Monday, December 12, 2011

The Grinch that Gouged Christmas

Butter in Norway is selling for something like $500 a pound. You read that correctly: five hundred dollars a pound. This is the result of the perfect butter storm: weather led to less milk production and lower fat content in milk. A bizarre high-fat-diet health care fad led to an increase in demand for butter. Now, with dark December upon them, Norwegians are heating up their ovens for the de rigueur Christmas butter cookies.

In a free market, this would lead to a big increase in butter imports from Europe's many dairies, and a very small increase in the world price of butter (how many butter cookies can 5 million Vikings eat?). But Norway doesn't have a free market for butter. It's byzantine centrally-planned dairy czars were cracking their knuckles and licking their buttery fingers as prices rose and butter-smugglers were seized. But the shortages went too far - and now TINE is the Grinch that gouged Christmas!

What went wrong here? First, the Norwegian government allowed a single monopoly to control virtually the entire dairy industry. Then, it gave the monopoly control of its tariffs and quotas on dairy imports! This paragraph is astounding:
TINE, the largest Norwegian diary coop who is also responsible for managing the Norwegian diary market has been under significant criticism fo insert linkr its management of the dairy. As a result, it was forced to ask the Ministry of Agriculture to temporarily reduce its import tariff rates from NOK 25.19/kg (€3.24/kg) to NOK 4/kg (€0.51/kg) to overcome the predicted weekly market shortage of 50 tonnes during December. This exceptional measure will only remain for the month of December and allows any trader to import butter at this rate.
In case you hadn't figured this out, quotas (like Norway's) are worse for consumers than tariffs. A tariff raises the price of imports, but it does so by a certain level. A quota, by contrast, limits import supply, and in the event of big shifts in supply and demand, it can do massive damage to consumer's pocketbooks - while the profits all flow to foreign companies! But this is the system chosen by a government that will only act when it is ordered to do so by an evil monopolist bent on robbing its fellow citizens.

So celebrate your freedom from public-private partnerships by cooking some Norwegian butter cookies this Christmas season. After all, the Norwegian consumers are helping keep the price of butter artificially low for those of us who emigrated!


Emily Grace said...

Check out page 126 Paragraph 226.

That's an incredible development.

Anonymous said...

My friend had read that butter had gone up to $500 a pound in Norway and I didn't believe him -- but now I've read it for myself!!