People are so weird. If you want to get a political education, watch all the episodes of the Simpsons when Springfield has to vote on an issue. For today the news in the UK is all about energy companies. The bosses of the big private companies that provide our gas and electricity have been summoned to government to explain to our politicians why they have all made huge increases in their charges as the commodity price is reducing; and why all the increases are more or less the same. The funniest comment was when one supposed expert said that it appeared that the companies were charging as much for their products as they thought they could get away with.
Duh. The system is called capitalism. The businesses are supposed to be in it to make money and the bosses have a (legal and philosophical) duty to make as much as they can for the shareholders – assuming they can do it without diverting too much attention from amassing personal fortunes. You can blame bosses for being greedy, although that doesn’t make a lot of sense when you have a system that is supposed to be driven by the profit motive (ie “greed is good”). It makes no sense at all to blame companies for trying to maximize their profits; and few people would invest in the shares of any company that failed to do so. To attack a company director for making too much profit is like blaming a leopard for not being a zebra.
UK members of parliament don’t understand this (or much else) or if they do they find it convenient not to let on. For the rest of us, it’s more useful to wonder how we got to the stage of needing half a dozen big companies to provide what a state industry used to deliver at a fraction of the cost in terms of executive pay, marketing spend and the rest. I do understand that the Free Market is a religious imperative as much as a rational organizational approach, but consider this:
These bosses who are forced to spend the best part of a day justifying their existence to a bunch of irritatingly non-deferential elected representatives (and will take it out their frustration on junior staff for the rest of this week) have all denied that there is any cartel existing between them, in spite of price rises being suspiciously similar. I believe the bosses – I don’t think they would risk their positions by getting together to fix prices. There is a simple explanation, they say. They all have the same cost base, the same basic commodity cost, etc etc. And it’s the truth.
But then; the Free Market is supposed to arrive at the most efficient economic position by the magic of competition, that reduces marginal cost and stimulates competition. So if we credit these bosses, who should know what they are talking about, then the whole expensive and painful process of privatising the power industry and all these unsolicited calls and mailshots we all get every week, encouraging us to switch supplier, have all been for nothing (in fact Mr Cameron, our notionally Conservative prime minister, has been talking about standardizing the tariff offerings of the different companies).
What we’ve experienced in the UK over the period since 1979 hasn’t been all (or mostly) about liberalising markets to make them Free. In respect of Power, Railways Health and all sorts of other stuff, we’ve seen state intervention to create an artificial market, or the illusion of a market, where in fact none of the conditions for a market exist. The model is that you set up three or four providers within the effective monopoly that replaces the old state monopoly. As there is no natural competition between the suppliers, you establish a regulatory body to “represent” consumers. In the case of Power, it’s called Ofgen, but in all cases the regulator comprises “experts” (ie people who have worked in the industry) who use evidence provided by the industry to impose a notional check on the wilder excesses based on the conventional industry wisdom. This arrangement never works because it can’t work: for the Labour party to say that it will solve this problem by creating a better regulator is intellectually dishonest.
Effectively, what’s been going on here is the worst kind of centralised planned economy that the Free Market worshippers are supposed to recoil from – even down to franchises being awarded to cronies, though we can pass on that for now – a Free Market that is neither free nor a market. I don’t know enough about energy production to say whether private enterprise could offer benefits, or what the benefits might be; but the bosses of the businesses involved are telling me that there are none.
I worked in public service years ago and saw inefficient management, relatively poorly paid, delivering a not very good level of service. When I’ve been back in the post-privatisation era, I’ve seen inefficient management (often the same people but richer) well paid, delivering a not very good level of service. Something has changed, but it doesn’t seem to have much to do with the greatest good for the greatest number.
It seems there are some problems that the Market is just not able to address: I’m quoting here from that well known Marxist firebrand, Bill Gates. In any case, my response to the fabricated indignation of the MP’s and their journalist remorae is – don’t break up a supply chain for ideological reasons, replace it with a bunch of profit making entities; and then start bitching when they do what they’re supposed to do and chase profit.
More generally (and I’m musing now) I was trying to explain to a friend recently that Spain is a more civilised country than England, because in Spain the entire political class is corrupt. All of the politicos have been dedicated for a long time to getting their snouts as firmly into the trough as possible; and that leaves no time for tinkering with what actually happens to the country (ok,Spain may split into different countries while they are messing about, but that would be a relatively limited tragedy). In the USA ( my son finds impossible to get his head round this) a citizen will vote for a democrat for one house and a republican for the other, on the basis that paralysis is the safest option. Here in the UK, most of our politicians find overt corruption non-productive (they have to find more imaginative ways to enrich themselves) plus they feel like they should be seen to be doing something. Our politicos are not hobbled by the electoral impotence that the US system creates; and many of them have swallowed the American Dream straight (without the mixture of cynicism and genuine idealism that makes it a cocktail for true Americans). All of the above makes mainstream UK politicians both wholly inadequate to the times and truly dangerous.
As a UK citizen, the only consolation you have as you sit in a traffic jam on roads that are disintegrating, or wait for an overcrowded train that doesn’t come, or waste a small fortune on palliative drugs as you are pending an operation that never is scheduled; is to know that things cannot go on in this way – so mismanaged, so harmful, so divided. History tells us that when things reach this stage, eventually they collapse and some kind of new order emerges – we just have to hope it won’t be a Golden Dawn that comes next.