Why socialism is evil #5, they think they know better than the market

Markets are wonderful things, we are all surrounded by many thousands of them, whether we are buying car insurance or a bag of sugar. They give the buyer the greatest possible choice and the ability to make informed decisions on quality and price. They force the seller to be competitive, to give the best possible quality and price and to be innovative so as to gain competitive advantage. They force the most efficient allocation of resources so that society receives the maximum benefit. They match supply and demand. In so many ways they advance the human condition, which is why they have been fundamental to society for thousands of years. There is no better way for goods and services to be traded than in a perfect market, this is absolute proven fact. Except that socialists don’t believe it.

One early example was the way they kept wartime rationing long after the war was over and in 1947 made it even stricter saying that there was no option. Under this system a farming uncle of mine was forced to throw large quantities of milk into the drains because his cows were so stupid that they made more than their quota. The incoming Conservative government of 1951 threw rationing out of the window, the markets took over again and almost instantly everyone had a better quality of life.

Nationalising companies and creating state monopolies is a disaster. They don’t have to be competitive, so they aren’t. They don’t have to look after their customers, so they don’t. They don’t have to stand up to the unions, so they don’t. They don’t have to allocate resources efficiently, so they don’t. All very obvious, except to the socialists. Their actions destroyed large swathes of British industry. Even the companies that weren’t nationalised suffered badly because they had no option but to buy from the nationalised monopolies. The rest of the world looked on, laughed, and took our customers away from us.

Amazingly today there are still large lumps of the British economy that are nationalised and they suffer from all the same old problems. The national health service, Royal Mail, the fire service, the London underground, several Scottish ferry companies, the Royal Mint, Railtrack, Ordnance Survey, air traffic control, CDC Group, East Coast trains, JISC Collections, lots of bus companies, the NEC, Manchester Airports Group etc. All these should be privatised.

Of course socialism under Wilson and Callaghan didn’t just run huge nationalised monopolies, they also instituted a prices and incomes policy. Under this the Labour politicians said that they knew better than the market and that they would micromanage prices from Whitehall. The total arrogance and stupidity was breathtaking. And of course this contributed to the wheels falling off the whole economy.

Some people say that Blair and Brown weren’t socialists because they didn’t attempt to renationalise, but lets face it, by then even the Labour party (most of it) could see how much damage their earlier stupidity had wrought. But they were socialists in many other ways as the previous four articles here have illustrated. And they made one enormous blunder of thinking that they knew better than the markets, they allowed Frank Dobson (IMHO an unreconstructed dinosaur of old school socialism) to get rid of the internal markets within the NHS. Obviously it all went pear shaped and it has cost hundreds of billions of taxpayers’ (you and me) money to patch things up. It is still a total disaster area that absorbs immensely disproportionate amounts of money to deliver a pretty poor service.

Today there is one huge area of the economy where the market is not allowed to work and it hurts UKplc very badly indeed. It is the labour market. Quite simply employers are not allowed to get rid of staff, no matter how bad they are or how little their services are needed (except in the most exceptional circumstances). So the employers do the obvious thing and don’t employ people in the first place. It is a very simple fact in the world that governments that “protect” the workforce more have higher unemployment and vice versa. Just look at Denmark, even though they say they are socialist they are not so stupid as to have restrictive labour laws. Employers can hire and fire to suit their businesses, so they do. The result is less unemployment and far shorter periods for individuals to be out of work. Then look at France, which has even more stupidly restrictive labour practices than Britain. The result is higher unemployment, as no business in their right mind wants to employ anyone unless they are absolutely forced to.

The British unions are prodigiously stupid in trying to protect their members’ jobs, all it does is increase overall unemployment and make everyone poorer. If the unions had any sense (an oxymoron) then they would encourage labour mobility, they would want the labour market to work. The whole of British industry would become a lot more efficient overnight, the economy would prosper, there would be more jobs and employees would be more highly paid.

If Cameron and Osborne want to do the one thing that will aid our recovery the most then it is to repeal the socialist labour laws and to allow the market to work.

4 Comments


  1. Cameron and Osborne repeal the labour laws? I’m ploughing my way through the Protection of Freedoms Bill this morning and everything they repeal is more or less replaced.

    Here’s the link if you’re interested: http://bit.ly/f63xCy

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  2. I have often suggested that we should have 2 minimum wages. One as now, whereby you get £6-7/hour and the protection of all the employment laws. And another whereby you get paid considerably more than that (perhaps double or more) but have no employment rights whatsoever. No holiday pay, no sick pay, no employment tribunals, no (or very little) notice period, nothing. Effectively you have turned all your ‘rights’ into cash.

    I think this would be very popular both with employers (who could see exactly how much the new employee was costing, and could get rid of them if needed) and with employees, especially loyal hard working ones, who would get more cash in their pockets. It would open up the job market massively as people would consider employing someone, even at a high hourly rate, as long as they knew they weren’t stuck with them for life.

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  3. Great blog, Bruce – only just discovered it, so sorry if you’ve been going a while. I agree with the jist of it, and by and large feel that the market system does generally work better in the majority of situations in terms of improving life quality, maintaining stable costs and boosting industry. But isn’t it true that there are some fields of industry (only a few, I’ll admit) which simply aren’t really viable as private enterprises because they just can’t make a profit without charging exorbitant prices? Wasn’t that one of the reasons why the old rail companies were taken into public ownership – because they were about to go bust (not having today’s advantages of lucrative government subsidies as today’s “private” rail companies do), and because the knock-on effects of that generally would have been economically disastrous? Wasn’t that action the government “bail out” of its day? I’ve travelled by train pretty much all of my life, and since privatisation the service doesn’t seem to have got either any better or any cheaper than it was under British Rail, for all its faults (and there were plenty). Not sure about the energy companies – maybe that was just political idealism at work – but I certainly haven’t noticed any improvement in service and/or price since privatisation. In fact, the only thing that seems to have changed is that I now get pestered endlessly by junk mail and door-to-door salesmen trying to get me to switch suppliers (did it once – never again!). But apart from those, and one or two other exceptions, I agree!

    Oh, and Jim – fab idea about the minimum wage thingy!

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  4. I’d very much concur with the comments made by Jax. Agreed there are many cases where the rigour and competition of ‘the market’ has and could improve a service.
    However.. in the case of rail, as a consumer I have no choice in which rail company I travel by, subsidies are enormous, profits ditto and I’m still left standing on the platform in the rain, with a depleted wallet, wondering if a dirty train with no available seats is ever going to turn up.
    Similarly, the utilities companies have all eaten each other up to the point where the very few players in the market are effectively a cabal which exists in order to fleece the consumer and without even having decent contingencies in place for emergencies (I speak as someone who did a round trip of 200 miles to get a hot xmas dinner due to a total lack of response to power cuts in the south east).

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