ONCE AGAIN SIMON POWER misunderstands the role of government, his lack of ability ending up hurting the very thing his party constitution claims to stand for: freedom.
This Minister-with-No-Understanding-of-Commerce claims to be fighting commercial “cartels,” “monopolies,” etc. with new regulations, and threats of jail time and hefty penalties for “offenders. while ignoring that is not “deregulation” that encourages mergers and cartelisation, but heavier penalties (which in the end are paid by the consumer) and heavier regulation (ditto): The bigger a business is, the more able it is to absorb the cost of all that regulation and all those hefty new penalties; which means the more regulations there are, the greater inducement there is towards bigger and bigger businesses, and the greater the hurdles for any new entrants to that market to o’erleap.
Mr Power has no conception of this dynamic, so he talks instead about introducing more regulation to combat the results of earlier regulation. Compound insanity, we might call it.
Such is Mr Power’s understanding of his job, and of the markets over which he thinks he presides.
His understanding is clearly less, even, than that of a newborn child. Consider something as simple as transport. Even a newborn understands that the easiest way to get from here to there involves removing the obstacles in between. The same principle is in play both in large and in small. Between Auckland and Welington, for example, obstacles of many kinds exist. First of all, there is distance, which entails loss of time, and we must either submit to this ourselves, or pay another to submit to it. Then come rivers, marshes, accidents, bad roads, which are so many difficulties to be surmounted. We succeed in building bridges, in forming roads, and making them smoother by pavements, iron rails, major highways, etc. But all this is costly, and if we wish to move goods between Auckland and Wellington the goods themselves must be made to bear the cost.
But while highway engineers and transport companies labour to decrease the obstacles between cities (and the effect thereof on producers and their costs), blood-sucking parvenus like Mr Power wish to increase the obstacles. While engineers and entrepreneurs attempt to lessen the physical obstacles, regulators are intent on increasing the legal obstacles—which act on costs in precisely the same way as ruts and bad roads. They retard, they trammel commerce, they augment the difference in costs between what things can truly be produced for, and what they can finally be bought for.
Mr Power claims however, against the evidence of history, that his new regulations are different. That his regulation are necessary to protect against the rise of new cartels. Let us confess to ourselves, the way all charlatans talk at the introduction of new regulations. “My regulations are different,” they say as they introduce another obstacle between producer and consumer.
But let us also confess to ourselves that there is no necessity at all for Mr Power’s regulations. It is just not the case. It is not necessary (and nor is it just) to write regulations making it illegal for businessmen to talk to each other. Instead of writing regulations prohibiting existing market players from collusion, Mr Power should be looking at what he can do to remove the barriers to new entrants to those markets in which he claims collusion is happening.
There can be no greater spur to the break-up of cartels, whether formal or informal, than to have all the barriers to new entrants broken down. It is new entrants to existing markets that is needed, not new regulations.
Which means not new regulation, but fewer regulations. Which is, let’s be honest, yet another plank of the National Party constitution that may be noted more in the breach than the observance.
MY COLLEAGUE RICHARD McGRATH has more to say on this, accusing Mr Power of “criminalising free speech between business operators…”
Libertarianz Party leader Richard McGrath said Mr Power’s comments are an attack on private enterprise, and an excuse to tap phones and bug the offices and homes of businessmen.
Dr McGrath challenged the assumption that specific laws were needed to deal with cartels or monopolies.
“As long as new players are free to set up in competition with cartels, there will always be downward pressure on prices. Thankfully, New Zealand is considered once of the easiest places in the world to set up a new business, so the public have little to fear from cartels.”
“In a free market, collusion between companies in attempts to fix prices rarely succeeds for very long, because it creates incentives for competitors to come in and undercut them,” said Dr McGrath.
“Our Anti-Commerce Minister would do well to improve the workings of the free market by removing government regulation and concentrating law enforcement on issues of fraud, extortion and violent crime – prosecuting those who initiate force against others.
“A cartel that tries to jack up prices is not initiating force against anyone, as no-one is forced to buy their product."
“My party is concerned that criminalising cartels would lead to fishing expeditions, where business and private homes were subjected to intrusive and involuntary surveillance in the hope of gathering evidence of communication between industrialists.”
The Libertarianz Party strongly advocates the deregulation and depoliticisation of industry, including making Mr Power’s cabinet post, and the misnamed Commerce Commission and Ministry of Economic Development, redundant.
Hear, hear!
NB: Some of the remarks in the middle paragraphs above are paraphrased from Frederic Bastiat’s seminal essay ‘An Immense Discovery,’ from his brilliant collection of Economic Sophisms. Why not buy a copy for our Minister-Who-Doesn’t-Understand-Commerce.
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