Wednesday, April 30, 2008

We Only Plough The Deep

For, why are we surrounded with the Sea?
Surely that our Wants at home might be supply'd by
our Navigation into other Countries, the least and
easiest Labour. By this we taste the Spices of Arabia,
yet never feel the scorching Sun which brings them
forth; we shine in Silks which our Hands have never
wrought; we drink of Vinyards which we never
planted; the Treasures of those Mines are ours, in
which we have never digg'd; we only plough the Deep,
and reap the Harvest of every Country in the World.
We are blessed, some three hundred years after these words were penned, to be the first generation in which most of us can truly enjoy the benefits of free trade and globalisation - to 'only plough the deep and reap the harvest of every country in the world'. In the intervening period wars, xenophobia, and dull-witted protectionism has denied billions of humans before us the fruits of free trade.

But there are forces that would drag us back behind the borders and the trade barriers, and they don't get more dull-witted than nonsense such as RTE's Wheres My Job Gone, broadcast last night. We were treated to the spectacle of John from Celbridge meeting 'the man who got his job' Vaclav in the Czech Republic after Schneider manufacturing moved their operations there four years ago. The tone of the narration was extraordinary: we were constantly told that jobs were moving as if jobs are goods that could be packed up in crates and shipped across the sea. They aren't: jobs are the outcome of people, capital and finance coming together in a time and place to create products and services that other folk are willing to buy. Jobs aren't like trees that can be planted (or uprooted) when the people with the capital and finance want to move. Though that still doesn't stop people wondering why the Government doesn't do something - like grow jobs as if they were trees?

Ironically John from Celbridge seemed to have a better understanding of this than the doleful programme narrator. As did the folk in Poland, expectant recipients of a Proctor & Gamble factory replacing the one in Nenagh referred to in the broadcast. They understand that there is no job for life: a tough lesson for John and his generation to learn but one I can assure you the younger generation in Ireland have learned. And so it seems have the Polish who are already thinking about what they will do when it becomes cheaper to set up factories in Bulgaria or further afield.

Yet it is because of the global ambition of P&G and Schneider etc to produce their products at lower prices that we can all enjoy the vastly lower cost of the things we buy in the shops or online. Luxury has been democratized - thanks to globalisation and technological innovation (the two going hand-in-hand). Better still, Ireland has embraced this trend: one reason the average standard of living in Celbridge or Nenagh is vastly higher than in Poland or the Czech Republic. The story of trade has been ever thus.

The question then is: how will we create the wealth that will create the jobs of the future? Firstly we begin with the fact that we have wealth: financial and human capital. Combine this with ambition, a willingness to take risks and access to the best part of 6 billion customers thanks to globalisation and we are in a good place to build on what we have. Like these two young lads from Limerick.

Sure it won't be easy: and for sure the forces working against globalisation and threatening catastrophic alternatives are strong. But it wasn't easy in the 1980s nor in the 1990s when we faced a far, far grimmer future and yet we succeeded.

For, why are we surrounded with the Sea?

Tuesday, April 29, 2008

Binge Blaming

Just a pity the Government hadn't seen the new SLAN Report on Irish people's health before introducing yet more draconian laws in relation to alcohol consumption. Because it seems the problem they set out to cure - binge drinking - is already curing itself. Something fairly evident to anyone looking at the consumption data or even passing by empty pubs during the week.

The chart (on page 81 of the report or page 101 of the pdf) shows the percentage of drinkers who reported having 6 or more 'standard' drinks on one or more occasions per week. Here's what SLAN has to say on the trend:
The percentage of respondents reporting that they had 6 or more standard drinks at least once per week has fallen, from 45% in 2002 to 28% in 2007. This pattern was reflected across gender, age and social class... The percentage of women reporting that they had 6 or more standard drinks at least once per week has halved, from 34% in 2002 to 17% in 2007 (compared to 54% men in 2002 and 38% men in 2007). The older age groups show the largest decrease in drinking – age 18-29: 48% (2002) to 40% (2007); 30-44: 42% (2002) to 27% (2007); 45-64: 47% (2002) to 23% (2007); 65+: 27% (2002) to 12% (2007). There was also a decrease in each of the social class groups – SC 1-2: 41% (2002) to 24% (2007); SC 3-4: 44% (2002) to 29% (2007); SC 5-6: 52% (2002) to 34% (2007); unclassified: 45% (2002) to 28% (2007).
So panic over: we can relax and leave the young ones alone to be young perhaps? Maybe not: the authors of the SLAN report insist on a caveat to this 'awkward' trend for the 'prohibition-inclined':
Findings must be viewed with caution since the survey method has changed over this period of time (from postal self-report questionnaires in 2002 to face-to-face interviews in 2007) and willingness to report drinking excessively may differ by survey method.
Fair enough: of course any researcher is going to be careful about trend comparisons when the methodology changes. But the implication of their caveat is that people are being 'economical with the truth' about their alcohol consumption when interviewed face-to-face (as in the 2007 survey). But here's the thing: the percentage that didn't drink alcohol at all in 2007 (19%) is practically unchanged since 1998 (18%), as shown in Table 13 on page 84 (104 of the pdf). I don't believe people are being economical about their lack of alcohol consumption: whatever the interview methodology. So it seems to me that there has been an overall reduction in heavy alcohol consumption (in effect, binge drinking) since 2002 as shown in the SLAN chart. Completely in line with declining alcohol sales in pubs as reported by the CSO.

The report also shows a marked decline in the proportions who drink and drive: showing that consumers are getting the message about taking more responsibility for their behaviour in relation to alcohol. As I've said before, and will say again, we have a young'ish population by comparison to other EU countries, but our indigenous youth population is now in decline - and with it so are alcohol sales. The binge drinking horse has bolted, so shutting the stable door by punishing the overwhelming majority of us who don't binge drink is disproportionate and an infringement of our freedom. Simple as that.

Business & Morality

I've been involved in a number of projects recently touching on the subject of sustainable business. At the core of the sustainable business debate is the issue of morality - though most debates rarely go there (not least because we tend to see morality as a matter of religious belief and therefore outside the bounds of normal business discourse).

I think this is a pity - but I also think it is changing. Many people do draw on their faith to inform their decisions about what is moral or not. But many don't, and in the world of business most moral dilemmas do not lend themselves to the more personal nuances of religious morality. Still, many business decisions have moral dimensions - and consequences. And, as often in the past, it is the mis-behaviour of certain firms or sectors (think sub-prime lending) that raises questions about the morality of business.

The behaviour of businesses is fundamental to our future: not least because a lot of folk think that businesses - and by extension, business people - are fundamentally immoral. Business is often seen as morally irresponsible in relation to the environment, developing countries, employees, customers etc. But not all businesses: think of Google's admonition to Don't Be Evil.

New insights from neuroscience are starting to provide us with a more useful understanding of secular morality. My guess is that we will hear a great deal more about morality and business in the months and years ahead - as we should. I keep saying to my clients: a company is a legal construct, it's the people in it that determine whether the business is behaving morally or not.

And here's a re-assuring example of a financial institution (no less) that has addressed the issue of morality and business responsibility head on. The company is Liberty Mutual who have launched the Responsibility Project. Here's just one example: magnificent stuff.

Sunday, April 27, 2008

The Consolations of Philosophy

Philosophy is cool again and it seems we have the Pope to thank for it. This struck me as I was listening to a (yet another great) episode of In Our Time on the subject of Materialism. The current tensions between political Islamism on the one hand and Western values on the other has forced a debate about what the West stands for - one that goes to the heart of our religious and philosophical inheritance.

Of course the 'debate' about the origins and future course of Western civilisation has been going on for a while, as detailed in the works of A.C. Grayling (a contributor to the In Our Time programme) and Jennifer Michael Hecht. The tone of the debate in recent times has been shrill, but I think it can and will change. As explored in a delightful article on The Rebirth of Religion and Enchanting Materialism, Europe can lead the debate in a better direction, if only because we started it.

And for those of you who like your philosophy without the ancient Greek, try out Philosophy Bites, a delightful series bringing the best of modern thinking and thinkers to an iPod or MP3 near you.

Friday, April 25, 2008

Release Your Inner Geek

Yet another post about maps - please indulge me. I came across two German guys, Max Braun and Rafael Spring, who - as Bruce Sterling puts it - "are setting new records for geolocative geekdom". Imagine your mobile phone's camera overlaid with Google Earth so that you could see 'reality' and data about distances to hospitals etc embedded in the image. It's called Enkin and it's only in prototype but I'm ready to join the queue for the first mobile phone that's got it.

As the nerds would say: The Future is Awesome.

Thursday, April 24, 2008

Paradise ... Without The Taxes

It'll soon be tax freedom day in Ireland I reckon - here's one way to celebrate ;-)

The Paddy Price

I've mentioned the Paddy Tax before, but now I've discovered the Paddy Price. The chart is from the CSO's latest Wholesale Price Index report for March 2008. It shows that the average price of goods manufactured in Ireland for domestic consumption has risen by over 15% since 2000, while the price of goods for export has fallen by over 20%. That's a 35% price gap ...

Sure, some of it has to do with the different composition of goods exported and those that aren't. The former are dominated by IT and pharmaceuticals: and prices have been falling worldwide. The latter are dominated by food and construction-related goods, and these prices have generally being going up (and not just in Ireland).

But I suspect it isn't all to do with composition. Rather I suspect that manufacturers are responding to the competitive pressure of the appreciating euro by cutting their prices to hold on to export customers and markets. I don't blame them. It does mean though that when the opportunity arises to 'cross-subsidise' their export prices with a bit of padding of their domestic prices then they will do so if they can get away with it. Again, I don't blame them.

On the one hand it is reassuring to see Irish-based manufacturers responding to the strong euro so aggressively and quickly: exports may well be the only positive part of the overall Irish economic picture this year. On the other hand, with consumer price inflation already over 5%, we don't really don't want to see the top line in the graph continuing upwards even if the bottom one has to keep falling.

Whilst on the subject of prices there was a reassuring piece in The Daily Telegraph recently explaining why a) it's a good thing that house prices are falling and b) why it's not that important as we're only talking about prices falling back to where they were a few years ago - not a few decades ago. I'm inclined to agree. And finally on prices - one of my favourite podcasts - from BBC 4's More or Less series - is now back on the air. The latest episode discusses why inflation feels higher even if objectively it isn't. Apparently it's all to do with the price of fun falling. Now surely that's a good thing?

Wednesday, April 23, 2008

The English Drove Us to Drink

A Happy St Georges Day to the 12.39% of my readers with UK IP addresses. I hope you won't take this post personally. But it seems the English drove the Irish to drink. Worse: it was the cricket and the Church of Ireland. And boarding schools (an alien English concept of course). You don't have to take my (possibly biased, Northern-Nationalist-upbringing) word for it: the proof is there in all its statistical glory (to a p<0.01 significance level) in a new study by UCD.

The research is in a paper called Why Do Some Irish Drink So Much? and it certainly provides lots of food for thought. Table 2 on page 26 provides a handy summary of the different variables tested by the researchers at the UCD Geary Institute (I'm a big fan). It literally shows that, from a survey of 3,500 UCD students in 2006, the following are the most significant influences associated with increased levels of alcohol consumption:

- if the student attended an all boy full boarding school
- if there is a cricket club in the student's home town
- if the student is Irish (not foreign)
- if the student is male (not female)
- if the student is from a Church of Ireland background
- if the student is in the early years of his or her degree
- the amount the student's mother drank
- whether older siblings drank

In response the Government has decided to restrict the sale of alcohol in supermarkets. Go figure. Of course I'm only kidding: the Government weren't responding to the UCD research - or any other serious research that I can see. Sure the UCD research does show a modest association between the number of off-licences in the student's home town and alcohol consumption: but the main outlets disadvantaged by the proposed public order bill will be supermarkets, not off licences (NOFFLA are in favour, naturally).

The HSE has just published yet another dreary litany of all the harm alcohol does, with the statistics suitably selected to paint the blackest possible picture of alcohol consumption in Ireland, and to excuse yet more state infringements on our adult freedoms. What you won't read (in a report from an organisation ostensibly concerned with health) is about the many physical and psychological benefits of moderate alcohol consumption. And here's the thing: the overwhelming volume of alcohol consumption in this country is moderate - and getting more moderate over time.

Yes, an unfortunate number of people ended up in A&E last weekend with alcohol-related problems or injuries - but over two million adults drank alcohol last weekend and didn't end up in A&E, or a car crash, or even hungover for that matter. But if the Government is really serious about reducing alcohol consumption in this country, then the real solution is clear: ban cricket, ban boarding schools and ban the Church of Ireland. And maybe reduce access to third level while you're at it. Though I hasten to add for my UK IP readers that I will oppose the Government if they do - honest!

Not Quite eReady

Happy days: Channel 4's 4oD service is now available in the Republic of Ireland (or Eire as they call it - but hey, I don't mind). So no excuse for not seeing the new series of the excellent My Name Is Earl.

Apparently the success of 4oD and the BBC's iPlayer service has nearly brought the UK's broadband infrastructure to a halt, so I wonder if we'll see the same happening here (especially if the Beeb launchs the iPlayer in Ireland - or even Eire for that matter)? I wouldn't be too sanguine about the possible impact: according to the latest EIU E-Readiness Ranking 2008 we are in a lowish 21st position in relation to our 'ability to leverage digital channels for communication, commerce and government in order to further economic and social development' (unchanged since last year). Two components of the index drag our score down: connectivity (e.g.: broadband access) and 'government policy and vision' (yes, we know ...).

One example of a country that is perhaps more e-ready than Ireland (even though the EIU places them at number 28 bizarrely) is Estonia. There the state electricity company has set up an internet service called KOU that uses the electricity grid to provide ubiquitous wi-fi for €19 a month. The kind of thing we need to do in order to move up the rankings.

But maybe the big driver won't be wi-fi but rather will be gaming. The Wii Fit has already sold out in the UK - and will likely do the same here (now that it's just launched). As I've noted before, I'm too old to really get gaming, but I can certainly see its power to drive innovation and technology adoption. Maybe the Government should issue a Wii Fit to every household: we'll get a better e-Ranking, and better health to boot ...

Tuesday, April 22, 2008

The Kids - and the Oul Ones - Are Alright

Here's hope for those of us (hopefully) past the trough of life's u-shaped happiness curve: older people just keep getting happier - right up to 88 years old (the top end of a recent US survey). Further evidence that society in general, and the media in particular, have a problem with their old age problem mindset.

And more good news: back at the other end of the u-curve - among teenagers - it seems they're coping well with 21st century life and that reports of their low educational standards are greatly exaggerated. Here in Ireland, though we may not be top of the educational league table, Irish students generally perform well above the OECD average on maths and science scores.

Worth bearing in mind the next time you hear someone giving out about the young generation.

Monday, April 21, 2008

Banks and Lemmings

There are times its seems that the banks make lemmings look like rugged individualists. First they all rush into sub-prime lending offering buy-one-get-one-free mortgages, then oops, there's an unseemly rush to impose stricter lending criteria and push up lending rates. Then again, maybe I'm being unfair to lemmings ...

I don't think we'll be hearing a lot from banks and financial institutions about innovation for a while to come, which is a pity really. There are some valuable insights from behavioural economics that could provide the basis of better banking products. Or, in one recent example I came across, better car insurance products. The idea is called Pay As You Drive (PAYD) and some US car insurers are already offering it. You install a recording device that measures accurately the number of miles you drive (and your speed) and your car insurance premium is calibrated accordingly. A win-win for consumers, for the environment, and for the health service (discouraging unnecessary driving reduces the potential for road accidents).

Any individualist lemmings out there willing to try it in Ireland?

Sunday, April 20, 2008

Here's The News, Pass It On

I like reading newspapers - though I only read the paper versions at the weekend. There's a tactile pleasure in spreading out The Irish Times or Sunday Business Post on the kitchen table and browsing through them with a cup of coffee in hand.

But the thought struck me this morning that I probably only read 10-15% of what's in the newspaper - less if I'm reading it online. On the other hand, I read about a dozen or more blogs every day - and I probably read 75-85% of the posts on those blogs. So in a way I get more 'relevance value' from the free blogs than from the paid for newspapers. But not obviously the tactile pleasure.

There's something really interesting happening to the definition of news - which isn't really news since the newspaper itself is a relatively new invention, as described in a fascinating post by the brilliant Marc Andreessen (writing in his blog, of course). Jeff Jarvis, who writes both a blog and for The Guardian newspaper, talks about the emerging 'press-sphere' in which a new 'news process' is emerging, as illustrated in the graphic.

Jarvis describes an emerging mediascape in which the news is an iterative process, co-created by journalists, media houses, bloggers and lastly, but by no means least, news consumers themselves. We are seeing this ably demonstrated by the use of web 2.0 tactics by the candidates in the US elections (which I've mentioned before). Writing in the New York Times (yes, a newspaper) Brian Stelter gives a fascinating example of the way in which news consumers are now actively engaged in the news dissemination process:
Senator Barack Obama's videotaped response to President Bush’s final State of the Union Address — almost five minutes of Mr. Obama’s talking directly to the camera — elicited little attention from newspaper and television reporters in January. But on the medium it was made for, the Internet, the video caught fire. Quickly after it was posted on YouTube, it appeared on the video-sharing site’s most popular list and Google's most blogged list. It has been viewed more than 1.3 million times, been linked by more than 500 blogs and distributed widely on social networking sites like Facebook.
Young people are in thick of this naturally. There attitude can best be described as If the News Is That Important It Will Find Me. The folk running newspapers know all this of course. I know they know because I work with some of them. Newspapers, and news broadcasters in general, are well used to change and to responding to shifting consumer requirements (including the requirement to participate in interpreting the news). So I have no doubt they will be respond to the changes now under way - and that ultimately the 'value relevance' of my newspapers will actually go up rather than down. Regardless of the tactile stuff.

Saturday, April 19, 2008

Happy Immigrants

As an antidote to the gloominess in some of my posts recently, here's some good news: being wealthy apparently does makes you happy. For a long time economists have puzzled over the Easterlin Paradox, the finding that apparently the happiness of nations does not rise with their standard of living above a certain point. But new research - summarised in the chart - suggests that Easterlin got it wrong. There's a good summary here, and the main research paper by Betsey Stevenson and Justin Wolfers is here. Ireland doesn't figure too much in the research paper (though we're doing well in the chart - top right hand corner).

But we do figure more prominently in a fascinating study focused on the 'unhappiness of nations' by David Blanchflower. What is especially interesting is his finding that happiness and life satisfaction are powerful predictors of migration flows (with a measurably separate influence from unemployment and GDP per capita indicators). By and large, emigration is highest from unhappy countries (controlling for different economic circumstances), and immigration is highest into happy countries. Needless to say, Ireland has become something of a 'happy magnet' for unhappy migrants in recent years.

What we don't know for sure is whether the experience of migrating to Ireland actually raises the subjective wellbeing of the migrant - something that would have to be tracked over time probably. However, research my own company has done does show that the vast majority of immigrants to Ireland are happy with their experience of moving here, and most intend to stay. That's certainly one proxy indicator of the hedonic benefits of migration.

You Can't Eat Tariffs

Fresh from its success in impoverishing tens of thousands of Brazilian farmers and farm labourers, not to mention leaving several million Irish consumers worse off, the Irish Farmers' Association now wants to stop food prices falling. They don't put it that way of course. No, instead we're treated to warnings that the current EU position at the WTO talks will open the floodgates to to beef imports, and bring rural Ireland to its knees.

Naturally our politicians have climbed well up the fence on this one - who cares about a few million Irish consumers when you have a few thousand angry Irish farmers to contend with? Nor do we hear a lot about socialist solidarity with third world farm labourers from the Labour Party; and the Greens haven't had a lot to say about supporting fair trade meat imports. And needless to say our development agencies are keeping mum about it too - better to hand out aid than give people a hand up, eh? What do these people think farmers in developing countries should do instead? Perhaps they think they should grow hedge funds or something?

Of course the biggest domestic loser is the Irish consumer/citizen/voter. Just how much they're losing has been helpfully calculated by Con Lucey, Chief Economist at the IFA. Go to page four of his presentation and you'll see a slide showing the impact on beef prices of the current WTO proposals that have so vexed the IFA and its allies. According to the IFA's own calculations, the WTO deal will reduce the price of sirloin steak paid by the Irish consumer by €2.58 a kilo. Shocking: we can't have falling prices for food now can we? Tut, tut.

What is truly shocking is the brass neck, self-serving, shameless ambition of the farmers lobby to foist higher food prices on consumers. And yet our politicians, like spineless sheep, dare not disagree with them. Just imagine if the book sellers of Ireland got together and lobbied the Government to stop the importation of books purchased on Amazon.com because it was reducing the price paid by readers? (The French, God help us, have done just that). Here in Ireland we would nevertheless be outraged - and yet the farmers propose the same thing in relation to something far more fundamental, namely the food we eat, and nobody dares say boo.

By the way, the WTO deal only proposes a 70% cut in import tariffs on beef - not their complete removal. We can't have those developing countries selling even cheaper food to Europeans now can we? Next time you're sticker shocked by the price of groceries, just be sure to thank the IFA and the Government for your predicament.

Friday, April 18, 2008

Planet Kill

One of the most interesting 'conversations' right now is that between marketing, design and advertising folk about sustainability and consumption. The latest David Report - I Shop Therefore I am - summarises lots of the usual stuff about green consumerism, but also pushes the discussion that bit further. Here's one extract:
But to consume is at the same time something positive. We consume restaurant visits, theatre shows, travels, education and so forth. Many enriching and life enhancing experiences springs from consumption. To use the word destroy about a wonderful travel, a magical concert or a university degree would be quite wrong. Consumption is quite simply both positive AND negative, from different aspects.
It's hard to argue with that. Unfortunately most anti-consumerism is really just intellectual snobbery masked in holier-than-thou bromides about only buying what 'we' think you need. What bugs most intellectuals on the greener fringes is the idea of individuals making their own minds up and making their own free choices about how to spend - or not spend - their hard earned money. Rather than being told, forced or cajoled into doing what is good for them.

Businesses have to deal with the real world rather than idealism or ideology, so it is good to see businesses like Nike working with suppliers not only to raise standards in relation to child labour, but also to help suppliers introduce better, more efficient and more environmentally friendly production methods. Here's one example of what Nike are doing as part of a pilot project in factories in China and Vietnam:
One important aspect of the project was the installation of wireless monitoring. Rather than manual tracking of power consumption on the factory floor, Nike helped the pilot factories install systems that measure energy use by manufacturing process. The new system provided online reports available in real time, 24 hours a day, 7 days a week.
This is a great illustration of using world class IT and energy technologies to support suppliers in developing countries effectively to leap frog more energy intensive and more polluting intervening generations of technology. It's also a nice illustration of Jeremy Rifkin's idea of the third industrial revolution.

The conversation about the future of consumerism isn't over yet - but as businesses become more engaged in the debate, then a more realistic and ultimately more effective response to the environmental and energy challenges we face will emerge.

Thursday, April 17, 2008

Binge Government

The OECD's Ireland Report (summarised here) paints a sobering picture of the challenges we face in the short, medium and long term. The challenge that caught my attention was government spending - here's what they have to say about the trend shown in the chart:
Public expenditure increased by around 15% in nominal terms in 2007. Spending growth is expected to moderate in 2008 as a stepping stone to annual growth of around 5-6% in later years. This requires a substantial change of pace after the rapid catch-up growth in earlier years: the increase of government expenditure from 2000 to 2006 was second only to Korea in the OECD. Such large and sustained increases in public spending have rarely been experienced in developed countries since the 1960s, even if the share of government spending in national income remains low by OECD standards. Although the pace of growth will be very much lower than in recent years, the rate of expansion will still be faster than in most other euro area countries.
In other words: our politicians lost the run of themselves, 'binge spending' as the nation binged on drink, debt and drugs. But the party has come to an end and the mess has to be tidied up. But the Government is in the same situation as the hungover host who has run out of paracetamol; it hurts. The Government's analgesic of choice is, of course, taxation. But the taxpayers are not prepared to spend more when they feel that what's been handed over to date has been squandered. The OECD itself points to spending on healthcare: which rose by 64% in real per capita terms between 1999 and 2005. Few would consider it the most efficient or effective use of taxpayer resources all things considered.

So the OECD focuses on greater public sector efficiency, higher productivity, reduced pension commitments and greater competition. All of which have been proposed before: but as the OECD freely admits in its report, much of what it has recommended in the past has been ignored or - worse - the opposite strategy has been adopted.

Perhaps then we need something more radical? I listened recently to a presentation by the President of Estonia, Toomas Hendrik Ilves, when he was in Dublin earlier this week (you can catch a flavour of his intelligent and refreshing style from this RTE interview). Estonia has a flat tax equal to 21%. No allowances, no mortgage interest or pension contribution reliefs, and no grotesque, Kafkaesque, form-filling bureaucracy overseeing it all. Countries like Russia have had a flat tax for some time, and Germany is taking a serious look at it. It may even be on the Conservative agenda for the next UK election.

The advantage would be to cut the cost of both collecting and paying taxes, and to facilitate a real political debate about just how much tax we are prepared to pay as citizens - and what we will get in return. And our politicians won't even have to switch over to a flat tax overnight: just run the two in parallel and let the consumer-citizen choose. Even the OECD might approve.

Wednesday, April 16, 2008

Sticker Shocked

The Americans, of course, have a term for it: sticker shock - that moment when the price or bill for something you are buying is unexpectedly high. Mine came earlier today when I bought petrol (the orange light on the dashboard was warning me I might have to get out and walk soon ...)

The cost of filling up my petrol tank came to just over €71 - the first time ever. And this just as I was getting used to €60-something (and even €50-something didn't seem that long ago either), ouch! More and more of us are starting to experience sticker shock: whether at the petrol station or in the supermarket. According to AA Ireland, the average retail price of a litre of petrol is €1.207, while a litre of diesel stands at €1.246. A year ago, prices were €1.111 and 1.068 respectively. That's annual inflation of 8.6% and 16.7% - or more than three times the general consumer inflation trend in the case of diesel. Double ouch!

Still, we should be grateful for the weakening dollar. If petrol and diesel prices had risen in line with the dollar price of a barrel of oil over just the past year (from $62 to $115 approximately) then we would be paying €2.06 and €1.98 respectively. Triple ouch! It isn't just petrol for transport that's affected of course, about half of Irish homes have oil fired central heating. Anecdotally I have heard of consumers switching from ordering oil deliveries by quantity (100 litres/200 litres) to ordering by value (€100/€200): such is the sticker shock as prices keep rising.

Still, maybe global warming will mean that we will all turn down the thermostat on the central heating? But long before that I expect that sticker shock will do more to curb our energy use than any amount of worthy exhortations to do our bit for the environment. It already has.

Tuesday, April 15, 2008

Dublin Will Save Us

According to the CSO, Dublin accounts for 3 out of 10 jobs in the country, down only a little over the past decade. Indeed, a fifth of jobs created since 1997 were created in Dublin.

Dublin is the wealth and job-creating engine of the national economy. The pace of job creation in the capital over these past few decades has been phenomenal: amongst the highest of any European city as the chart shows (from a fascinating analysis of Europe's resurgent cities).

The important thing in the current uncertain economic climate will be to ensure that Dublin is allowed to continue playing its job-creating role. That cannot be taken for granted unfortunately. As I've noted before, our national spatial strategy does seem tailor-made to leave us with the worst of all worlds: a dysfunctional capital and mis-developed regions.

But the future is urban - for most of humanity, not just the Irish. Here's one glimpse of a technology-led urban future: precisely the kind of thing we need to imagine for Dublin. Let the East awake.

Global Hunger to Trump Global Warming

There has been something of 'watching a train crash in slow motion' about the unfolding food crisis. It is a bitter irony that several responses to the threats of global warming and energy insecurity have unleashed a far deadlier problem: global hunger. One multi-media summary in The Financial Times shows just how global and severe the food issue has already become. Several countries are already imposing export restrictions on trade in grain and rice to protect domestic supplies.

To make matters worse, key energy supplies (needed to farm and produce food) are coming under increasing pressure as evidence of an imminent peak in global oil output accumulates. The latest victim appears to be Russia - with oil output peaking last year. Again, none of this is news to those of us who have been following the peak oil issue over the past few years. There is one silver lining however: the more apocalyptic climate scenarios touted by some of the same people who led us down the deadly cul-de-sac of biofuels will not now come to pass because of peak oil.

So what next? There is enough oil and gas to produce enough food to feed the world. The critical thing will be to ensure that farmers, investors, energy producers and consumers all receive the right price signals in order to change their behaviour. That means no more subsidies to private transport (i.e.: toll-free roads); no more state monopolies of public transport (i.e.: anyone qualified to drive a bus should be qualified to provide a bus service); and no more tax-funded subsidies or grants to biofuel production (or any food production for that matter). Then the free choices of private actors in the economy will avert the disaster that now threatens so many around the world. One far more deadly than falling house prices or stock markets.

Monday, April 14, 2008

Smile You're On CCTV

One of the things you most notice about London, returning after a few years, is the incredible number of security cameras. Apparently the UK has a fifth of all the security cameras in the world - one for every 14 citizens. It was recently pointed out that there are 28 cctv cameras within 200 yards of the home of George Orwell, he of 1984 fame.

To their credit, many British are refusing to take this Big Brother interference in their lives lying down. The photo is the latest mural by the anarcho-artist Banksy - created, ironically, under the cold gaze of a security camera. And for a hilarious series of montages sending up another dreary public services advertisement (from the Metropolitan Police) inviting Londoners to spy on their fellow citizens check this out.

Freedom is hard won, lightly worn and easily lost. We must be vigilant in Ireland too.

It's Not the End of The World (Yet)

The weekend's newspapers were full of the usual self-flagellation about the state of the economy, the housing market and the demise of the Celtic Tiger. But for a slightly saner, there's-hope-yet read on our global economic predicament check out the writings of Chris Dillow, who at least manages to keep things in perspective.

Here he is on the financial crisis and the IMF's forecast that the final bill could reach nearly $1 trillion:
Truth is, though, that the number is much less spectacular than the papers think. For one thing, it's much less than equity investors have lost. Worldwide, $5.6 trillion has been wiped off share prices since late October. Few serious people are much troubled by this.
And similarly, here's his take on the housing crisis:
Many men have borrowed thousands of pounds to buy an asset that’s fallen in price. We call them car-owners. No-one worries about negative equity in the car market. So why worry about negative equity in another consumer good? ... Sure, some people have lost money because they over-invested in housing. But why should we care about these any more than about those who over-invested in Laughing Boy in the 3.30 at Wincanton? It’s not the government’s job to bail out bad gamblers.
All-in-all a somewhat less shrill interpretation of events than that in the columns of our newspapers or on our airwaves. Most of us have jobs (who want them), most of us have houses we want to live in, and we are in a much better place to weather any economic downturn than any previous generation. No harm counting our blessings from time-to-time.

Friday, April 11, 2008

The Paddy Tax

Bad and all as the headline inflation rate of 5% is, the trend in key components of the consumer price index is even more disturbing. Flour prices are up 42.0% on last year, bread up 19.6% and milk up 31%. Food prices overall are running at nearly twice the headline inflation rate. As I've noted before, we are only at the start of a food/energy supercycle that will bring lots more of the same soon.

One thing that should help is the strength of the euro - lousy for exporters, great for consumers. But it isn't, at least not yet. Part of the problem is Irish consumers' remarkable inertia towards and tolerance of bad value. It has rightly been dubbed 'the Paddy Tax', and we all pay it in one way or another.

More and more we are out of kilter with the rest of the world. For example, a recent study has shown that Dublin is the second most expensive location in the world for industrial space. Another reports Dublin as having the fourth highest cost of living in a survey of 71 cities. Yet a short trip across the border to Northern Ireland reveals a very different mind set when it comes to bargain hunting and value for money. And it's not just, er, the ones with Scottish ancestry.

However, I think the worm is turning here in the Republic of Ireland. Anecdotally it takes the form of conversations among my (mainly middle class) contemporaries about the cost of eating out and the steady erosion of their spending power at the supermarkets. But I think it will go further: the next turn of the worm will come when citizens start to query the value for money of all the public services and quangos they are paying for - with relatively little to show for it. Fine Gael are on to something with their report on Streamlining Government - though personally I think it could be streamlined a lot further. Even left-of-centre organisations like Tasc are increasingly conscious of the burden of public sector inefficiency on citizens and taxpayers.

Paddy the taxpayer may well be in for a further painful shakedown if our political masters are left to their own devices (preferring to raise taxes than cut spending). But at least a few politicians are starting to wake up to the potential vote winner that is advocating value for money for the taxpayer. Just in time really.

Thursday, April 10, 2008

Getting from Here to There

I was at a presentation by Jeremy Rifkin recently to the Institute of European Affairs in Dublin. The Institute is unique in Ireland in providing a forum for the discussion of ideas, trends and options independent of party politics or government influence. I'm proud to be a member and I would recommend membership to anyone interested in serious discussion about our future.

Rifkin's ideas about The Third Industrial Revolution are provocative and timely. With oil prices continuing to rise the penny has dropped with most folk that we have entered a very different energy era to the one heretofore. But as always with radical solutions such as those proposed by Rifkin there is the problem of how do we move from 'here' knowing where the destination is 'there'?

I've mentioned before the tyranny of the installed base, and I think this applies to the energy sector in particular. Rifkin's idea of distributed power generation using building design to create a surplus of power for local and shared consumption is very smart. Unfortunately, most of the building stock we're going to have for the next 20-40 years has already been built.

I expect therefore that the Third Industrial Revolution will be just like the first one - it didn't replace the previous order (agriculture) but rather subsumed it into an new economic system. Similarly, we will continue to have centralised generation capacity and grids (including those enhanced with renewables) alongside distributed power generation and consumption as Rifkin envisages it.

More evolution than revolution admittedly, but we should still get to the same destination. At least I hope we will.

Wednesday, April 9, 2008

Emotional Mapping

I have a thing about maps. It's probably a guy thing. I was in London yesterday navigating with my trusty A-Z guide, happy as a pig in proverbial.

I think that's one reason why I am so inspired by the work of Christian Nold, whom I've blogged about before. I think the guy is a genius. He is using technologies like GPS devices and lie detectors to 'emotionally map' villages, towns and cities. Here he is talking at MIT Media Lab about his work with Responsive Communities, referencing Greenwich in London as it happens, among other places. You can see the outputs here.

His shtick isn't technology per se: rather it's about the anthropology of the urban spaces we live in. And he brings an artist's and designer's eye to the work that he does. He's now working on doing a biopsy into the health of a particular community. Sounds like they need him in Limerick right now. Nold's work is a delightful example of the idea of 'history as a mineable resource' that I've previously described as the future for Ireland's innovation success.

Is anyone in Ireland doing this kind of stuff? If you are, I'd love to hear about it.

Postscript - some of my favourite map sites: Worldmapper and of course the Strange Maps blog.

Sunday, April 6, 2008

The Problem With The Ageing Problem

If you haven't seen The Zimmers (average age 70+) performing My Generation then do join the 4.3 million who already have. I've blogged before about the Frisky Fifties: this seems to push the boundaries for 'ageing disgracefully' out a decade or two.

I have been involved recently in a number of projects, workshops and studies dealing with the consequences of an ageing society. Inevitably, it seems, such discussions tend towards a (usually gloomy) assessment of the future of retirement and health spending. Which is a pity really. I think all of us (policy makers and business people) tend to 'problematize' old age far too quickly - and unnecessarily. First of all, the vast majority (96%-97%) of us will not end up in a retirement home or hospice. Even though that's the mental image many of us have about the 'end stage' of old age.

Of course, in the long run medical research responses to ageing may well push the current limits out considerably, as argued by scientists like Aubrey de Grey (whom I used to think was a bit of a quack - as many still do - until I heard a fascinating interview with him as part of the Point of Inquiry series earlier this year).

But long before that, common sense and a sense of opportunity will change the way some (though by no means all) businesses think about older consumers. One excellent blog on 50-Plus marketing is that by Dick Stroud over at 20plus30.com. There are many useful resources, presentations and studies for those interested in seeing beyond the stereotypes when it comes to the 'silver surfers' or whichever other label you want to apply.

Still, I think we need to go further. We need to see growing old - being old - as something natural, positive and welcome. But I don't think economists, marketers or politicians are going to lead the transformation, however well intentioned. Rather it will be the poets, artists and philosophers who will help us re-perceive being older for what it is. Here's one delightful example of just that, from the poet Yehuda Amichai, called A Man in His Life (posted on the Speaking of Faith website) and which coincidently refers to every securalist's favourite book in the Bible, Ecclesiastes:

A man doesn't have time in his life
to have time for everything.
He doesn't have seasons enough to have
a season for every purpose. Ecclesiastes
Was wrong about that.
A man needs to love and to hate at the same moment,
to laugh and cry with the same eyes,
with the same hands to throw stones and to gather them,
to make love in war and war in love.
And to hate and forgive and remember and forget,
to arrange and confuse, to eat and to digest
what history takes years and years to do.

A man doesn't have time.
When he loses he seeks, when he finds
he forgets, when he forgets he loves, when he loves
he begins to forget.

And his soul is seasoned, his soul
is very professional.
Only his body remains forever
an amateur. It tries and it misses,
gets muddled, doesn't learn a thing,
drunk and blind in its pleasures
and its pains.

He will die as figs die in autumn,
Shriveled and full of himself and sweet,
the leaves growing dry on the ground,
the bare branches pointing to the place
where there's time for everything.

Saturday, April 5, 2008

Banshee Journalism

Irish tradition has it that the death of a great lord or chieftain is accompanied by the wailing of the banshee. And so it seems with the Celtic Tiger: the rising chorus of crying and keening accompanying the economic news in our media certainly presages a noble death.

But like the myth of the banshee, the reported 'death' of the economy is just that: a myth. Three reports published yesterday were certainly not good for the eardrums. The Central Bank told us that the economic growth rate is going to be slower this year than it previously thought. The CSO told us that the numbers signing on the live register increased by the largest amount on record. And the International Monetary Fund told us that Ireland is among the countries most susceptible to a house price crash. Better call the undertaker, eh?

As I've noted before, it would help if even a few Irish journalists actually read the reports they are so vexed about (and not just the press releases). Take the increase in the numbers on the live register, up 12,000 on the previous month if we take the seasonally adjusted figure. This is the largest increase ever to be sure. But that's because we have the largest number of people in work ever. The increase brings the unemployment rate to about 5.5% - going the wrong way but hardly a catastrophe. Bear in mind: the unemployment rate 10 years ago (1998) was 7.4%, and twenty years ago stood at nearly 15%. But far, far fewer people had jobs to be made redundant from back then.

The more interesting insights are from the Central Bank and IMF reports. Though much has been made of the Central Bank's reduced forecasts for GNP and GDP growth, curiously nobody commented on the fact that they have left their forecast for consumer spending practically unchanged: at 3.4% for 2008 versus 3.5% in their January outlook. Indeed, their current forecasts for 2008 and 2009 are for further growth in the numbers in jobs, alongside a slight increase in the unemployment rate. Not quite the end of the world as we know it.

One explanation for the Central Bank's positive outlook is hidden in the IMF report (that got the same doom and gloom treatment as the other reports). Figure 3.4 in chapter 3 of the World Economic Outlook shows that Ireland has one of the lowest correlations between consumer spending and house prices of any of the countries surveyed. The reason? We didn't treat our houses as ATM machines to fund current spending out of increased borrowings secured on our houses. So even if house prices fall further (because they've been falling for some time now), consumer spending will continue to grow - creating jobs and wealth along the way.

Maybe that'll stop the keening for a while.

Nudge, Nudge

There's a hilarious Monty Python sketch about the power of insinuation, which draws the viewer into thinking they know what's going on, when in fact they don't. We are 'nudge, nudged' by the dialogue into understanding what Norman means, but it turns out to be something else entirely.

Back in the world of behavioural economics and public policy, there's a fascinating contribution to the burgeoning literature of 'applied microeconomics' called Nudge: precisely about using subtle signals to change people's behaviour. I've only started reading it, and I suspect it is one of those books that's going to get a lot of marketers and policy makers thinking about how they go about getting their messages across.

The authors, Richard Thaler and Cass Sunstein, argue a case for 'libertarian paternalism', in other words: by knowing how people think, it is possible to design choice environments that make it easier for people to choose what is best for themselves, their families, and their society. What the authors call "choice architecture", designed to nudge us in beneficial directions without restricting freedom of choice. Some of the insights from the book are fascinating. Here's Christopher Caldwell's summary from a review in the Financial Times:
People misjudge their best interest even in simple decisions where all the information is available. For instance, the candidate in a multi-candidate election whose name is listed first generally gains about 3.5 per cent more votes from the location of his name. People are irrationally loss-averse. They are twice as upset over the loss of something as they are elated over the attainment of it. People tend also to be present-oriented. They have a bias in favour of the status quo.
Now we know why Bertie did so well for so long! In effect, Nudge is about harnessing human frailty for human betterment. A laudable goal indeed. So the authors propose things like 'opt-out' rules for organ donations and pensions savings, rather than the present 'opt-in' stance of many arrangements. So using inertia to affect better outcomes whilst still allowing everyone the freedom not to participate (in other words, they consciously opt out, rather than consciously opting in). It is also about the power of contracted commitment: a great example being StickK.

We have had some experience of this in Ireland: the plastic bag tax, for example. The book contains lots of other examples of Nudge in practice - and the potential for Nudge in theory. The Nudge blog, by the way, is excellent and well worth a visit. Certainly, since I've started reading more of Thaler's and Sunstein's work I find myself seeing 'nudges' everywhere. Here's one I liked from the Philippines - encouraging smokers to quit by getting them to save money in a bank account, which they forfeit if they start smoking again ...

What I like about the Nudge concept - or libertarian paternalism if you wish - is that it rests on the same fundamental insight of economics, namely: INCENTIVES MATTER. Only instead of accidentally creating the wrong incentives, the plan instead is to use behavioural economics to identify the right incentives.

That certainly works for me. Know what I mean?

Friday, April 4, 2008

Fate and Fatalism

I caught the Vincent Browne show on TV3 for the first and last time last night. There was nothing else on, honest. It was vintage, brow-beating moralising by Vincent, inflicted on his unwitting guests. But just as I was about to flick to CSI: Anywhere Else, I caught the contribution by Noel Whelan to the discussion. Noel made an interesting point, to summarise: now that 'Bertiegate' is more or less out of the way (as a major news item) we might see politics getting back to, well, politics in Ireland.

I think he has a point. I've been following the recent debates in the UK about stem cell research and immigration; both subject to intense, sometimes heated, but usually intelligent debate about serious issues affecting citizens lives. Somewhat removed from foreign currency transactions in bank accounts in the early 1990s. Needless to say, most politicians in Ireland would run a mile from either debate, which is a pity really: they're kind of important issues.

Certainly in relation to immigration (a subject I intend writing about in more detail in a future post, as I have in the past), my own exposure to what Irish people are thinking and saying about the issue in focus groups and surveys tells me that immigration could quickly flip from being a 'non-issue' on the political agenda to being a major, divisive issue very quickly. And no, I'm not saying the Nazis are coming: I'm simply making the point that those most exposed to the economic impact of immigration (Irish manual or unskilled workers in the main) are less and less tolerant of the consequences. Consequences that may turn deeply negative in an economic downturn.

Still, with the passing of Bertie we may have also left behind the last vestiges of fatalism. As a recent article in the Globalist put it this week, the story of Ireland in the past twenty years has been a story of how we lost our deeply embedded culture of fatalism. In which case we do not have to take the consequences of change (especially negative ones) for granted.

Thursday, April 3, 2008

The Waste of Advertising

They used to say that half of advertising spending is wasted. But it's worse: nearly a third of advertising reduces your sales! That's according to a fascinating interview with advertising guru John Philip Jones in the latest issue of Esomar's magazine. His research in several countries shows that 30% of advertisements actually reduce sales in the short term. Talk about unintended consequences.

But maybe new insights from behavioural economics and neuro-marketing will help reduce that figure. Like those smart people in the UK's equivalent of our Road Safety Authority. Pay attention now ...

Wednesday, April 2, 2008

The Mis-Rule of Law

I thought the Sunday Independent was trying to get away with a pre-emptive April Fool story last weekend when they ran two items in the same edition. The first informed us that politicians were thinking of raising the legal drinking age to 21 and making parents legally liable for the behaviour of their adult children aged 18-20; and the second story told us that the Gardai can't handle all the new laws the politicians are introducing ...

Which got me thinking: have we too many former solicitors and barristers in government, suffering from a version of Field of Dreams: 'make it the law and they will comply'?

What about a compromise: make it the law that you can only introduce a new law if you remove an old one from the statute books? It might even help the Gardai do their job more effectively (as they would wish to).
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