity depends upon environmental protection

The second day of the New Year is a good time to take stock of the old year. We celebrate the New Year arriving, but do we ever celebrate the old year that has passed? There has not been much to celebrate in the old year, as far as the environment is concerned.  Nations have been too distracted by economic problems to concentrate on the long term, and they regard the protection of our planet as a long term issue, rather than as an issue that must be addressed now.

China’s energy consumption reduction target

The Chinese government have set a target for reducing energy consumption. China is a vast country, with plenty of coal reserves but little other fossil fuel. It has been growing its economy aggressively and the growth has been dependent upon energy use. It is no surprise that China is seeking to reduce energy use, and its target of reduction – 15% – is expressed in terms of a reduction of energy consumption per unit of GDP and the ambitious 15% reduction is targeted for 2015.