Wednesday 16 July 2014

The real scandal behind the sausage cartel

It is strange that Adam Smith is quoted so widely, not to say obsessively in the American economics departments, but his great warning about monopoly seems to have been forgotten:

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

This is, of course, a way of talking about the German sausage cartel, revealed today.  There was a discussion on the Today programme, full of the inevitable puns, which suggested that this was a blot on the reputation of German business (there have been cartels in other things recently).

I think rather the opposite.  The fact that these conspiracies against the public have been unmasked in Germany is a major positive.  If only we had competition authorities like that - but we don't: my only brush with the Competition Commission appeared to reveal an organisation staffed mainly by secondees from the European Commission, and with quite a different agenda.

Their interpretation of competition seemed to have little to do with breaking up cartels, and a great deal to do with building up European champions to take on the American semi-monopolies.

It was this confused body which conducted the recent flawed reviews of the UK groceries market.

I am coming to the conclusion that the blindness of the UK establishment about monopolies has a great deal to do with the failure of the Liberal Party to play a greater role in the second half of the twentieth century - and, when they did come to play a role, they seem to have forgotten their original economics.

Competition, competition, competition, plus diversity.  How could we forget?

So here's my take on the sausages.  It is bizarre, isn't it, that companies are not allowed to collude with each other about prices - yet they seem to be allowed to buy their competitors almost at will.

The UK's abject competition authorities allowed Waterstones's to buy Ottakars, almost their last high street competitor.  Fair enough, maybe that was the only way of preventing collapse - though I doubt it.  But then to let Amazon buy their only UK online competitor in the books market, the Book Depository.

So we are subject, over and over again, by conspiracies against the public by the back door.  And all because Liberals and liberals forgot the central economic lesson of Liberalism.

This is how Adam Smith continued the paragraph:

"It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."


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