Friday, 1 August 2008

Blocking business

Warehouse_180 For eighteen months now Foodstuffs and Woolworths have been wanting to act on a very basic business decision: to buy Warehouse shares from Warehouse shareholders, who for eighteen months have mostly been indicating they're wanting to sell. uk.reuters.com-2year
Willing buyers, willing sellers -- the very basis of the market economy we're supposed to have -- but for eighteen months the agencies of The State have been refusing to let this voluntary deal happen -- and the more The State has got in the way, the more the shares in the Warehouse have been losing value, from a high over over seven dollars at the start of 2007 to just over four dollars yesterday morning (right).
uk.reuters.com Yesterday the company last about twenty percent of its value (right) as the Court of Appeal upheld the decision of the Communist Commission to block the voluntary sale of shares by Warehouse shareholders.  This is a ban on business. [News here.]
The ban was obscene enough, but more obscene still was the statement made by the egregious bully Paula bloody Rebstock, whose belligerent presence as the head of the Communist Commission has done more to kill this deal than anything else.  Rebstock showed she's not just a thug, but an ignorant thug when she said after the decision: "We do see this as a victory for consumers and for competition, in what is a very important market to all New Zealanders."
The ignorance is breath-taking.  A decision to block a voluntary sale is to this entity "a victory for consumers."  A decision in favour of a monopolistic state agency -- her's -- is a "a victory for competition." The woman is a deluded self-important bully, which no doubt makes her the ideal choice to head a state agency whose mucky hands are thrust into  every significant business deal done in this pathetic authoritarian backwater.
"In coming to its decision to decline the acquisition," said Rebstock, "the [Communist] Commission considered that The Warehouse had already brought important new dimensions to supermarket competition, and potential competition, through its innovative supercentre stores."
In other words, I'm punishing investors because of the innovative business they chose to invest in.
The ignorance, and the argument for the existence of her agency, rests on a fundamental Marxist myth: that left to itself, a free-market will result in the formation of coercive monopolies.  This is an utterly flawed platonic  idea of competition -- a notion of “pure and perfect competition” totally unlike anything one normally means by the term “competition -- that results in the banning of freely made business deals, and the destruction of real property. 
Nothing could be further from the truth than the idea that entrepreneurs in a free market need to be overseen by ignorant bullies like Rebstock.  As a former Libertarianz leader said when her Commission was bullying Telecom (a softening up on which Labour's Minister for Nationalisation David Cunliffe later capitalised):
The only thing that needs to be regulated is the government, the only price that needs fixing and reducing is government spending, the best savings for the consumer will come when the government abolishes outfits like the interfering Communist Commission—and many more government departments besides.
[For a bonus point, can anyone tell me which scum-sucking statist politician set up the agency Rebstock heads up? Here's a clue: he's not the free-market hero you think he was.]

11 comments:

Julian said...

Well said PC. Anything that is bad for producers - the wealth creators - IS bad for consumers. We rely on these innovators to provide us with things which improve our lives - and yet they are the ones that are punished.

Again, the government shows that they only possess the power to destroy wealth (witness the vandalism of the share price of The Warehouse yesterday) - rather than create wealth. Warehouse and Telecom shareholders know what that actually means. Of course most of them will still vote for parties which sanction their own persecutors...(sigh).

Julian

Heisenbug said...

Hmm.... 1986 was during the Lange/Douglas Labour government, and I see David Caygill is on the Commission. I couldn't guess which one of Douglas, Prebble, or Caygill set it up, though. My guess is.. Prebble?

Cheers

Richard

StephenR said...

I realise you probably have a strong opinion on this that i'm not aware of, but reading the post it seems that PC thinks a monopoly would be...fine and dandy?

StephenR said...

Sorry, should've said a reason behind the [apparent] thinking that a monopoly would be fine and dandy.

Peter Cresswell said...

Yep, good guess Richard. The answer is Dodger Rugless, who set the damn thing up about the same time he floated the dollar.

With Douglas there was always one step forward, and another back.

Peter Cresswell said...

Hi Stephen,

I have no problem at all with a 'monopoly' that emerges from the cut and thrust of competition in a free marketplace, which is achieved purely by a companies own honest efforts in meeting and exceeding customer expectations so well that competing is difficult or impossible.

What possible objection could there be to such a benevolent enterprise?

What I'm opposed to is coercive monopolies, whose position in the market is maintained by government force, or government favour.

For more on the distinction, you might like to check out that link on monopolies I supplied: Cue Card Libertarianism: Monopolies.

Anonymous said...

Stephen,

The state has no business getting involved in private transactions. A larger sized business can often reduce costs. Bringing social benefits. Moreover, a market does not include only the current participants but ALL potential participants. If the current bunch were to make profits beyond the standard rate of return, then other firms will enter the market.

Additionally, monopoly is quite often a perfectly acceptable market structure. I think it quite reasonable that I have monopoly control over the shirt on my back or the contents of my wallet or the distribution of my book (currently unwritten).

Finally, while you seem to rally against the idea of monopoly, you accept, wholesale, that the the Commerce Commission is the legitimate wielder of monopoly force. Perhaps you should explain why monopolies are bad...except for those that you like...contradiction much?

Anonymous said...

PC Foodstuffs and Woolworths have for years maintained a cosy duopoly. The Warehouse has decided to enter the supermarket business and end this duopoly providing much needed competition. Foodstuffs and Woolworths, using their financial muscle want to buy the Warehouse thus ending the threatened competition. You approve of this. The Commerce Commission, recognising that this will remove much needed competition and will be bad for the consumer, has blocked this takeover. You condemn this.

Anonymous said...

Mark,

You state that the Warehouse will provide "much needed competition". But you do not provide any standard to judge this buy. You might "feel" this to be true, but ultimately it is just a bland assertion.

You claim that the buy out would be bad for consumers. Again you provide no evidence. You simply ignore the potential for increased economies of scale.

Your further claim that the Commerce Commission was correct to intervene. Yet you ignore the fact that as long as free entry to the market is maintained (and it can only truly be prevented by government entities like the commerce commission) then the threat of competition remains. And if the market proves to be more lucrative than other opportunities then investors will move into the market.

You also ignore the simple fact that any regulation that interferes with firms ability to do business increases the cost and reduces the supply of that good to the market. The commerce commission is no fiend to the consumer!

Anonymous said...

Great post PC. And add this to the raft of authoritarian legislation going through Parliament at the moment.

For example, in the wake of the Finance Companies going down, which is correcting what is simply a bad business model, we have the panic induced Financial Advisors Bill going through. In this the definition of Financial Advisor is being cast so wide, it will probably catch me and make my job difficult, despite the fact I am NOT a financial advisor, and have never advised a single client into any of these companies, or any purchased investment product (given that is not my job). And of course the typical irony being, once the new Bill becomes an Act, do you know how many of these companies it would have saved? Not one.

They make rules upon rules upon rules, out of complete authoritarian ignorance, and just make everything even worse. There is truly little hope.

I could go on, but my time has to be spent on my own survival in a business environment that is having the very life regulated out of it. And 'they' wonder why smart people are leaving New Zealand in droves. Take twenty years off me and I'd be gone.

Mark Hubbard

Anonymous said...

"fiend" should be "friend"

Thanks.