'Free' market myths no. 5: competition works

Competition is an essential part of  our economy. The fact that companies compete with each other to provide us with better goods and services means that the goods and services on offer constantly improve and we get better value for money. It means that companies that don't perform well go to the wall and the best run companies thrive, and it also means that individuals work harder to do better and achieve higher rewards right? Wrong!

The idea that much vaunted 'free' market competition does all these things and is essential to the well-being of our economy just happens to be nonsense. Of course this is hard for many people to accept because we have been told this is the case all our lives, and most of us believe it. But the idea of competition that most of us have is based on real competition of the kind that you find in the Olympics where individuals and teams do battle to win prizes. This kind of striving for ever greater excellence is not the same thing as competition in a capitalist economy. In fact its possible to make a case that in some sectors there is little or no competition at all. Mature markets are where particular markets are dominated by a few major players, all the smaller operators having been squeezed out, usually by acquisition rather than competition. An obvious example of this which has been making the headlines recently is the energy sector, which has been accused of making excessive profits at the expense of hard pressed bill payers. And we have witnessed the neoliberal Coalition government's feeble attempts to 'regulate' energy prices for consumers. As the Guardian editorial said:

"But all Mr Davey is proposing is a change in billing, not pricing. And he is certainly not proposing to change the mechanics that place 85% of the retail market in the hands of the big six suppliers, and which mean that when one raises prices the rest follow soon afterwards. If it looks like an oligopoly, and acts like an oligopoly, then it probably is an oligopoly"

It was accepted, until fairly recently, by economists, that such 'mature markets' were examples of monopoly capitalism, until neoliberal 'free' market dogma came to dominate in the 1980's, and monopoly capitalism was conveniently 'forgotten'. Its well worth reading this article by Bellamy Foster, McChesney and Jamil Jonna, which describes how monopoly - not oligopoly by the way - is increasing and competition is decreasing, on a global scale. here is a telling quote:

"The desirability of monopoly, from the perspective of a capitalist, is self-evident: it lowers risk and increases profits. No sane owner or business wishes more competition; the rational move is always to seek as much monopoly power as possible and carefully avoid the nightmare world of the powerless competitive firm of economics textbooks. Once a firm achieves economic concentration and monopoly power, it is maintained through barriers to entry that make it prohibitively costly and risky for would-be competitors successfully to invade an oligopolistic or monopolistic industry—though such barriers to entry remain relative rather than absolute. Creating and maintaining barriers to entry is essential work for any corporation."

The reality is that competition in the capitalist global economy is just another 'free' market myth, slavishly maintained and adhered to by the capitalist media we all know and love so well.

Tax dodgers are poverty creators

Let me make clear from the start that by 'tax dodgers' I mean tax avoiders and well as tax evaders. The former is not unlawful and the latter is. But the former ought to be, and this post is about why it ought to be. Recently, companies such as Amazon, Starbucks and Google have been taken to task for tax avoidance. All three companies were hauled up before the Public Accounts Committee, and their responses to questions about tax avoidance were woefully inadequate - see this excellent account of the proceedings by Richard Murphy in which he said:

"For Amazon things were much worse. Its rep could not justify how an order made in the UK for a product in a UK warehouse, shipped by UK staff through the UK post and with a bill enclosed printed in this country could somehow have anything to do with Luxembourg. Despite this he had the gall to claim tax must be paid where the economic substance of the deal was – even though Amazon does nothing of the sort."

Tax avoidance means that this country loses money which we badly need to pay for infrastructure, education, health - and, as you know, the list goes on. But by dodging tax, these companies are not only shrinking the UK tax base, and therefore dumping more of the tax burden onto individual taxpayers, they are also killing off British retailers which are based here and pay their full  taxes. This isn't creating jobs, its costing jobs and the profits made in the UK are siphoned off abroad. Corporate tax avoidance is nothing more than a race to the bottom where corporations swan around the globe looking for the cheapest tax rates and playing one country off against another in the process. Its not much more than a form of robbery and we are the ones who are being robbed.

Stupidly, politicians in different countries are playing the corporations' game as they compete with each other to get these tax dodgers based in their country. What they should be doing is deals with other countries to set a standard corporate tax rate so that the corporations cannot gain advantage. It looks at that that British industry is beginning to wake up to this scam and beginning to fight back. Polly Toynbee reported in the Guardian:

"John Lewis's managing director is calling on the Treasury to demand tax is paid in the country where profits are made: Amazon made £3.3bn in sales but paid zero UK corporation tax on any of the profits of that income. "They will out-invest and ultimately out-trade us," tax-paying John Lewis protests, unable to compete fairly with tax-shirkers."

Th reality of 21st century capitalism is that it is no longer productive. It doesn't create as much real wealth any more. Profits from companies like Amazon aren't re-invested in useful economic activity. They are spent by investors on, yachts, financial schemes and property booms. So huge has non-productive financial capitalism become globally that it completely dwarfs the productive economy. Far from being wealth creators, these companies will increase poverty in the countries they are shafting, like the UK, and we will be the losers. Our spineless politicians need to get a grip, and fast. It ought not the be beyond the wit of the EU countries to agree a corporate tax rate of £25% and to clear out the tax havens which are causing so much damage to our economy. Do it, and do it soon! Meantime, if you want to get involved join the UK Uncut demo on 8th December!

The BBC debacle is just part of a much wider malaise

Another week passes by and another debacle for the BBC to deal with. Now, the BBC Director General, George Entwistle, has resigned after Newsnight alleged that a 'top Tory' was involved in child abuse in a children's home in North Wales. The allegation, made on Newsnight by Steve Messham, who was abused whilst in care, wasn't properly researched, and it turned out that Messham hadn't even been shown a photo of the man he thought was his abuser. He was wrong, and he apologised. So far so bad, a sloppy piece of journalism which should never have been aired, and coming on top of the Saville affair it has rocked the BBC from top to bottom.

The BBC has an enduring and important role in our society - Plaque at Alexandra Palace

 
No doubt the enemies of the BBC, including Rupert Murdoch. will be rubbing their hands at the pickle the BBC is in. There are plenty of people who would like to see the end of public broadcasting in the UK. These people are essentially asset-strippers, who seek the privatisation of public services such as the NHS, so that private sector vultures can grab hold of public sector infrastructure and assets, and make easy money from delivering services on long term contracts without any competition - see here. The end of the BBC would mean a bonanza for private sector broadcasters like Rupert Murdoch's Sky.

What has happened at the BBC looks like part of a much wider malaise which includes the Parliamentary expenses scandal, the Libor banking scandal, widespread tax avoidance and tax evasion, and the economic crisis we are in itself. In all these cases people in positions of power, either by virtue of high position or wealth have either failed to maintain expected standards or abused the system for their own benefit. What this indicates is a widespread failure in the system brought about by a toxic mixture of incompetence, corruption, and sheer criminality. What is the cause of this? Well, there will always be people who try to get their fingers in the till, but I believe the main cause is the corrosive and malign influence of neoliberal 'free' market capitalism. This is a get rich quick, devil take the hindmost, beggar my neighbour ideology, which puts profit before people and seeks to destroy collective provision for private gain. We had a wonderful example of this recently when it transpired that a group of GPs had made millions by hiving off NHS services to the private sector. 

If you are wondering what this ideology has to do with institutions that are still wholly in the public domain I can assure you that marketisation and 'free' market ideology is all pervasive in the public sector, thanks to the 'influence' of New Labour and the Coalition. But we need our BBC, and  for all its faults and failures, it still provides far better value for money than its private sector rivals, and acts as a bulwark against the rabid and poisonous propaganda pumped out by private 'news'  stations like Fox - its well worth watching this attack on Owen Jones.  What we need to to do is understand the dangers of this insidious 'free' market political project and work to protect our public services. We also need to re-discover that old fashioned and oft forgotten concept of public service, which some of us still remember, and value.

Footnote: the day after I posted this, an interesting article by Simon Caulkin appeared in the Observer. What Caulkin, who is an award winning commentator on management issues, is arguing is that management has been taken over by 'free' market ideology - worth a read.

The' living wage' is nowhere near enough

Its been an eventful weekend, with the final stages of the battle for the American Presidency, between Obama and Romney, and yet another child abuse scandal and 'cover-up' erupting in North Wales. What caught my interest though was Ed and Dave Milliband's plan to deliver the living wage in the UK. When you hear that the Labour Party plans to do something for working class these days you take it with a hefty dose of salt. In fact, its fair to say that Labour has been responsible, in recent times, for kicking the working class just as hard as the Tories, which is why, electorally, some of those people have defected to the BNP, as a protest vote. The infamous 'squeezed middle' may be a priority for Labour, but the working class, low paid, and unemployed have dropped completely off the radar, abandoned to the cheap labour market of neoliberal globalisation.

But if you read the Guardian article by Dave Milliband and Dave Prentis it gets much, much worse. Firstly, we get: 

"But progress depends on keeping up the pressure and keeping up the campaigning. And it means finding incentives to persuade reluctant employers that it's in their interests as well."

 Er......so its only a campaign you are talking about then? I thought for a second a you meant a Labour government was going to legislate. Next:

"Public tendering is one area where this could work, particularly with growing privatisation. For example, could government reward local authorities that get employers to sign up to the living wage, with some of the savings from tax credits to go into a local skills fund, controlled by those authorities?"

Right, so first, we fully accept the asset stripping of privatisation, then local authorities have to beg employers to sign up? Huh? So we ask the corporations nicely to cough up - please. Its enough to make any self respecting trade unionist choke on his/her beer - if they can still afford any these days.

What I would expect any self-respecting politician who believes in social justice to do is to make employers pay a living wage through legislation. For years now the capitalists and corporations have had an orgy of excess, grabbing an ever greater slice of the economic cake at the direct expense of the rest of us. They have brought about the biggest economic crash in world history, causing economic chaos and misery to millions. Does it matter to them? -  no, not a bit. They have been completley insuated from the crisis they created. Now it is time for democratic governments to make them pay for their excesses and bring them to account. We need to reverse the neoliberal 'heist' that has been going on for the last 30 years. 

The best way to revive the global economy is to put money into pockets of the workers and the poor, and that means more than the 'living wage', because its not just enough.They will spend that money and they will create new jobs. They are the real wealth creators and job creators. For far too long we have put up with self-serving 'free' market bullshit about tax cuts for the rich, deregulation, and labour market flexibility. What we need is democratic control of the economy and asset redistribution to build a fairer, more equal, and more effective economy which can fight climate change and provide prosperity for all.