Business

Quite so Paul, Quite so.

Paul Krugman:

The point is that the quintessential business figures of the 80s weren’t creative entrepreneurs. They were big-corporation executives (Lee Iacocca) and takeover artists (Michael Milken, Ivan Boesky). The gazillionaires who started in garages came later.

Quite So.

 

 

Eh?

Equally, as a member of the WTO, China has made considerable progress in establishing systems of law and accountability. But these systems of accountability and governance are not just weak and underdeveloped: they are also hampered by the Party\’s overriding concern – to continue to monopolise power in a vertical, authoritarian system. To have real accountability, transparency and rule of law – of the kind that Gordon Brown, no doubt would like to do business with – requires independent institutions, a free press, a citizenry with rights and equal access to the law, all of which contain potential challenges to the Party\’s monopoly of power and the spoils that come with it.

Who is this Gordon Brown who will be doing business?

Aren\’t we a country with independent institutions, independent businesses, a free press, a citizenry with rights and equal access to the law, rather than a one party state with a monopoly of power and the economy and the spoils that come with it?

Cretins, Cretins

You knew this was coming of course:

The Chancellor has demanded a meeting with the energy regulator to explain why fuel prices have risen so dramatically,

Having a lawyer as Chancellor is going to cause such things. An ignorance of how markets work (err, you have seen that oil is around the $100 mark Alistair?) isn\’t a great qualification for that office.

This is worse though:

Some experts believe that energy companies can buy reserves in advance and that there is no need for the price rises in raw materials to be fed through to consumers at once.

That companies can make long term contracts is true: but that doesn\’t mean that price rises should not be fed through. It\’s pretty much a basic thought that you should sell your products at their replacement costs, not their actual costs. Indeed, all energy companies do this: it\’s why BP and Shell\’s profits soar when prices rise and fall dramatically when they fall. Because they value the oil in process at what they can sell it for, not what they paid for it.

Most Sad

Piece in The G makes this statement.

Jobs define us

An extraordinarily sad statement. That where we export our labour to is the definition of us?

No, humans are really rather more complex beings than that.

It\’s Not Just Government

That is beset by idiot bureaucracy.

BG: \’Hello Sir I am a supervisor, we are calling a you for immediate payment of the £627 you owe on your gas account. Do you have a debit or credit card handy?\’

Me: \’Is this regarding (address)?\’

BG: \’Yes sir\’

Me: \’This property burned down in June of this year, as I have informed you at least half a dozen times. So this is for estimated usage yes?\’

Really?

You sure?

Andrey Illarionov, a market reformer and Putin\’s economic advisor until his resignation two years ago, alleged that the Russian government\’s £75 billion Stabilisation Fund, created in 2004 to cushion the budget from a fall in oil prices, was being exploited by members of the ruling elite for their personal benefit.

He gave no details of how this allegedly occurred.

"The Stabilisation Fund, in the form in which it was created in which monies were accumulated, has ceased to exist. It has died. This is now a fund for increasing the personal wealth of specific individuals," he claimed in a radio interview.

Now that is a surprise!  Politicians get to control $ hundreds of billions and some lines their pockets?

Slap me down with a wet kipper.

Sure, We Know That…

Or at least we should all know that:

The report – which scrutinised the labels of 54 ready meals from Asda, Morrisons, Sainsbury\’s and Tesco – says that while the difference between premium lines and standard lines are noticeable, the difference between budget and standard ranges are less obvious, with the ingredients often appearing remarkably similar. Often the only difference is extravagant wording on the packaging.

Tesco, for instance, says that its standard bolognese is "produced in the UK using beef from a welfare-assured source". In fact, its value bolognese contains exactly the same meat, but refrains from boasting about it on the packaging.

Segmentation I think it\’s called. Or is it price discrimination? You as a producer know that there are some people who are happy to pay a higher price for your products than others are. What you want to do is keep the low priced business (which is after all profitable) but find a way to shake those extra pennies out of those willing to pay more. So you charge more for silly things and see what happens. It might be the above, telling people about some feature. It might be Starbucks offering, for a fee, to shake and stir the sugar into your iced tea. It might be, in the metals trade, labelling your alloy "aerospace grade" and "commercial grade", even though they\’re the same. But of course the aerospace grade is higher priced because you "guarantee" that it meets certain chemical standards, while commercial grade simply meets them (true story btw).

Now you can look at this two ways: one is that suppliers are trying to rip off customers. The other is to look a little more deeply. It\’s a standard assumption that in a perfectly competetive market there should be no profits over the cost of capital: any that did exist would be competed away. This sort of segmentation is the response to being (or thinking that you as a supplier are) in such a competetive market. Yes, perhaps it is true that this is "ripping off the consumer" but what it tells you is that the suppliers think they\’re in a competetive market.

It\’s a slightly cock eyed manner of looking at it, I agree, but interesting as well: the very fact that people are doing these things to avoid being in a perfectly competetive market shows their underlying assumption, that they are in one.

Ahah, Ahah, Ahah, Ahahahaha

Snort, giggle. Via, surprisingly, here, this:

\"\"

Yes, it is what you think it is. It\’s a gold noose, to be worn as jewelry (I suppose we could call it a Pierrepoint as the other part of his name is already used for jewelry of a more intimate nature). And guess who it is sold by? Yup, Disney, so you were right there too.

$36 a pop.

Stave off plunderers with a charming threat wearing this Disney Couture necklace! Booty hunters beware!

From the Pirates of the Caribbean "Dead Man\’s Chest" collection – 14K gold plated 20" Noose Necklace.

By Disney Couture

I wonder which marketing executive thought up this one, which one actually signed off on it and whether both have already been fired or have that pleasure yet to come?

I think it\’s mindgobbingly stupid but then what do I know?

Russian Business Ethics

A rather rough world out there:

Oleg Zhukovsky, the deputy chairman of the state-run banking giant VTB, appeared to have become the latest victim in a series of high-profile killings that have stirred memories of the brutal mafia wars of the 1990s.

State television, however, suggested that Mr Zhukovsky may have committed suicide, despite the fact that his hands and feet were tied.

Typical

This is no surprise:

John Cridland, deputy director general of the CBI said: "The CBI welcomes the Government\’s plan to review when and how the right to request flexible working will be extended to parents of older children. It should beware of increasing numbers eligible to request too far too fast, however, as this could jeopardise the future flexibility of those currently eligible."

No doubt the CBI does welcome it. For such plans hit small business disproportionately heavily, big business being able to deal with it better. Thus the small strivers who compete with big business are hamstrung. How could you not welcome such a development?

Russian Customs

Well, here\’s a surprise:

Sources say the conflict is as much about financial interests as power: some former KGB figures are said to offer protection to businesses and are involved in money laundering and smuggling.

The fiercest battle is reported to be over control of Russia’s customs organisation.

There is indeed good money to be made by being in charge of it.

The investigation, which uncovered evidence that Tri Kita managers had bribed FSB officers to smuggle in goods without paying duty, led to the dismissal and arrest of several high-ranking FSB figures last year.

We, of course, are far too small to be of interest to such people. But over the past 6-8 months there have been increasing problems in trying to import or export anything. We\’re a little unusual in that we do indeed pay all of the applicable customs duties on our materials, as we have done for over a decade. But we\’re now, even so, being hit with endless delays, samplings and so on. All the prelude to a shakedown in fact. So while we\’re of no interest to the big boys, the littler ones seem to be looking for their slice too.

It\’s actually got so bad that we\’re looking to build a supply chain outside Russia, despite it being the obvious place for us, chock full of both our desired material and the expertise to purify it in the manner we want. It\’s not even, to be truthful, the idea that a slice of the action will be demanded. We can change pricing to deal with that. It\’s the uncertainty that matters: a two month delay in shipping means we lose (as we have done) a customer.

Doesn\’t bode well for the Russian economy as and when the oil price falls, does it?

David Frost is an Idiot

No, not that geeky one on the TV, this one:

David Frost, the director general of the British Chambers of Commerce, has found himself in hot water with women’s business groups at the launch of Small Business Week.

Speaking at the release of a report on the growing popularity of homeworking and what the Government could do in response, Mr Frost questioned the merit of encouraging what he called “lifestyle” businesses at all. “What are we trying to achieve at the end of the day?” he asked. “Do we want 50 million self-employed businesses or do we want some growth businesses.” It seemed a valid question, even if he already knew his preferred answer.

I\’m not sure I\’d agree with everything said in response but there\’s truth in it:

Maxine Benson, co-founder of women’s network Everywoman, blasted back that “lifestyle business” was a derogatory term and anyone, including women, choosing to set up a business that allowed them to balance their desire for stimulating and financially rewarding work with their family responsibilities should be praised and supported and not criticised.

What Frost has missed is that we don\’t actually care all that much about "growth" is such if growth is to be measured purely in financial or monetary terms like turnover, GDP and the like. What we care about is growth in utility, in that grab bag mix of the satisfaction of individual human desires. This is one part where the Greens are indeed right, we shouldn\’t objectify GDP growth above all other things (although there are any number of entirely valid reasons to reject their actual proposals, the largest being that what they propose might increase their utility in a sort of millenarian rural socialism, but that\’s what most of humanity has been trying to escape for the last 8,000 years), we should indeed look to the wider scene.

Another way of putting this is that "growth" isn\’t the desired end. Growth in utility is and "stimulating and financially rewarding work with their family responsibilities" certainly meets that goal. Growth in GDP, the growing of small businesses to large, "growth businesses" are means to that end, certainly, but they are not the end itself.

But then by concentrating the argument upon utility I am of course betraying my classically liberal mindset. As the determinants of each individual\’s utility are known only to that individual we have to bugger off and let them do as they wish, subject only to preventing them impinging on the rights of others to pursue that goal. Which is the real reason that Frost is an idiot: "we" are not trying to achieve any goal that he can either help us with nor, from his comments, even recognise.

 

Christmas Tree Shortage

OK, so subsidies were cut in Denmark leading to a drop in planting, leading to a shortage in this country of Christmas trees. OK, fine. So prices here should go up. Which they are.

Although Nordmann firs are grown on plantations in Britain there are not enough to meet the annual demand. The British Christmas Tree Growers Association is advising its members to limit price increases to 20 per cent. The extra cost will be passed on to customers at garden centres and markets this Christmas.

Err, hang on a minute. A central trade body offering recommended price rises? Isn\’t that, err, a cartel? As in illegal collusion to screw the consumer?

Why aren\’t they being prosecuted?

Alisher Usmanov

A profile in The Times.

Personally, that he was indeed the son of privilege and then survived 6 years in a standard penal colony (and I\’ve met others, even traded with some, with similar backgrounds) would be grounds for being extremely suspicious of the man.

Soviet camps were not survived by such without contacts being made, favours offered and taken.

Authoritarian Russia

Nick Cohen has a nice piece on the rise of authoritarianism in Russia. Most especially, on the way in which big business doesn\’t seem to mind:

Just before Tony Blair resigned, a telling scene illuminated the new world. At the June G8 summit, Blair warned Putin that unless Russia shared Western democratic values and tolerated dissent, there would be a business backlash. No, there won\’t, replied appalled business leaders. Hans-Jorg Rudloff, the chairman of Barclays Capital, said Blair\’s approach was \’unbalanced\’. Peter Hambro, executive chairman of Peter Hambro Mining, an Aim-listed company with extensive interests in Russia, said that Blair\’s comments \’ran the risk of being damaging\’ for British business interests in Russia. The outgoing PM\’s position was \’very different to that business\’.

And so it went on and few noticed that a regime filled with ex-KGB men was now being defended by the beneficiaries of global capitalism.

He also gets in a marvellous series of digs at the founders of the university I went to, the LSE.

There is one point I\’d like to make though. I\’ve not been particularly worried by morals in my business life (I\’ve done a deal with North Korea for example, I\’ve paid douceurs as another) but I have been concerned over the ease of doing business. A lot of that business life has taken place in Russia so I\’m well aware of the trends which Cohen is talking about: but I\’d like to insist that it is Big Business that thinks this way, not the small fry like me. Not, as above, for any moral reasons, but because that imposition of State power is making it ever more difficult to actually conduct business. Our last three shipments have all been delayed for weeks at customs, as those running the system attempt to extract their rents (we do in fact pay all of the applicable export taxes, as we have done for more than a decade). So much so that I spent part of this week thousands of miles away looking into the possibility of recreating the extraction and purification system outside the borders of Russia. Not because it would be cheaper (it wouldn\’t) but because it would be more reliable, less subject to the exercise of the power of the Russian State.

Big business might make peace with authoritarians, but small business never will: because we can\’t. We never have enough power to infuence the decisions, we are the prey that is picked over. The tragedy for Russia, indeed for all those who suffer such political systems, is that small business is the future, the driver of economic growth and the creator of the golden uplands of the future.

I know that as a good liberal I\’m supposed to be concerned about freedom of the press in Russia (which I used to write for actually and there\’s no way that the same house would publish those pieces now, owned as it is by Usmanov) and indeed I am. This is from the other side of the mind, from my self-interest, not my enlightened one.

Another way of putting this is that if someone as unscrupulous as myself is ready to give up on the place as a place to make money then they\’re right royally screwed.