Pros and Cons of Tobacco Products

¶ … Tobacco

At first glance, many would agree that there is little reason to keep the tobacco industry afloat. The glaring health concerns and ethically questionable political actions of this industry have vilified its members in the eyes of countless global citizens. However, upon objective examination of the relevant data one finds this industry to be startlingly lucrative. Accordingly, the global production of tobacco continues to be a leading commodity in the globalized market. The fiscal benefits realized by governments are another factor promoting the security of this industry far into the future . What is more, knowing the high volume of production in this industry, there are certainly quite a few jobs at stake. When considering the relatively inelastic demand for tobacco products, this industry is one of the rare arenas that is presumably capable of offering its employees genuine job security. Thus, bearing in mind the uncertainty present in almost all global economies, this type of self-sustaining business landscape seems highly attractive . And while several environmental and public health organization have attempted to curb the success of tobacco by incessantly focusing on its negative health potentials, statistical and fiscal data favors the industry .

The outright promotion of the tobacco industry by a government could certainly be construed as morally questionable. Nevertheless, while the overall tobacco industry has experienced recent declines, a strictly corporate outlook reveals that an investment in this industry continues to be appealing. The massive potential customer base, for instance, shows the pre-existing demand needed for small business success. In fact, studies in global tobacco trends have shown that approximately 47% percent of adult males are smokers and that there are roughly 1.3 billion smokers worldwide (Action on Smoking and Health). Therefore, from a purely business perspective, there are few opportunities that can offer such a large prospective client market. Moreover, the numbers of smokers and cigarettes consumed continue to rise. In its most recent global survey, The World Health Organization stated that:

"If there are no dramatic changes in cessation rates, no new interventions, and if children continue to start smoking at expected rates, then the current figure of 1.3 billion smokers worldwide is predicted to rise to 1.9 billion consuming more than 9 trillion cigarettes by 2025." (Action on Smoking and Health 2)

With trends in future demand tilted in their favor, potential tobacco investors stand to gain in the long-term. Also, the production of cigarettes worldwide has significantly increased over the past decades.

(Action on Smoking and Health 3)

The above figure illustrates global cigarette production from over the past 45 years. With production rates that have more than doubled in the last half-century, this provides business owners with a multitude of potential suppliers and the potential to create a wealth of employment positions. Furthermore, these growing production rates also help to stimulate a competitive business environment. All of the recompenses above illustrate some of the many reasons why it would seem counterproductive and counterintuitive to completely discontinue this industry and ban its products.

In addition to the various microeconomic reasons to not ban tobacco products, there are also several macroeconomic gains recognized by governments around the globe as a result of this industry. The creation of jobs and the bolstering of government revenues represent two noteworthy examples of such incentives (PricewaterhouseCoopers). Both the quantity of jobs created and increases in government proceeds have not been insignificant as a result of the tobacco industry. In fact, British American Tobacco Australia has approximated that more than 57,500 full-time jobs were created by the demand for tobacco products in Australia (PricewaterhouseCoopers). This increase in employment is certainly substantial, especially in times of high worldwide unemployment rates. An industry capable of such considerable augmentation to unemployment rates is one that will be seldom overlooked by governments.

Moreover, governments will also have a hard time overlooking the proliferation of revenues generated by tobacco companies. Retail sales of cigarettes and tobacco products comprise a hefty percentage of total sales in many countries (including Australia). For instance, in 2006-07 tobacco sales reached more than $10.1 billion, which represents about 5% of total retail sales in Australia (Australia Bureau of Statistics). Therefore, as one can deduce, the revenues garnered by the Australian government as a result of tobacco are quite sizeable. This trend also exists in several other developed nations. Despite the real monetary gains attributable to tobacco, some who doubt the future of this industry claim that resultant healthcare expenditures negate any and all fiscal benefits accrued from tobacco production and sales. However, according to a study done by Macquarie University Professor Dr. David Collins and Queensland University Professor Dr. Helen Lapsley, the actual numbers favor the continuation of the tobacco industry: