Sunday 19 May 2013

Cuckoos and the economics of orchards

Years ago, I interviewed the former economics adviser to the Jersey government for the New Statesman, and he explained to me how the island's tax haven status had been like a cuckoo in the nest.

Financial services are so profitable (and I might add, so safe - you can get bailed out) that other forms of enterprise become economic.  First the agriculture runs down, then the tourism, then - with over 500 banks on the island - nobody else can afford a home.  It is the same process that is happening, much more slowly, in London.

But there was a story in the Evening Standard this week which made me realise that there are the other forces working in the same direction - monopolistic supermarkets making small farming uneconomic, competing with Chinese wages and Far Eastern-style employment standards.  The result is the bizarre story that de-regulating migrant Bulgarian and Romanian workers in the UK could lead to the end of British orchards.

This was what the Home Office Migration Advisory Committee told Home Secretary Theresa May.  The idea is that the migrant workers will be able to work elsewhere in the UK economy shortly, and will abandon fruit-picking.  Prices will rise, the supermarkets will reject UK fruit, and there go the apple orchards.

It is tempting to ask who picked the fruit before the Bulgarians came to do it a few years ago, but there is a deeper problem than this.  It means that supermarkets are using their semi-monopoly position to force fruit producers into lower than economic prices - just as they have done with milk.

But there is a bigger issue too.  What else can't we afford to do in the UK?  We can't afford to train many of the staff in the NHS, which is staffed by recruiting direct from training colleges in developing countries.  Now, apparently, we can't imagine how we might use our existing orchards to grow fruit - except by importing the poor and desperate to do it for us?

The cuckoo in the nest syndrome again.  It isn't what I would call the 'balanced economy' that the coalition promised in 2010.  Nor is it the kind of economy that spreads the benefits much further than financial services.

And what will become uneconomic for us next?  Growing wheat?  Making screws?  Making ships has pretty much disappeared already.

And all because monopoly power undermines realistic pricing.  That, and a fetishistic over-emphasis on the doctrine of comparative advantage, which suggests that - because we have banks and speculators - it isn't worth doing anything else.  If the British Disease used to be poor management and the closed shop, it is now the way our rulers cling to speculation and financial services as if it could feed us.

Well, I for one will continue to eat local fruit - and if the supermarkets can't stock it, I will be buying it elsewhere.  The fact there is now an elsewhere, in the burgeoning local food movement, is one of the hopes for the economy and the future.

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