Thursday 24 April 2008

Tackling monopoly power

Over the years debating fair trade versus free trade, I have come to the slightly woolly conclusion that they don’t have to be opposed to each other. But that does mean making a clear distinction between Liberal free trade (the right of free people and communities to do business with each other, or not) and Conservative free trade (the right of the rich and powerful to ride roughshod over anyone).

What makes the difference between the two, and guarantees some chance for Liberal free trade to flourish, is being vigilant against the abuse of monopoly power. This used to be a central plank of Liberal economic policy until the 1950s and 60s, then – for some reason – the party forgot about it.

This was immensely damaging because the Labour tradition wasn’t interested, regarding anything about business as anathaema, and the Conservative tradition was primarily concerned with the rights of the powerful and the economic fantasy of trickle-down.

As a result, we wake up this week to hear the miserably pusillanimous report of the Competition Commission on BAA, wondering if it was possible that their monopoly of UK airports was damaging consumers.

Well, of course it is damaging consumers. How could it not be, when the main focus of BAA is currently to keep consumers captive and in their shops and to pay off their hideous debt mountain? Where is the pressure to be nicer to the poor benighted passengers?

Why this extraordinary ignorance about the effects of monopoly? Is it New Labour ideology? Is it a naïve believe in the efficiencies of scale? Actually, having met a few of them at the Competition Commission, I think it’s worse than that – it is a massively naïve belief that if a business situation exists, then consumers must have chosen it to be so.

Either way, it is time Liberal Democrats made the issue of monopoly their own.

I feel this very strongly this week because of an article in the Sunday Telegraph last weekend about how Tesco was dealing with food price inflation by squeezing their suppliers.

This might help consumers in the short-run. But if they abuse the monopoly power shared by the Big Four supermarkets and squeeze these suppliers too far, as the article hinted, then we will lose our local capacity and will face massive inflation as the supermarkets seek out suppliers overseas.

When you think that the Big Four currently abuse their monopoly position by insisting that they can pay suppliers after 90 days, rather than the 30 days accepted by their small competitors – giving themselves a rolling interest free loan equal to two months of their entire stock – the chances of them accidentally rolling over a portion of UK agriculture is not beyond the bounds of possibility.

And now that Tesco is trying to gaol critics in Thailand, and silence the press in this country with their ferocious legal action against the Guardian – we libertarians need to keep our attention as closely on them as we do on the antics of their friends in the government.


Alasdair W said...

Labour and the Tories idea of free trade has been one of helping monopolies. That's why many think of economic liberalism as right-winged.
The reality is economic liberalism is about competition. I would wish for small businesses to compete against corporations. With open competition, consumer demand rules. Then you also get fair trade. International Standards put in place also.
The choice isn't a wolly one.

Jo Hayes said...

Absolutely, David. Let's tell FPC. My particular concern is that the big supermarket chains continue to gobble up the small shops. Supermarkets are like the narrow bit in an hourglass, control-freakily getting between the producers and the consumers and raking off the profits. I have voted with my feet by shopping at market stalls and family-owned small shops. Very often the prices are competitive and I avoid spending time and money on travelling to and from the supermarket. BTW can I put in another plug for the very nice fruit stall outside Embankment Tube Station in London?

Edis said...

Markets work where there is disciplined pluralism - where customers can spend directly to get the outcome they want and where there are competing alternatives to gain that spending.

In the case of airports, passengers are not usually the customers of airports. Airlines are the customers. The airline largely determines which airport the customer goes to. And the airline industry slang term for passengers is 'self-moving freight'. Once the airline has established its route, the relvant airport has a monopoly on the processing of that 'freight'.