23 January 2010

A tale of two cities.

One of the interesting things about economics is that just because it is "economically rational" to do something, it doesn't mean it is actually sensible, morally good, or even in the best interest of the majority. Phenomena like the Tragedy Of The Commons and Externalities demonstrate that, under capitalism, self interest can create Bad Things as much as it can be the dynamo of wealth creation.

So I thought it was interesting to consider two different approaches to the ebb and flow of market forces. I offer this merely as an observation, not necessarily proof than one is a better outcome than the other:

2005 - Danone shares rise by 20% on the back of rumours of a takeover by PepsiCo
2006 - Kraft don't rule out non-hostile bid for Danone, provoking further takeover speculation
2006 - French government introduce laws to protect "strategic industries" such as Danone, to popular acclaim.

2008 - UK government lends RBS £20bn to save it from collapse
2009 - UK government extends its stake to 68% of RBS
2010 - RBS lends Kraft £7bn to take over Cadbury-Schweppes to popular indignation

On the one hand, it confirms that there is no room for sentiment in British banking. On the other, I suppose it means, as a UK taxpayer, I now own part of Cadburys. Next time I'm in Birmingham I'll try to pop in to claim a curly-wurly before they start filling them with cheese.

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