The nanny state is alive and well. What? Do you mean all those entitlements going to people who should take care of themselves and their children? Well I could be meaning that but Joe’s going to start ending the age of entitlement next Tuesday. Ain’t he? Ain’t he? He Ain’t? Ah, well!
No, what I’m talking about is businesses running off to the federal government, or its regulatory consigliere, the ACCC, whenever competition rears its ugly head.
You will recall the kerfuffle over milk and petrol prices a little while ago. Coles and Woolworths had the temerity to sell milk and petrol at very low prices to the chagrin of dairy farmers and those businesses wanting to charge higher prices for petrol and which believed they had a God-given right to go on doing so. I think they may have done the same thing with bread prices, the bastards.
Now, apparently, the ACCC is alleging that Coles is demanding that two hundred of its suppliers discount their prices or else stuff won’t be bought. Where will it end, this rampant competition?
I spoke to an elderly pensioner doing her shopping in Coles and she told me, and I’m quoting here, “Well I can’t speak for anyone else but I would much prefer to pay higher prices for everything than to see those poor businesses supplying goods to Coles being squeezed. I don’t mind keeping my heater off unless it gets really cold to save the money to pay more for my groceries. And really, I don’t need to buy chocolates”, she said as she put the box of chocolates back on the shelf.
Thank God for the ACCC. Where else could we turn to keep supermarket prices up?
In case anybody, obviously including the ACCC, is in any doubt, a sure sign of competition is lower prices. I thought, mistakenly, apparently, that the ACCC was in favour of competition — but not, certainly not, when it actually does result in lower prices. There the ACCC draws the line.
What does competition mean? Why is it good? And why do lots of businesses dislike it?
Competition happens when two or more independent businesses, producing similar goods and/or services in the same market try to outdo each other. One of the main ways they try to do this is to lower their prices. In turn, this means, among other things, that they bargain as toughly as is practicable with their suppliers.
This is good because those buying from these competitive businesses enjoy lower prices. It is also good because it drives uncompetitive suppliers out of business (yes, out of business) or makes them operate more efficiently. In the end result the whole economy benefits. In other words, we look more like we do now than Eastern Europe in 1989. And we could have looked a lot better if governments hadn’t mollycoddled so many industries, like the car makers, for so long.
Many businesses don’t like competition, particular those at the sharp end of it. Why would they? Competition is uncomfortable and demanding. Their time-honoured response is to approach the consigliere for protection rather than improve their business processes. You never know, an offer that can’t be refused might be made to those causing you competitive angst.
OK, I don’t know the details of the case being brought by the ACCC against Coles in the Federal Court. But, what the ACCC shouldn’t care about is businesses being squeezed by other businesses in the competitive marketplace. They shouldn’t be concerned about lower prices unless they are result of a predatory intent to drive a competitor out of business before jacking up prices in the future. From the information available, it is hard to see how that applies in this case.
The free market is a hard, impersonal, taskmaster. That is one of its advantages over all other systems. We don’t want businesses protected and mollycoddled by the government or its agencies. That is a step closer to the inefficiencies and corruption of socialism.
You will always notice the absence of complaints when businesses are doing well. They complain only when things are going badly. Importantly, like children who fall over, they complain more loudly the more they think they will be listened to and given succour. Unfortunately, for many years a culture has been created in Australia of regulatory protection and taxpayers’ dollars being used to prop up businesses that should have been faced with only two options: getting more efficient or getting out.
The fiscal pressures that Australia will face in the future can only be solved by increased productivity. Part of that involves lowering business taxes and regulatory obstacles. Part also involves allowing relatively untrammelled competition to drive efficiencies.
Peter Smith, a frequent Quadrant Online contributor, is the author of Bad Economics and the holder of a modest number of shares in Westfarmers, parent comapny of the Coles chain