Watch out for unintended consequences | John mangun
“The law of unintended consequences is that the actions of people – and especially government – always have unintended or unintended effects. Economists have taken its power into account for centuries; it has been largely ignored by politicians for so long. This comes from Rob Norton, former economics editor of Fortune magazine.
The examples are limitless. Mao Zedong’s Four Pest campaign has targeted the elimination of rats, flies, mosquitoes and sparrows, the latter because birds eat rice. Sparrows have been threatened with extinction in China, but rice yields have declined because the birds also feed on plant-eating insects. The Chinese government eventually had to import 250,000 sparrows from the Soviet Union.
A European country has decided that the personal income tax rate should be 104 percent of all income above a certain level. Surgeons in the private sector stopped working because they were in fact paying to perform delicate operations. One notable author demanded that his publisher stop selling his books because he was losing money on every copy sold.
When such situations arise, the government’s response is that it is shocked and surprised that everything it has planned could possibly turn out in a way they did not expect. Not all unintended consequences are unintended. Aspirin – acetylsalicylic acid – is used to reduce pain. Some people have the side effect – unintended consequence – of upset stomach. However, aspirin is also used as part of the treatment of those who have had a heart attack because it is a blood thinner. Unintentional.
The other problem when we find out that a government policy worked differently than what was “intended”, it was perhaps not a surprise. The magician knew that the rabbit might escape from the hat unexpectedly. Maybe it was all part of the law.
Turkey appears to rebound from crisis to crisis about every six months. Last week, the Turkish Central Bank raised interest rates by 200 basis points. This allowed President Tayyip Erdogan to fire the governor of the Turkish central bank, on the job for just over 3 months. He is the country’s fourth central bank governor in the past two years. The Turkish lira collapsed, but the president assured the country that “Erdoganomics”, along with low interest rates, is the key to solving Turkey’s 15% inflation problem. If things go too badly, there can always be an “unintentional” coup attempt like in 2016.
Biofuels using ethanol are great for the environment, they say. The 2005 US Energy Policy Act made the mixing of biofuel and gasoline mandatory. Environmentalists loved the idea. The same was true for corn growers when the price went from $ 2 to $ 7.50. Producers who use corn for animal feed are not happy, nor are consumers who have seen beef prices drop from $ 2.50 to $ 5.
US President Biden’s green fuel policy of using edible oils as fuel has spiked global vegetable oil prices by more than 70% in less than a year. “There was a new factor that came after President Biden was elected that projected higher demand for soybean oil, which is 100% biodiesel,” said Dorab Mistry, senior edible oils analyst. “Four refineries have already announced they will end fossil fuel refining [and] instead, start producing fuel from vegetable oil. Biden supporters love the idea.
“Soaring food prices can only cause social instability in emerging countries, because some people can no longer afford cooking oil to prepare their food,” says Albert Edwards of SocGen. No problem. Just an unintended consequence.
The protests of the Arab Spring in 2010-2012 spread across much of the Arab world as a “response to oppressive regimes”, corruption, police brutality and high income inequality. It is all true. But then again, in 2011, as the protests turned critical, the price of bread – the absolute staple of the diet in the region – rose 85%.
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