Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: climate follies, minimum-wage follies, "robber baron" myths, Crocs' pandemic surge, and COVID-19's long-term economic scarring. To sign up for the Capital Note, follow this link.
Reining in the Economy, Not the Climate
British Prime Minister Boris Johnson, a politician not famous for his fondness for detail, accuracy, or practicality has been promising economic recovery, deregulation, and one of the most aggressive greenhouse-gas-reduction programs in the world. That the third objective will be difficult to reconcile with the first two is ignored, denied or, indeed, brushed aside amid claims of a green-jobs bonanza:
I suppose Brits should be grateful that Johnson has a "ten point" rather than a "five year" plan. Progress!
As is so often the case, greenery goes hand in hand with corporatism with Johnson talking about "uniting businesses, academics, NGOs and local communities in a common goal to go further and faster to tackle climate change."
The individual, meanwhile, is just expected to follow instructions. In November, it was announced that the U.K. "plans to ban sales of diesel and petrol [gasoline] cars from 2030", ten years earlier than was initially envisaged (the target date had already been brought forward to 2035). The original scheme - none too rational in the first place - was crowned with a fool's cap, in that the ban was also to include hybrids. That cap is still there but has been allowed to slip a little.
But now reality bites.
It should be stressed that the U.K. is not the only country going down this route. France will be banning all but electric cars by 2040, and Germany, Ireland and the Netherlands will (like the U.K.) be doing so by 2030.
However, the U.K. has an additional self-imposed problem, which Tavares did not hesitate to point out:
Rather than choose something akin to the Norway option, retaining participation in the European Economic Area, the Single Market encompassing the EU, and three non-EU states (including Norway), the Conservatives opted for a very hard Brexit, a curious decision that makes the coming of a supposed green boom even less credible than it already is. Tariffs may not, in this case, be a problem, but a rather more treacherous obstacle, non-tariff barriers, will be.
At this point, American readers may be asking themselves why they should care about the contradictions inherent in what passes for a British prime minister's economic policy. Well, to start with, our new president has made it clear that climate change will be an element that is central to his policies - and, unlike Johnson, he is not pretending that deregulation is any part of his agenda. In fact, he is promising the opposite.
And so far as "climate" is concerned, rejoining the Paris Agreement is only the beginning. Even that (mistaken) act did not stand alone.
But in the meantime, take a look at this, via TechCrunch:
The calculations that go into producing these metrics will, in their own way, almost certainly be a marvel (read that word in any way you choose), but they will also be manna for lawyers, other regulators, and, of course, the rent-seekers (who include lawyers and those staffing regulatory agencies) who are already doing so well out of the interlinked ideologies of "socially responsible" investing and stakeholder capitalism.
Whether this will do anything to rein in the climate is doubtful (and, no, I am a lukewarmer, not a "denier"), but it will rein in the economy.
The jobs that are going to be lost as a result of Biden's decision to rescind the necessary consents for the construction of the Keystone XL pipeline will only be the first casualties of the president's (allegedly) green agenda.
Around the Web
Some Consequences of the Minimum Wage
The Grumpy Economist (John Cochrane):
"Robber Baron" Myths
Here's an extract:
Crocs' Pandemic Surge
Some of this is down to CEO Andrew Rees:
COVID-19 and Risk Assessment
In a Capital Letter back in August I referred to work by Julian Kozlowski of the St. Louis Fed that (to oversimplify) demonstrated that one of the ways that the financial crisis had depressed economic growth was that it led companies to revaluate risk. The "impossible" had happened, and the fear that it could happen again either deterred investment or led companies to demand a higher potential rate of return before putting their dollars to work.
So, will COVID-19 have a similar effect?
Mr. Kozlowski returns with further commentary, and it does not make for a reassuring read.
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