Wednesday, 22 September 2010

Vince is right about business and competition - but his solution is wrong, very wrong.

We have to disagree with Vince don't we? After all his rhetoric about spivs and gamblers, his comments about capitalism, his anti-business stance - all these things make him wrong and bad?

Well not exactly. Indeed Vince's comment about business and competition is absolutely spot on:

Capitalism takes no prisoners and kills competition where it can, as Adam Smith explained over 200 years ago. I want to protect consumers and keep prices down and provide a level playing field for small business, so we must be vigilant right across the economy – whether in the old industries of economics textbooks or the newer privatised utilities and cosy magic circles in auditing, law or investment banking. Competition is central to my pro market, pro business, agenda.

Understand this dear reader - business is, to the very core of its being, anti-competition. As a businessman my aim is - or should be - to secure some form of monopoly or monopolistic advantage so as to get closer to the nirvana of maximised profits. Whether it's the market trader who objects to another swagman taking a stall in the covered market, the banker who persuades the regulator to prevent market entry or the steelman who bribes the government party to introduce protectionist anti-dumping rules. Or even the horny-handed farmer moaning about the inadequacy of subsidies. All these businessmen - and women - are not interested in promoting competition. They are interested in reducing competition - at least so as it favours their profitability.

Vince referred to Adam Smith who famously said:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices…. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary.

And that was what Vince was on about - the last labour government (and governments elsewhere and before) facilitated a corrupting association between bankers, financiers and governments that allowed a vast conspiracy against the public interest to damn near destroy our economy. We allowed - just as we have done with health, with education, with agriculture and (increasingly) with social care - the production of the service to take precedence over the consumption of the service. Government has acted against the interests of the people and in the interests of rent-seekers (and spivs and gamblers) seeking to profit from monopolies of service.

We have forgotten what else Adam Smith had to say:

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.

I'm not sure Vince - with his faith in the power of 'better regulation' quite understands - almost always, regulation acts against the interests of the consumer by reducing competition, preventing market entry and stifling trade. So, while Vince is right about business not liking competition he is wrong about how to protect that competition:

But let me be quite clear. The Government's agenda is not one of laissez-faire.

And that's where you're wrong, Vince - if you want more competition you have to get Government out of the way, to stop giving in to special pleading, to break down the monoliths of health and education and to institute again a free-trading, free-market, laissez-faire economy. It will work - and we, the consumers, will be grateful for the wealth that our liberty brings.


1 comment:

Angry Teen said...

It is in the interests of the politicians to ensure that all of our problems—poverty, inequality, monopoly, etc.—still exist, so that they can justify their useless existence.

The welfare state has existed for about a century already, but there are still supposedly millions of people in Britain still in "poverty" which the state has to save with perpetually increasing handouts.

Libertarians must constantly be asking big government advocates: why is there still a problem?

And when the feck will it finally be solved?