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My Countrymen Don’T Understand The Theory On Which Our National Prosperity Is Founded: Capitalism

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"My countrymen have a problem. They don’t understand and have never wholeheartedly bought the economic theory on which our entire national prosperity is founded: capitalism and the free market. The theoretical case for competition has never really penetrated the national skull. Like the Americans, we enjoy the benefits of a more or less free market, but unlike many Americans, too few of us could or would explain and defend the theory with any enthusiasm. Everything that Adam Smith was trying to say still largely passes the British by." (Matthew Parris, The Times, June 11 2011)

Down with competition? Your choice, comrade

Matthew Parris

June 11 2011 12:01AM

We enjoy the fruits of capitalism yet despise the free market. It’s the duty of ministers to be honest and defend it

Imagine that in Britain we took European agricultural policy to its logical conclusion, and had a Soviet-style “collective” system of agriculture, with all farmers’ purchases channelled through a state-controlled system of supply. And then imagine a government deciding to change course by giving individual farmers the power to choose between competing suppliers.

Now picture a special conference called by the farmers’ trade union to debate the proposals. Here is an extract from a union leader’s speech to the conference. He is railing against a duty, in the proposed legislation, to promote localised competition . . .

“I want proper controls nationally considered, not locals trying to sort things out . . . I want politicians of every stripe to understand that we do not need competition to run Britain’s food production. It creates duplication that is wasteful — and why give state agriculture’s money to private shareholders? What Britain’s food production needs to improve quality and efficiency is collaboration and co-operation across [all] sectors, [not] different materials being delivered by different providers in order to try to get a cheaper deal — fertilisers in one place, feedstock in another, veterinary services in another and follow-up somewhere else.

“Which brings me to one particularly unacceptable idea in the Bill: performance-related bonuses ... otherwise known as the ‘quality premium’. The idea is that farmers’ groups that ‘purchase well’ — ie, save money — will be given some money to hand out to their members . . . this idea stinks.”

Absurd? Maybe. But you will recognise behind these arguments a distinct theory of economics and the public interest. The theory states that free-market competition is wasteful because it:

  • fragments provision;
  • duplicates services;
  • forgoes the economies of scale offered by monoliths;
  • creates uneven provision across the country;
  • wastes resources by pitting one against another;
  • creates an invidious incentive to outperform comrades;
  • siphons money off to profiteers, and fails to harness co-operative instincts for the general good.

“Co-ordination, not competition.” You will sense a certain juvenile potency in this critique. Why, what could be more practical than a system that identified national objectives and made a plan for realising them? What could be sillier than, for instance, two schools in the same locality, each trying to steal the best teachers (and attract the best pupils) from the other? Better to combine, providing the best education for all.

What could be more inefficient than two shipyards each competing for the same contract, trying to undercut each other, paying their workers less, and cutting corners on quality of construction? Better to combine, set a fair price, a fair wage, and an agreed standard for quality.

What could be more ridiculous than two stores, selling similar products, one right across the high street from the other, but being restocked by different lorries and battling to nab each other’s customers while the directors grew fat on profit margins that only increased the cost of citizens’ supplies? Better, surely, to have one big store, twice the number of customers, and no profit.

What indeed? But we tried it. Or the Soviet Government did. It was called GUM, an abbreviation from the Russian for “main universal store”. It was a joke. So was Soviet agriculture. So was manufacturing. The whole Soviet economic model failed, basically for two reasons: first, it was less efficient than a market economy in predicting and matching demand and supply; and second, it failed to incentivise its management or workforce to work hard, keep on their toes and satisfy their customers.

RIP Marxist economics — except, it appears, in Britain’s National Health Service. That “farmers’ union” speech I’ve just quoted is not imaginary. It is the keynote speech delivered by a doctors’ leader to a British Medical Association local medical conference in London on Thursday. The only change I made to Dr Laurence Buckman’s speech was to substitute the vocabulary of food production for that of healthcare; otherwise, I quoted him word for word. He was applauded to the rafters.

My countrymen have a problem. They don’t understand and have never wholeheartedly bought the economic theory on which our entire national prosperity is founded: capitalism and the free market. The theoretical case for competition has never really penetrated the national skull. Like the Americans, we enjoy the benefits of a more or less free market, but unlike many Americans, too few of us could or would explain and defend the theory with any enthusiasm. Everything that Adam Smith was trying to say still largely passes the British by. We still think competition is faintly unpleasant, we’d rather nobody failed and would prefer everyone to work together in the interests of all.

What makes our economy tick is precisely the opposite of those happy thoughts. Among the causes of our disinclination to grasp that is a deep English fear of anything theoretical that doesn’t sound like apparent common sense — which, for all its clodhopping academic prose, socialism, in its essentials, does.

The other cause I blame on the Conservative Party and, in today’s context, on David Cameron and his ministers. It is a Tory duty, if it is any British political party’s duty, to make the intellectual case for competition, and to make it unashamedly. The coalition is funking it.

Ever since its country-gentry clash with the more mercantile Whigs, the Tory party has enjoyed an ambiguous relationship with the three Ms: markets, merit and social mobility. Class may be at the root of this. In the deepest recesses of its ancient heart, the Tory party half believes, along with millions of the English, that advantage should be derived from status, not work. This queasy unease about competition is why the upper and middle classes never really fought for the grammar schools (and why the Labour Party should have).

Today, the zombies of the PR trade have persuaded Cameron and Co of what (from any strictly PR perspective) is true enough: that “competition” is a boo-word with the voters; so if competition is what you mean, choice is what you’d better say. Tories therefore mumble about choice. It serves them right, then, that this triggers the popular response that now makes ministers wince because they cannot answer it: “But I don’t want a choice of schools/hospitals in my area; I just want one good school/hospital.”

Are we British really too feeble to be introduced to the idea that it is competition that helps a good school/hospital get good? Wouldn’t most people understand why, even if they don’t need a choice of two good supermarkets, they won’t even get one good supermarket without competition? Thinking Conservatives and Liberal Democrats should believe earnestly in competition. They must not funk defending that belief. Otherwise they fully deserve the juvenile plausibility of Dr Buckman’s onslaught, for he attacks something that they will not defend.

:)

Excellent.

"Respec".

Edited by Tired of Waiting

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"Competition" interferes with my human rights, as does the expectation that I'll work for a living, provide for my sprogs and pay my way. The other socially unacceptable word is "Responsibility", as in I will take any for those items listed above.

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"Competition" interferes with my human rights, as does the expectation that I'll work for a living, provide for my sprogs and pay my way. The other socially unacceptable word is "Responsibility", as in I will take any for those items listed above.

I think the main problem is that Adam Smith is not part of the national curriculum.

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Adam Smith was a genius. But what we have today bears no relationship to the sort of markets he envisaged. Ours are riddled with crony capitalism, bailouts of failures, monstrous state intervention in the monetary system (all but destroying the price signal) and systemic and enduring fraud

When it comes to healthcare, rather than lampooning the BMA (which is like shooting fish in a barrel) can anyone give an example of a market-based healthcare system that outperforms the NHS on the triad of quality, cost and access?

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How free should the Housing Market be?

IMPO, much much freer, particularly the supply side, currently virtually blocked by the planning system. Whilst the demand side was strongly boosted by totally irresponsible and unregulated financing.

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Politicians can't advocate free markets because thay ren't part of them.

The utter hypocrisy of their position makes it impossible.

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As a consumer in the new health care paradigm do I get to choose the illness I contract- one most suited to my budget?

Don't get me wrong- I'd really like some of those rarer conditions you read about, they do have a certain 'cachet' - but I'm concerned that my budget or health insurance plan won't stretch that far and I will end up being forced to suffer from cheaper illness's- and thus suffer from discrimination by those who can afford better diseases than I can.

This is just another case of discrimination against poor people- who will have to make do with cheaper medical afflictions while the rich can afford to develop more interesting and complicated problems that require specialised treatments.

So will the poor be given subsidies to allow them to afford the more more expensive illnesses- I suspect not!

It will be a case of having the conditions you can afford- and if you want something fancy that's just that's tough- you will be forced to make do with a simple cancer, maybe of just one organ- while the rich can afford a full invasive multi organ job with all the trimmings.

It's disgusting how class ridden this country still is :angry:

I think the poor should be entitled to suffer from the same illnesses that the rich can suffer from- and not be made to choose cheaper ones simply because the more expensive conditions are out of their reach financially. Why should I put with only having some cheap and simple to treat condition when the millionaire can afford a life threatening multi disciplinary ongoing chronic disease?

It's just plain wrong.

Edited by wonderpup

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The Dutch reformed their health insurance system in 2004 and it gets very good reviews, without being perfect.

Yes, I heard it is excellent.

Isn't the French system similar? With private providers as well?

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Removing HB and SMI would be a good start. Lending criteria would distort the housing Market, but if there's no bailout for the banks, lending should also be a free Market.

With bailed out lenders and planning restrictions it's hard to imagine a more manipulated/regulated market.

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Removing HB and SMI would be a good start. Lending criteria would distort the housing Market, but if there's no bailout for the banks, lending should also be a free Market.

SMI could be claimed by the 250000 new IR mortgage holders if they became unemployed ! Banks become huge landlords paid for by the taxpayer, hilarious

IMPO, much much freer, particularly the supply side, currently virtually blocked by the planning system. Whilst the demand side was strongly boosted by totally irresponsible and unregulated financing.

Agree on supply side but with respect a free market would not regulate finance.

Which is why I asked the question how free. Everyone who wants a free market wants something regulated.

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Most Conservative supporters are actually natural opponents of true free market capitalism. They (quite naturally) support measures that give advantages to their family and children. In a true free open market, all would have the same advantages in terms of initial education, contacts, and (lack of) inherited wealth. Then, and only then, could you have true competition.

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Politicians can't advocate free markets because thay ren't part of them.

The utter hypocrisy of their position makes it impossible.

yep, they're wining even when they lose. ;)

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Agree on supply side but with respect a free market would not regulate finance.

Which is why I asked the question how free. Everyone who wants a free market wants something regulated.

But we even had fraud boosting the demand side - liar loans, etc. These must be curbed, surely.

Modern market capitalism is not a totally laissez-faire system. Of course some regulation is always needed, even to keep competition, like curbing monopolies and cartels, etc. Or for health and safety. Or even some reasonable, sensible, positive town planning. Most modern developed countries have a liberal-market democratic system, where capitalism is democratically regulated, ideally towards the public good.

But the discussions around the recent NHS reforms missed the point completely, ideologically really, with extremely stupid and naive arguments like: "cooperation is better than competition". I can understand that coming from Lisa Simpson, but not from an adult. I think THAT was what motivated Parris to write his column.

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But we even had fraud boosting the demand side - liar loans, etc. These must be curbed, surely.

Modern market capitalism is not a totally laissez-faire system. Of course some regulation is always needed, even to keep competition, like curbing monopolies and cartels, etc. Or for health and safety. Or even some reasonable, sensible, positive town planning. Most modern developed countries have a liberal-market democratic system, where capitalism is democratically regulated, ideally towards the public good.

But the discussions around the recent NHS reforms missed the point completely, ideologically really, with extremely stupid and naive arguments like: "cooperation is better than competition". I can understand that coming from Lisa Simpson, but not from an adult. I think THAT was what motivated Parris to write his column.

You can't regulate monopolies out of existence because it requires at least one monopoly to do!

All of this angst is purely and simply to ignore the basic moral issue - taxation is theft and theft is wrong.

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Most Conservative supporters are actually natural opponents of true free market capitalism. They (quite naturally) support measures that give advantages to their family and children. In a true free open market, all would have the same advantages in terms of initial education, contacts, and (lack of) inherited wealth. Then, and only then, could you have true competition.

Exactly.

The Conservatives don't promote equal opportunities.

Labour should, but they want equality of outcomes instead.

Nobody defends meritocracy any-more.

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Adam Smith was a genius. But what we have today bears no relationship to the sort of markets he envisaged. Ours are riddled with crony capitalism, bailouts of failures, monstrous state intervention in the monetary system (all but destroying the price signal) and systemic and enduring fraud

When it comes to healthcare, rather than lampooning the BMA (which is like shooting fish in a barrel) can anyone give an example of a market-based healthcare system that outperforms the NHS on the triad of quality, cost and access?

The problem is he had theories, theory tends to work will on paper but turns out crap in reality as variables you failed to account for turn up.

The free market starts to fail because it creates monoliths, the very nature of the market allows power to be concentrated and once that happens it fails.

There is no perfect market theory, they are all flawed. Many of Marx's criticisms of the free market are accurate, however his own proposal is also fundamentally flawed.

The most free market country in the world was the UK during the first part of the 1800's and it failed miserable.

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But we even had fraud boosting the demand side - liar loans, etc. These must be curbed, surely.

In a true free market the lenders making irresponsible decisions would have gone bust, the investors/savers who provided their money would have gone looking for those responsible and the remaining banks/lenders would have tightened their lending to make sure they didn't suffer the same fate. Yes it would have been painful for some in the short term but there's a reason it hurts when you hit your thumb with a hammer.

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Maybe taxation is the only way to have a decent society like what we have here in the UK in principle with the current monetary system.

They could easily change the monetary system so that taxation would never be needed again. The fact is how ever the monetary system evolve, its only semantics, the end result is still the same thing, greasing the wheels of mankinds roller coaster development through time. :D

All of this verbiage is purely and simply to ignore the basic moral issue - taxation is theft and theft is wrong.

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I think they ought to introduce true competition in running the country.

Start with the South being run by the Tories and the north, wales and scotland run by Labour.

No links or monetary transfers but free movement of people allowed.

As an area expands its population so it gets an increasing share of the land mass.

Everyone's happy. That's known as 'choice'.

but then youd get 60 million people living in Maidstone which would make it very crowded

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All of this verbiage is purely and simply to ignore the basic moral issue - taxation is theft and theft is wrong.

Then "free" education & "free" healthcare etc are also the proceeds of theft and are also wrong.

If this is true, please suggest your alternative.

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taxation is theft and theft is wrong.

Right- and if some thief stole my money- I would call the police immediately...

Oh, hang on....

No one paid them so they all went home. :lol:

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Then "free" education & "free" healthcare etc are also the proceeds of theft and are also wrong.

If this is true, please suggest your alternative.

Don't steal.

After that, do what you want.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • up 5%



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