Monday, 29 July 2013

Sympathy for the tobacco industry

My favourite is sunbed bloke whereas Mr Throat with the manky ‘tache gives me the heebies. I’m talking about the pics on the side of tobacco products of course, which are to continue to co-exist alongside product specific branding after the ConDems backtracked on introducing plain fag packets. 

Now would plain packaging discourage more young people from smoking? No idea, probably I guess, which would be a good thing. More concretely, generic packaging would limit the scope for smokers new and old to develop or maintain any brand loyalty with this undermining the price premium branded products currently enjoy. I reckon this is the real reason fag companies oppose plain packaging.

To give a practical examples, there have always been what were known as “pleb” fags. When I was a teenager it was Kensitas Club, a brand whole families smoked so they could collect the coupons and exchange them for goods at the Kensitas Club shop off Sauchihall street. Hence, smoking Club, fags being a visible thing in social situations, was a marker of (limited) social status.

Latterly, Lambert and Butler took the pleb fag crown because they were a chunk cheaper. No idea what it is now, but I do know 10 Marlboro lights remains the lower to middle middle class Friday night fag of choice. In fact, Marlboro light are the iPhone of fags, both because of who smokes ‘em and because they’re also premium priced. And crikey, having just had a look, branding matters given the 60p difference between the cost of 20 Lambert and Butler King Size vs 20 Marlboro (a 7.5% difference).

Now, put all fags in plain packaging, stand outside a pub, take ‘em out, crash a few even, it doesn’t matter because no one looking at you would be any the wiser as to what brand you were smoking, meaning one of the main reasons for paying extra would disappear in a puff of smoke.

Back to the premium pricing though and the recent legislation forcing supermarkets to sell fags from secret cabinets; thinking about it, these could well become one of the best friends tobacco companies have ever had. Before, when fags and how much they cost were on display, the consumer could compare/contrast prices while standing in the queue. On reaching the till he or she could then choose on the basis of both price and brand. Now, no one has a scooby how much cheaper/expensive the alternatives are. By taking this vital price information off the shelf, the government has made it easier for tobacco companies to charge and maintain a premium of almost £2 in some cases on 20 fags (and retailers who can add a cheeky few pence on and you'll be none the wiser) (1).

Oh and hiding something just out of reach behind a wee, secret door doesn't attract the interest of children? Seriously?

 (1) Combining generic packaging with readily available price lists ordered from most expensive to cheapest per fag or per gramme i.e. to avoid fag companies mucking about with packet size to obscure things, strikes me, a rollie smoker, as the way forward.

Sunday, 14 July 2013

The earth is flat and other fiscal fairy tales

Pesky facts and actual experience having comprehensively destroyed the supposedly practical arguments once presented in support of fiscal austerity, the question now is why are they still at it. The answer, scanning thru George Osborne’s recent mansion house speech, is simple; dogma.

So why are we having to endure “a tough, credible fiscal policy that bears down on our excessive deficit”?  Previously, it was to preserve Britain’s AAA credit rating, the notion fiscal austerity promoted growth and the Rogoff and Reinhart claim that beyond a certain level government debt undermined economic growth. Oh and there was probably scope for runaway inflation too. Now that each these notions has turned out to be utter pants, Osborne says its because we have “a public sector that was too big, paid for by a private sector that was too small” and that “(t)here are more difficult decisions. There have to be when the country is living way beyond its means.”

So there you are then. Why are libraries closing? The public sector’s too big. Benefits being cut? Again, because the public sector is too big. Roads a pot-holed mess? The country was living beyond its means.

Obvious really, except this is moralising tosh that only merits attention because of who is trotting it out given (a) the long-term damage to Britain’s productive capacity fiscal policy continues to wreak (as per the recent growth in long-term unemployment), (b) the strong negative correlation - pointing to causation - between fiscal austerity and economic growth and (c) as examples of rank rotten nasty dogma.

As ever, big dods of Keynes are needed here. One, because, as he observed, an increase in debt funded public sector spending on infrastructure is needed to take up the slack left by a cautious private sector and two because, in place of dogma, as he wryly observed, "When the facts change, I change my mind. What do you do, sir?