No 161: Strange Story 3 - The Irish Government Cheese Plan

THE world economy grew more in the 1990s than in any other time in human history.

For example, between 1995 and 1997, the world's GDP grew by more than during the 10,000 years from 8100 BC to 1900!!!

Of all the countries of the EU, the Republic of Ireland gained the most. Unemployment fell from over 15% to 5%. GDP growth averaged 7% each year from 1994 to 2004. GDP per capita rose from 66% of the EU average in 1986, to 111% of EU average in 1999 (significantly higher than in the UK).

The government policies that seemed to have led to this success were deregulation, encouragement of foreign investment, and very low corporation tax rates of 11% (whereas in the USA, it is 35%)

However, as the graph below here shows, the fall of Ireland during the Credit Crunch has been just as spectacular.

In all, GDP fell by 13.5% in 18 months.

The average wealth of a household fell from E95,000 in 2006, to E51,00.

The Irish banks needed billions of euros of help from the government.

In 2010, the government will borrow funds equivalent to 32% of the whole country's production.

In recent weeks, the country's situation has got so bad that the Irish government has been forced to accept 85 billion Euros of loans from the EU and the IMF.

At the same time, they announced 10 billion Euros of cuts in government spending, and 5 billion in tax rises.

Understandably, the people of Ireland are angry, as you can see in this picture:

But, have no fear people of Ireland, because your government has thought of a plan, and although it may not solve all the problems straight away, it is will surely make everyone feel much better. The plan is....

CHEESE!

That's right, the Irish government has bought a very big piece of cheese and every household in the country will get some of it!

Brendan Smith, the agriculture minister, said the plan was "an important means of contributing towards the well-being of the most deprived citizens in the [EU] community".

However, the plan has made some Irish people extremely angry:


One caller to a radio show said: "Have they taken leave of their senses? It's not cheese that people who have lost their jobs that people are worried about, it's about how they're going to tell their children or grandchildren that Santa has very little money."


"What are they going to tell their children and grandchildren: that Santa has cheese instead?"

Another said: "This is just crackers. The scheme is full of holes. This is the last straw - it's really grated on the whole community." 

Further Reading

Independent news story about the cheese

BBC story about the recent loans to Ireland

No 103: Competition Policy Story 2 - More about banks

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THIS one concerns ISAs (Individual Savings Accounts), tax free savings accounts in which every UK adult can invest up to about £10,000 a year.

Those financial insitutions who provide ISAs have just become subject to a "super complaint".

Now you may think you are a big complainer. Or perhaps someone in your family. Or even your Economics teacher. However, none of us qualify to be called a "super complainer".

Super complainers are independent organisations who try to look after consumer rights. If one of these makes a super complaint, the government competition authorities have to investigate immediately.

There are 8 super complainers (here is a list of them from my least favourite website). They include CAMRA, a most excellent organisation that tries to keep beer cheap.

The ISA super complaint in fact has two parts:

(Read full article here.)

I have in fact experienced both of these problems.

My first ISA paid 4.6% interest, far above the Bank of England base rate and well above the inflation rate of the time. I was happy to leave my savings there, until one day I discovered that for six months I had only been receiving the much lower rate of 0.4%. The bank hadn't told me about the change.

Part of government policy to improve competition is to encourage information comparison websites about such products as bank accounts, insurance, home gas and electricity costs and telephone charges.

When consumers find out they can get better a deal with another company it should be made easy for them to switch to the cheaper provider.

Unfortunately though, most of the paperwork has to be done by the company who the consumer is leaving. Therefore, there is little incentive for this firm to do the paperwork quickly. In fact, switching often takes a very long time.

Last year it took 2 and a half months for me to switch my energy provider. My wife wanted to move her phone number from one mobile provider to another, and this took 2 weeks.

Strangely though, this BBC article reports a very high rate of consumer satisfaction with UK banks.

One aspect of economics I love is the detective work - of seeing beyond what seems to be a confusing surface picture to what really is happening.

Does the fact that only 7% of people with bank accounts are likely to switch next year prove they are happy with their accounts? Or is something else happening?

If you post a comment about this, I'll tell my recent experience with this also.

The final sentence of the quote above may help you, as may reading the full article.