Friday, January 21, 2011

Nanny land

A friend from France recently asked me why Australians seemed to have little problem with their governments giving them advice in the form of media and advertising campaigns that urge people to change their lifestyles. Certainly Australia is home to many publicity drives that urge us to stop smoking, to slow down on the roads, to check our superannuation accounts and so on. The French would, at least according to my friend, be far less tolerant of government 'interference' in their private lives.

Are Australians too trusting of their governments? Has the "nanny state" taken over down under? Certainly Australian political history gives less cause for concern than that of most countries. The USA was settled by pilgrims feeling religious persecution at the hands of government in the UK. Later, the civil war there killed more people than all of America's other wars on foreign soil. The Germans have particularly traumatic memories with democratically government that turn themselves into genocidal dictatorships. The French too have been through a famous revolution that went wrong and still have memories of the collaborationist Vichy government during WWII that shipped thousands of French citizens to extermination and forced labour in the Third Reich. Australian politics, in comparison, are, thankfully more like a Sunday kindergarten picnic.

It is not that the legal situation in the USA, France or Australia is radically different. Smoking in indoor public places is banned in all three. Driving when drunk is also illegal. Perhaps Australian governments are more proactive. After all, the point of such laws is to bring about behavioural change. And prevention is the best cure. It is a better outcome for all concerned if people abstain from drink driving before the law gets involved. Similarly, there are financial benefits for nations that have a healthier population. With the skyrocketing cost of medical treatment in most Western countries, this is more true now than ever. So maybe a publicity campaign with a policy objective makes good sense.

Dame Edna Everage is reputed to have said that if Germany was the "fatherland" and England was the "motherland", then Australia was "auntie land". Maybe she meant to say "nanny land".

Tuesday, January 11, 2011

A bit rich

This week's edition of the Economist newspaper features a sadly imbalanced and ignorant attack on public sector unions. Membership of these workers' groups have remained relatively high as unions in the private sector have fallen over the last twenty years. This fact throws up two questions: why is the public sector still heavily unionised and why are membership densities in the private sector down. The first question assumes that there is some sort of unwritten number that represents the ideal level of union membership that the public sector is unhealthily above. That is the question that the Economist pursues instead of asking why private sector unions are below a healthy level. In fact, there is plenty of evidence that the more unionised a national workforce is the higher the standard of living is.

The central argument of the article is that the public sector unions are facing a challenge as governments in many countries impose financial cuts on their respective public sectors. Up to quite recently German school history text books were infamous for treating the Third Reich as something akin to a natural disaster that was unfortunately visited on the population. Now the Economist is doing the same with the current economic crisis. It writes that 'Governments almost everywhere — particularly in the rich world — are being forced to cut back public spending' with the result that public employees are being asked to carry the can. The article omits to mention by who or what the governments are being forced. Presumable some sort of unavoidable natural disaster like the arrival of Nazism in Germany. In fact what is behind the difficulties of governments are the failings of the banks and financial sector. The article makes no attempt to explain why public sector employees should be asked to rescue the banks when they are the last who were responsible for the financial debacle.

This is not a question of pinning the blame. But it is very hard to learn from mistakes when the analysis is blind to the real cause. The disastrous state of public finances in Greece, Ireland, the UK and the USA is due to the enormous mistakes of private sector banks, not public sector employees and their unions.

Wednesday, January 5, 2011

Demise of the retail dinosaurs?

Some of Australia's largest retailers are calling for a change in tax laws to reduce the difference between their prices and those of online competitors, particularly those from overseas. So far retailer's appeals have rightly earned little sympathy. These corporate heavies seem to think that a ten percent saving from avoiding the relevant tax makes the difference between in-store and online shopping. They seem determined to insist that consumers shop on retailers' terms. Instead, what we may be witnessing is the death of a business model and the triumph of a new one with far reaching repercussions.

The essence of traditional high-street retailing consists of attracting customers into visiting a store in a convenient location and making the experience so rewarding that they will come again. But the rents for such real estate are high and every square meter has to be used to maximize returns. There is a whole science behind how retailers use shelf space and shop layouts to boost sales. The simple physical stature of the average human sets limits on  shelving, and that is just the beginning. The alternative model - filling online orders from a warehouse in a low-rent area on the urban fringe - has a lot going for it. Retailers can stock more goods per square meter of floor space because shelves can extend much higher and there are no inefficient hierarchies of good and bad shelf space. These benefits are further multiplied if automated retrieval systems are used. The benefit for consumers are lower prices, greater product variety and choice. A good website is also much easier to use and search for product comparisons and information than it is to get reliable information from shop-floor staff who are often just school kids on holiday jobs with little idea about what they are selling. 

A wider shift away from antiquated bricks and mortar retailing to online shopping would free up valuable inner-urban real estate for housing, cultural and leisure activities or public space. The death of the retail dinosaurs could be the birth of a better urban landscape.

Image: Cobalt 123