The issue for me is that knowledge of resource flows and potential risks is widely dispersed among market participants. It is very difficult, if not impossible, for such information to be collated by centralised authorities in any way which might be of practical benefit and not simply a snapshot in time which is outdated by the time it is published.
Markets are the most efficient means we have for allocating resources. The government really needs to recognise that it can't do this better than the market or try to anticipate future resource flows or how to address them.
When the EEF surveyed its Members in 2012, resource risks featured prominently (first? second?) among their concerns. I suspect that if this survey was repeated today then those concerns would be somewhat diminished.
A real issue though may be the fact that for some materials, total volumes produced and traded are relatively low, which can lead to large swings in prices. Rather than Canute-like trying to stop the inevitable, the government could instead consider how to minimise its impact. This could potentially be done by working with the financial industry to develop hedging instruments which are more widely available (particularly for SMEs).
For me the government's resource security action plan is already out of date. Defra is trying to find a way in which it is relevant to the government's overall economic agenda. This isn't it.
On the contrary, EEF surveyed its executive members recently in its Executive Survey 2013. Material risks still featured prominently. Concern about rising input costs featured as the second top risk to growth, which of course includes energy too. Raw material shortages featured as the fifth risk to growth.
ReplyDeleteArguably all data represents a snapshot in time but that doesn’t make its usefulness redundant. Our members are still very keen to get their hands on better market information. And they are not alone. The USA is pressing ahead with the development of its “early warning system”, an approach the German’s have adopted too. In Korea and Japan, meanwhile, there are very sophisticated government information offerings to industry to help bridge information barriers.
Thanks Susanne. How many risks are listed in total in your survey? Were raw material concerns fifth out of 10 or 20 etc?
ReplyDeleteI am sure all market participants would like better market information. I would query whether government is best placed to provide such, notwithstanding your suggested examples.
I suspect that private market information providers would do a better job than government agencies and believe that public money (which is of course particularly limited at the moment) would be better spent elsewhere.