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Friday, May 19, 2017

Free Competition

Henry George, in his 1891 Populist plank, included a well crafted plank that included a definition of where the distinction between a public set of goods and services can be managed by the "market," Left up to individual initiative, and where it shouldn't. The distinction rests on the question of "where free competition becomes impossible," and his examples; "telegraph, railroads, water and gas supplies", today would include all telecomms, internet, electrical power, etc... are as valid today as in his time (1890s). And they hing on the term "free competition."

Too Socialist or Too Free Market?

To Georgists in the United States that notion was "too radical." His statements on behalf of industrialists had gotten them to support his movement and they objected to the notion that the industries where they'd made their millions should be run "for the whole people". They struck that passage out of the Georgist plank over his objection. This was seen as "too socialistic" a formulation. And H. George was labeled a Socialist by an important Catholic prelate, and so wound up having to write an encyclical replying to the famous encyclical Rerum Novarum. He would in the end be labeled "too free market" for the socialists, and "too socialist" for freebooting privateers. But the reality is that this plank #11 stands the test of time.

Free Competition versus Freebooting

To this day, one of the areas where people, worldwide!, get grifted (swindled) is in the area of free markets versus monopoly and Government control. Modern Pirates don't need to fire literal cannon's anymore. They've traded eye patches and peg legs for lawyer briefs and Armani Suits worldwide. Time and time again important industries are "privatized" in the name of "free competition" and "free markets" and the result is not what anyone agreeing to the swindle expected. The Grifter sales force usually promises that "free competition" will generate a cornocopia of benefits and save dying industries, regenerate coal mines, keep factories belching smoke, and provide abundant drinking water to people in cities at a low or nearly costless price. It never happens that way because to have a free market you have to have conditions of free competition and free participation.

Markets require 'Free Competition'

The correct answer to whether something is a monopoly or something that can be turned over to "market solutions" is found in answering the question of "is it subject to free competition?" or "Is free competition even possible?"

If the answer to that question is "no" then the goods and services are not "subject to free competition" and will be managed eventually either oligarchically, monopolistically or simply will be subject to "market failure" and be available to only a few or to nobody after a time. Thus the question of where the "free market" is appropriate and where it is not hinges on "whether free competition is possible."

So what is Free Competition?

There is a lot of misinformation about what "free competition" is. For example this capitalism propaganda site defines free competition thusly:

"Free-competition means freedom from the initiation of physical force. Free competition is the freedom to produce, and the freedom to trade what one has produced, for ones own self-interest, i.e., in the pursuit of ones own happiness." [Capitalism]

The Cambridge English Dictionary:

"a system in which supply and demand control prices, incomes, etc. freely and without government involvement" [Cambridge]

Of course government involvement *IS NECESSARY* in the form of rule of law, access to courts and standards of weights, measures and disclosure. The definition includes an "invisible hand" of good government.

To have free competition, the two attributes of the expression must be met.

Freedom
Buyers and Sellers must be free to enter or leave the market at will
Both buyers and sellers must have a choice between products and customers.
Competition
There must be alternatives for both buyer and sellers.
Specifically sellers must be able to compete with one another to vend their goods and services with other buyers and sellers.

if there are no (or few) alternatives for who to buy from then there is no genuine competition going on.

To have a free market it has to have "free competition"

Almost any stock definition of a free market says:

"In a free market, individuals and firms taking part in these transactions have the liberty to enter, leave and participate in the market as they so choose."

There is a further distinction. If you can't refuse a good, but the seller can refuse to provide it, then the sale of that good doesn't meet the tests of free competition. If you go into a genuine free market you can find similar goods going from stall to stall. If you don't like the peaches from one vendor you can buy peaches from another. The average store gives you a "choice" between peaches all from the same farm and truck. A store doesn't meet all tests of a free market.

Individual Freedom

All participants must be free to participate or not participate. "Free competition" depended on whether a good or service can be refused by the buyer AND whether the buyer has alternative means to acquire the good. This definition was used by the Commerce Department to claim that buying Chicken instead of Beef meant that chicken and beef are inter-changeable and so the prices should be treated as a basket. But most early examples of "free markets" included participants who have no choices. Slave markets, company stores, monopolies and oligarchies, oppress participants and are not "Free Markets!"

Monopolies, Vital Services, Infrastructure Cannot be Free Competition

And similarly healthcare does not offer free competition except in some narrow specialties. People don't even want to choose a new doctor every time they visit one. They need the particular expertise of one person and his valuable time. They may have the right to refuse treatment, but that is a coerced right unless society privileges equal access and the resources, for everyone. Health Care Cannot be delivered as a "free market."

Infrastructure as "Necessary Social Function"

Similarly, while infrastructure monopolies such as Transport, Communication and Power infrastructure can be setup to give some appearance of free markets they are fundamental necessities for everything else a society does, which is what defines them as a "necessary social function." It is also why all of those natural monopolies must be "controlled and managed for the whole people concerned."

Indeed without free access to transportation and communication free markets become impossible. People have to be able to connect; seller to buyer, buyer to transporation, and be able to do so with a minimum of unnecessary diversion to third parties.

Subsidiarity in Infrastructure Management

Healthcare, education, government services in general and infratructure, all need to be managed for the general good of the public in order to have a free market system. If you can differentiate between areas where free competition is possible and areas where it is being blocked or a third party is extracting private taxes (rents) on every transaction, you can create healthy markets, fair markets, and places where transparency, rule of law and mutual benefit prevail.

Resisting Privateers

To do that you have to resist efforts to over-centralize, to let economic royalists (I call them pirates) take control and extort rents, and other forms of Usurpation. It is true that the people closest to a public good should have operational control over that good. Towns should control their own communications, energy and transportation within an overall framework. We need more democracy locally and better representation in our general functions. There is nothing wrong with someone owning a Coal Mine Operation, for example, but he should not be able to convert that operational power into local autocracy. Coal Mines are also the property of the people living near and around them. At least if we are to call ourselves a Republic. Private entities as operators is appropriate. They can compete with one another. As monopolies they are a source of inequity, oppression and mischief.

George's Statement on Monopoly is an excellent statement with guidance on how to distinguish were free competition makes sense and where we need to govern ourselves as communities.

Notes:

I'm not a Georgist, but on matters of Economics he is a master for three reasons:

  1. He very carefully used moral and rational reasoning to clearly define his terms.
  2. His definitions were therefore both masterful and an excellent guide to policy to this day.
  3. He didn't cater to public opinion when talking about economics, so his basic logic stands the test of time.

Not everything he taught stayed the same. He planned to write a follow on book on Economics to expand on what he'd written in "Progress and Poverty" but never finished that book. His movement went in different directions after his death, consequently, and some who call themselves Georgists are following people whose ideas diverge from the logic he used even if they quote directly from his writings. He gets parsed into a neo-liberal libertarian, when he was very progressive for his time. I don't believe he was a saint. I don't follow him as a slave. I engage with his writings and find them valuable on their own and on Siddhartha's precept to use my "own reason."

I have a lot to say, but this is enough for today.

http://capitalism.org/competition/what-is-free-competition//dd>
http://dictionary.cambridge.org/us/dictionary/english/free-competition

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