Tag: economics

Counting on … 176

30th October 2025

Private jets – 3

For climate activists there is also the issue of justice. The increasing use and ownership of private jets represents the growing gap between the wealthiest and the poorest. This gap is socially unjust but doubly so, because the richer you are the bigger your carbon footprint. And the bigger your carbon footprint the more the damage you cause to the environment, the greater the impacts of adverse weather events, pollution, food and water shortages on the poorest. 

“If everyone used private jets and superyachts like 50 of the world’s richest billionaires, the remaining carbon budget to stay within 1.5C would be burned up in just two days” quotes Oxfam’s report, From Poverty to Power (2024). The report looked at data on the luxury transport consumption of 50 of the world’s richest people and found that their  consumption emissions totalled more that the poorest 2% of the world’s population (155 million people).  

Amongst its recommendations, Oxfam’s report included –

  • Taxing the super-rich to curb their excessive consumption and investment emissions, and their role in propping up polluting industries.
  • Banning or punitively taxing carbon-intensive luxury consumptions, starting with private jets, superyachts, sports utility vehicles (SUVs), and frequent air travel.
  • Regulating corporations and investors to radically and fairly reduce their carbon emissions. (1)

There is also an issue for economists trying to address net zero. In a series produced by The Guardian, entitled The Great Carbon Divide, the economist Thomas Piketty says “Questions of social and economic class must be at the centre of our response to the climate crisis, to address the huge inequalities between the carbon footprints of the rich and poor and prevent a backlash against climate policies. Regulations will be needed to outlaw goods and services that have unnecessarily high greenhouse gas emissions, such as private jets, outsized vehicles, and flights over short distances.” (2) 

(1) https://frompoverty.oxfam.org.uk/billionaire-pollutocrats-what-we-can-do/

(2) https://www.theguardian.com/environment/2023/nov/22/ban-private-jets-to-address-climate-crisis-says-thomas-piketty?CMP=Share_iOSApp_Other

Counting on … day 148

22nd September 2025

Lack of political will can also worsen the impact climate change. Ilan Kelman, Professor of Disasters and Health, UCL explains it thus: “The IPCC’s summary entirely avoids the phrase “natural disaster”. This reflects decades of work explaining that disasters are caused by sources of vulnerability – such as unequal and inequitable access to essential services like healthcare or poorly designed or built infrastructure like power plants – rather than by the climate or other environmental influences.

“The [2022 IPCC] report states, with high confidence, that “climate change is contributing to humanitarian crises where climate hazards interact with high vulnerability”. In other words, vulnerability must exist before a crisis can emerge. Climate change is not the root cause of disaster. The report explains that places with “poverty, governance challenges and limited access to basic services and resources, violent conflict and high levels of climate-sensitive livelihoods” are more vulnerable to climate change impacts.”

“The report explains that disaster risk and impacts can be reduced by tackling fundamental issues which cause vulnerability, no matter what the weather and climate do. It places high confidence in risk management, risk sharing, and warning strategies as key tasks for adapting to climate change.” (1)

(1) https://theconversation.com/ipcc-report-how-politics-not-climate-change-is-responsible-for-disasters-and-conflict-178071

Counting on … day 146

18th September 2025

Introducing alternative ways of managing our economies will require a high degree of political will – and especially the willingness to shift from short term (before the next election) to long term goals. 

One organisation that has done research on how this can be achieved is Nesta (a UK innovation agency for social good).

“Why long-termism doesn’t often happen…Part of the problem is that so much of our system of government pushes in the opposite direction. Decision makers get stuck in “firefighting traps”, a symptom of which includes focusing on the urgent instead of the important.

“Rather than simply indulge in well-intentioned hand waving about the need for greater long-termism in government, we need practical ways of encouraging future thinking that are hardwired into the system. Fortunately across the globe there are pockets of government innovation where we can find just that.”(1) 

Do read the full article. And ask questions when we next have elections – how will the candidate/ party ensure better long term planning to ensure intergenerational justice?

  1. https://www.nesta.org.uk/blog/how-to-build-long-term-thinking-into-government/

Counting on … day 145

17th September 2025

Intergenerational justice asks us to embrace “the interconnectedness of all things, the recognition of the inherent value of nature and its interdependence with the human world.” (1) Such insights are not new – in 1624 Donne wrote ‘no man is an island’ and in1224  St Francis wrote about all creation as being our brothers and sisters. Rather is seems as if it is our industrial world, our market economy, that has separated our activities into discrete silos. Traditionally economic theory only considered demand and supply of a product and not its impact on society (for good or ill) nor any damage it may cause in terms of pollution or diminishing future supplies. Indeed as regards the latter, a diminishing supply can in fact boost profits for the supplier!

The free market economic model does not protect future generations – it is not even capable of caring for present generations. We need alternative approaches to manage our economies – such as Kate Raworth’s Doughnut Economics (2) (More on this next week).

(1) https://gceurope.org/intergenerational-justice-or-how-to-be-a-good-ancestor/

(2) https://doughnuteconomics.org/about-doughnut-economics

Counting on … day 115

23rd July 2025

Joy in Enough is the name of one of the Green Christian groups, and it strikes me  as a beautiful description of how it would be to live well. And so how to live in a world where waste is valued.

Their aim is to seek out, develop and pursue a new form of economics that would ensure joy in enough for all.

‘…the purpose is clear. We want to build a society where there is delight in enough, taking from the earth only enough to meet our needs rather than satisfying our greed. We want to allow time for earth’s resources to be replenished, safeguarding them for future generations. We joyfully seek a just and ecologically sustaining economy where there is enough for everyone, locally and globally.’ (1) 

  1. https://joyinenough.org/resources/awakening-to-a-new-economics/

Counting on … day 80

9th June 2025

Last week leading economists from the University of Oxford, the University of Cambridge and the London School of Economics and Political Science, wrote to the Prime Minister, the Chancellor of the Exchequer and the Secretary of State for Energy Security and Net Zero. 

That letter includes the following paragraph re energy security:-

“Maintaining UK fossil production, in contrast, makes little difference to UK energy security; the price of oil and gas is set by the international market, and security is not achieved by modest increases in domestic fossil fuel extraction, such as through the Rosebank oil field. The risks are economic as much as environmental. North Sea oil and gas carry relatively high marginal extraction costs. Such facilities could easily prove uneconomic were the oil and gas price to fall much below present levels as global demand for oil and gas wanes. The government may have to pick up the tab of decommissioning.” (1)

(1) https://www.smithschool.ox.ac.uk/sites/default/files/2025-06/PM_letter_No_trade_off_between_net_zero_and_economic_growth.pdf

Green Tau: Issue 89

Profit, cost and loss

10th May 2024

Maximising profits seems to be the name of the game, the chief goal of businesses, educational establishments, public services, governments etc. But what are profits and are they intrinsically good?

What is profit?

A profit is an advantage or benefit, or more specifically a financial gain. The word’s meaning comes from the Latin ‘profectus’ meaning growth,  advance, increase, success or progress. From this there comes the idea that to profit  is to benefit.

In business terms profit may be understood as:-

Gross profit = revenue from selling a product or service less costs of materials used in producing it.

Operating profit = gross profits less operating costs such as of labour, machinery, depreciation, rent and utilities.

Net profit = operating profit less all other costs such as taxes and interest payments.

Who benefits from the profit?

  • The business owner who can simply pocket the lot. 
  • The business owner as a return on his/ her investment – possibly a risky investment. 
  • The business if the owner reinvests the profit in the business. Such investment could upgrade the business’s resources, infrastructure, and/or workforce, and so improve productivity. 
  • The shareholders if the profit is shared as a dividend. 
  • The employees if the profit is shared as a bonus.
  • The country may benefit if tax is paid on the profit.

The company and its shareholders may also benefit in other ways. Increasing profits can increase the value of the company’s shares which benefits the share holders (if they choose to sell) and increase the value of the company. The latter can benefit the company if the owner wished to sell or, conversely, protect the company if the owner wished to avoid being bought out. It can also benefit the company by making it easier for it to obtain finance for its operations. Maintaining and indeed improving profits also safeguards the jobs of the senior members of staff.

But are higher profits always better?

Increased profits may not be better for the consumers who may be contributing to these profits through paying higher prices. Last summer UK supermarkets were accused of ‘greed-flation’ as they reported significant profits whilst food price increases peaked at nearly 20%. 

Increased profits may not be better for employees who may face redundancies and pay cuts in order to maintain profits. Labour costs are often the first things a business tries to reduce to improve profitability.

Increased profits may not be better for the environment, if more damaging processes and trading practices are used to reduce costs and increase profits. Some companies transfer operations to other countries where there are lower environmental protection standards – or where there is cheaper labour and/ or lower welfare requirements. 

Increased profits may not be better for the environment if they also increase pollution. Increasing oil production leads to more flaring and more oil leaks damaging the environment. Increasing profits through sales of more takeaway meals, increases the use of single use plastic and the pollution it causes. 

Increased profits may not be better for the environment if the increase comes from the increased production of a product that is intrinsically damaging – whether that is carbon producing fossil fuels, or muck and methane producing cattle/ chickens etc. 

 All the above will also have adverse effects on the local community either though increased local unemployment or through increased pollution. Local communities can also be affected if the increase in profits arises from increases in production leading to increases in delivery traffic. 

If the increase in profits only, or disproportionately, benefits those on high incomes, that can increase environmental damage as those on high incomes tend to have lifestyles with a higher carbon and environmental footprint. It can increase social inequalities that undermine social cohesion and wellbeing. It can create inequalities in power, resulting in the community/ society/ economy being shaped to suit those with most money – further disadvantaging the low paid and unemployed.

The increase in profits may not benefit the host country if the company can arrange its affairs so that its tax is paid elsewhere – probably at a lower rate.

Do markets prevent excess profits? 

According to pure economic theory the movement of the market will prevent excess profits being made. For if a business makes more profits than expected, other companies will enter the market and such competition will continue until profits return to the normal level. In reality markets are not perfect. It can be hard for new or small firms to enter especially of the start up costs are large – eg in the oil industry, in supermarket chains etc. 

It maybe that a company holds an effective monopoly – rivals to ‘X’ cannot offer their customers the same audience base. Ditto for an online market trying to compete with Amazon. 

Information is not perfect. Many consumers may not know that Starbucks does not pay a fair proportion of taxes in the UK, that Shell is not paying for the safe dismantling of its disused oil pipelines, allowing them to leak toxic chemicals into the North Sea, or that their supermarket chicken has come from a factory farm that is polluting the River Wye. If customers knew these facts would they be as willing for pay for the products that generate profits for multi national companies?  Sadly it maybe that many customers have a low income that prevents them making other choices.

Does profit have to be the over riding priority?

No, other business models exist.

  • Charities and not for profit businesses operate in the basis that the prime objective is to pursue the mission of the organisation, and if profits arise, they are to be used to support that. eg The National Trust, the Big Issue, The Peabody Housing Association.
  • Social enterprises which aim to promote, encourage, and make social change. Any profits are reinvested in the enterprise. eg Belu who sell bottled water who donate their profit to Water Aid. Clean For Good is a London based cleaning company that promotes fair and ethical employment of cleaning staff; profits are shared between reinvested, cleaning staff and shareholders (charitable bodies such as  the Parish of St Andrew’s in the Wardrobe, CMS, and the Centre for Theology & Community.
  • Cooperatives are companies owned and controlled by its members so as to meet their shared needs. eg Suma is a workers’ cooperative – its business is owned and run by its employees who then share equally in the profits. Energy 4 All helps develop community owned renewable energy projects. Members receive a fair return on their investment from the sale of green electricity but at a level that is capped so that the balance of the profits can support the community fund enabling more such projects. 
  • Mutuals are companies which are owned by their customers, who share in the profits. eg Scottish Friendly which is a finance services provider whose profits are reinvested in the business. NFU Mutual which is an insurance company for the farming industry. It has 900,000 members and any profits made are shared between them.
  • Impact businesses have two ‘bottom lines’, one being profitably and the other a dedicated issue that could be social, environmental etc. eg Octopus Energy aims both to be profitable and to make the renewable energy transition faster and cheaper for its customers. Hey Girls sells period products using a buy-one-give-one model to end period poverty and improve period health. 
  • B-corps are impact businesses that have been certified by B Lab – a world wide certification body – as meeting specific target levels vis a vis their social impact. eg The Guardian is a B Corp with a commitment to using its profits to support carbon neutral policies, reporting on climate change and, for example, not accepting advertising from fossil fuel extractors. OddBox takes fruit and vegetables that would otherwise go for waste – because they are too many or too few in number, the wrong shape or otherwise unwanted by retailers – and sells them via a veg box scheme.
  • Credit Unions are community-based financial organisations where profits are used to support local initiatives or are repaid to members. Members may have to qualify by living in a certain area or working within a certain industry or for a specific employer. Members are often encouraged to save money with the Credit Union before applying for a loan.  
  • Community share schemes allow people to invest  in a local scheme via ‘withdrawable shares’ – these cannot be sold, traded or transferred, and whilst the share holder may receive interest on their investment, no dividend is paid. All members have an equal vote in shaping the policy of the company. Members can withdraw their share – but only if the company has the funds to buy them back. Community share schemes are used for to support nurseries, pubs, local transport schemes and preserved railways etc.

There are many ways of running businesses that benefit society in ways other than purely financial. These are the truly ‘profitable’ businesses!