Diminishing Margarine Returns
Norway is undergoing a mass butter shortage just in time for the holidays. Some reports have pegged that the black market price of butter has hit as high as 3,000 kroner, or $515 for a half-kilo of the yellow spread. A Russian man was arrested for trying to smuggle 90 kilos of butter, apparently with a street value of $92,000 (margarine of error +- 98%) into the country. Are there any questions as to one – and only one – culprit that could cause this: Diet craze causes butter shortage.
Wait, what? A diet craze is causing a shortage of butter? Are they putting it on a stick and deep frying it? Never mind, thats Iowa. So what is causing this dairy crisis?
“Many are blaming Tine for not addressing the butter shortage sooner and being slow to acquire butter from outside countries.” Tine is Norway’s largest dairy co-operative with a monopolistic 85% of the market.
“I think this is absolutely ridiculous,” Svetlana Paludo told Norwegian Broadcasting (NRK). “It’s terrible with monopolies.”‘ Or, with a little license, I might edit: ‘It’s terrible with government-imposed protectionist monopolies.’
Here ‘s more: Butter Shortage Hits Norway. Again, why? “The reasons behind the Norwegian butter shortage are similar to those recognised also in Finland. The demand is suspected of having skyrocketed as more and more people now favour low-carbohydrate diets and organic food.”
Low-carb diets are fairly popular in the US, too, but we don’t have this problem. Maybe we can sell some of our butter to the Norwegians, since it is cheaper here? That’s how trade, and capitalism, work. With transportation and logistics technology today, shipping should not be a major problem, even in a low-margin business like butter.
Oh, wait. “Norway is not an EU country, and the import tariff on butter from abroad has been set at 25 Norwegian krone (EUR 3.30, USD $4.33) per kg. For this reason dairies from other Nordic Countries do not really export their products into Norway at all.”
So, in conclusion, let’s blame the mega-conglom-co Tine for failing to accurately predict and prepare for changes in consumer preferences. The fact that the government has made it economically disastrous to attempt to compete with them has little to do with their, and the local market’s, failure.
At least there was some recognition of a root cause: ‘After the butter shortage hit the country, Norway agreed to lower the import levy to a mere four krone per kilogramme of butter, a move that failed to resolve the problem.’ Might that failure have something to do with totally-missing-the-point?: ‘“We have nothing to offer at such short notice. Also, from the business point of view such short-term activities are not really worthwhile. Norway has already communicated that the Customs duties will be raised back to normal on January 1st [emphasis added]‘, Brøgger says.” Because it isn’t like businesses plan for the future or anything.
“Butter shortage” rightly has the ring of a history lesson concerning the inability of communist economies to meet basic human needs. That any Norwegian doubts that the dairy tariff is the primary – indeed, only – culprit in there being a shortage of butter in a modern, industrialized economy, seems to present a compelling argument that rudimentary economic thinking still hasn’t made much of a dent in the more popular mercantilist mindset.
Nevermind that Norway is ranked number 3 in the quality of life index (ahead of the US, which is ranked 13).
Come on, man. Is it so important, when these same economic policies have provided widespread contentment and general prosperity in a time of worldwide crisis.
Also nevermind that Norway isn't communist. The citizens elect their government. And generally, they love what they have.
This is inflammatory without merit.
Louis – Thanks for participating! This is what its all about. Our point wasn't to bash Norway in general – the point was only that in this day and age, regional shortages of any commoditized goods are unnecessary and are often caused by protectionism and lack of a free market in that sector. Granting a virtual monopoly to a single entity and making it virtually impossible to compete with them through extremely high import tariffs is crony capitalism at its worst, yet we see it all the time, especially in the United States.
Louis – Thanks for participating! This is what its all about. Our point wasn't to bash Norway in general – the point was only that in this day and age, regional shortages of any commoditized goods are unnecessary and are often caused by protectionism and lack of a free market in that sector. Granting a virtual monopoly to a single entity and making it virtually impossible to compete with them through extremely high import tariffs is crony capitalism at its worst, yet we see it all the time, especially in the United States.
Common Sense Economics I understand your point- but Norway enjoys a high quality of life because of its protectionism and high import tariffs- not in spite of them. Domestic industries are able to flourish without the downward wage compression of competitive nations like China.
Right- A butter shortage sucks. But because of their import tariffs, domestic farmers make more money and can provide a better product. Ask most Norwegians, and they'll stick with margarine over the alternative.
Louis Gruber I think Norway enjoys a high quality of life because of its incredible oil and natural gas reserves and a relatively small population. The dairy tariffs only really benefit Tine, a for-profit company with 85% of the diary market in Norway and revenues of 19B NOK. The articles I've read on the shortage suggest a very frustrated population, most of which misdirect the blame to Tine for "failing to produce enough milk to meet demand" instead of the Norwegian government for protecting Tine from Swedish importers who are actually able to fill in the void between supply and demand. Sure, Tine is at fault as well, but only for successful lobbying to have the government protect them from competition instead of competing fairly.
Trond Blindheim, dean of the Oslo School of Management, has told Norwegian paper Nationen that the situation has been caused by the monopoly from Norwegian butter manufacturer Tine and the strict tariffs on imports:
“A lot of people would probably say that Tine is living on borrowed time. The way things are now, the situation benefits producers but not consumers.”
Blindheim went on to describe how the situation exposed the "Soviet conditions" of the butter market.
(thats from this article: http://www.businessinsider.com/norway-butter-crisis-soviet-2011-12#ixzz1h2KicyCP)
Louis Gruber I think Norway enjoys a high quality of life because of its incredible oil and natural gas reserves and a relatively small population. The dairy tariffs only really benefit Tine, a for-profit company with 85% of the diary market in Norway and revenues of 19B NOK. The articles I've read on the shortage suggest a very frustrated population, most of which misdirect the blame to Tine for "failing to produce enough milk to meet demand" instead of the Norwegian government for protecting Tine from Swedish importers who are actually able to fill in the void between supply and demand. Sure, Tine is at fault as well, but only for successful lobbying to have the government protect them from competition instead of competing fairly.
Trond Blindheim, dean of the Oslo School of Management, has told Norwegian paper Nationen that the situation has been caused by the monopoly from Norwegian butter manufacturer Tine and the strict tariffs on imports:
“A lot of people would probably say that Tine is living on borrowed time. The way things are now, the situation benefits producers but not consumers.”
Blindheim went on to describe how the situation exposed the "Soviet conditions" of the butter market.
(thats from this article: http://www.businessinsider.com/norway-butter-crisis-soviet-2011-12#ixzz1h2KicyCP)
I think Norway enjoys a high quality of life because of its incredible oil and natural gas reserves and a relatively small population. The dairy tariffs only really benefit Tine, a for-profit company with 85% of the diary market in Norway and revenues of 19B NOK. The articles I've read on the shortage suggest a very frustrated population, most of which misdirect the blame to Tine for "failing to produce enough milk to meet demand" instead of the Norwegian government for protecting Tine from Swedish importers who are actually able to fill in the void between supply and demand. Sure, Tine is at fault as well, but only for successful lobbying to have the government protect them from competition instead of competing fairly.
"Trond Blindheim, dean of the Oslo School of Management, has told Norwegian paper Nationen that the situation has been caused by the monopoly from Norwegian butter manufacturer Tine and the strict tariffs on imports: 'A lot of people would probably say that Tine is living on borrowed time. The way things are now, the situation benefits producers but not consumers.'
"Blindheim went on to describe how the situation exposed the 'Soviet conditions' of the butter market."
(thats from this article: http://www.businessinsider.com/norway-butter-crisis-soviet-2011-12#ixzz1h2KicyCP)
So sure, a butter shortage isn't the end of the world, but its an illustration of what happens when governments write rules to benefit multi-billion dollar corporations at the expense of the people. These unintended consequences are everywhere, and we should learn from them because next time, it could be a medecine shortage or something that actually is a matter of life and death.