Tuesday, August 28, 2012

Sure, You Can't Afford Food, But At Least You're Buying Local

From the New York Times travel blog comes a humorous - and totally unintentional - economics lesson in a routine story about traveling in Scandinavia on a budget:

Most people assume Norway costs so much because of its high tax rates. Not so, said Nils Henrik von der Fehr, chairman of the economics department at the University of Oslo. Taxes play a supporting role — there is a 25 percent value-added tax on most products, for example — but the real reasons are labor costs and agricultural protectionism.

“The most important factor is the way our labor market works: centralized bargaining,” Mr. von der Fehr said. “One has made an effort to have an egalitarian wage structure. While people like me are not well paid compared to our colleagues in other countries, people at the lower end earn much more. You don’t have cheap labor in Norway.

“All the things you want as a tourist — hotels, restaurants — are labor-intensive,” he said. “That’s why it’s nice for us to be a tourist in the U.S.: everything you want is cheap because of the abundance of cheap labor.”

Another factor is the high tariffs on agricultural imports that keep Norwegian farms in business: “We have perhaps the most protected agricultural system in the world,” he said. “It’s not a particularly easy place to grow anything. Farms are small and the season is short.”

That may mean higher food prices, but at least you are buying local.
The NYT earlier notes that a cup of coffee will cost you $4.50 in Oslo, a fast food burger and fries is a whopping 23 bucks, and - most depressing - a six-pack of "mediocre beer" goes for a buzz-killing $30!  When asked how they cope with these prices, a Norwegian pharmacist quips "It's easy. We buy everything in Sweden."

Smart dude, but I'm not so sure that's the result of a sound economic policy.

Now, I freely admit that I don't know anything about Norway's labor regulations, but the bit about agricultural tariffs finds strong anecdotal support in last December's blog post on how Norway's import-prohibitive dairy protectionism caused butter prices to spike to an insane $450 per pound, thereby threatening a "cookie-less Christmas" in the world's butter cookie capital.  And if economist Mr. von der Fehr is correct about Norway's labor regulations, you just have to love how an obsession with income inequality has - combined with fierce protectionism - created shared misery in its attempt to prevent unequal prosperity.

But, hey, at least you're buying local!

(Or rich enough to afford traveling to Sweden and smuggling back some reasonably-priced cookies.)

No comments: