Modern Capitalism – the myth of efficiency

Grumpy Old ManI was thinking just yesterday as I sat staring aimlessly out of the window wondering whether the postman was going to come or not, with actually no easy way of knowing, how totally destructive the so called free-market is and yet by all accounts people are still happy to believe that it is the proper way to run things – despite the vast amount of evidence to the contrary.

You see I had been told that something had been posted ‘first class’ the day before and I was hoping to get it in time to take it with me to a lunch time appointment I had.

This item, although not commercially valuable was hugely valuable to the man I was meeting – it was the proof copy of a book that he wrote 10 years ago and we were publishing for the first time. As an author myself I know the feeling of holding your first published book in your hands; so armed with that knowledge I was trying to hold on until the last possible moment before leaving and abandoning the opportunity of delivering ‘his baby’ for another day.

So we had our meeting, minus the book, and I returned home to find that it had been delivered after midday when I left. I of course told him and despite the fact that there was no commercial imperative to do so – the following morning he got in his car and made a 30 mile round trip on a Saturday morning simply for the pleasure of holding his book in his hands for the first time.

The point? – it’s not all about money. Whether he received the book Saturday morning or Monday made not an iota of difference as to whether his book would appear in the bestseller list or whether he would take over from JK Rowling as top selling children’s author or whether he would be lauded as the new CS Lewis. It was important to him (as well as those close to him) and had nothing to do with money.

It led me to think though about the postal system and the Royal Mail and what an incredible organisation and infrastructure it was; a credit to the ingenuity and organisational ability of our country.

Just think about it – a few short years back (maybe only comparatively short because of my rapidly advancing age), you could put a piece of paper called a postage stamp that cost you a few pennies on an envelope, address it, stick whatever you liked (within reason!) inside it and drop it into a sealed box somewhere within a reasonable walk from wherever you happened to be and be pretty confident with a close to 100% certainty that it would turn up at whatever address you had scribbled on the front, pretty much anywhere in the UK, before 9.00 am the next morning regardless of remoteness or distance of the sender or the recipient from each other, or their personal wealth profile.

Just stop and think of the incredible logistics required to do that – mind boggling.

Would we ever build something like that again?  Absolutely not – so one would think that a little thought might be given to a decision to dismantle it.

Certain things that are valuable like the Royal Mail have a couple of things in common

  1. They are natural monopolies by the very nature of what they do.
  2. Their overall worth cannot EVER be measured in absolute financial terms.

There are others, trains for example, health, gas, electricity, water (I would also argue Banking), education and food.

If your ultimate measure is going to be entirely based on financial considerations nobody would ever run any of these things – unless of course you totally divorce from the equation the two things that every commercial organisation is supposed to balance – which is COST versus RETURN.

If you cannot balance these two things in such a way that RETURN always ultimately is larger than COST then clearly you do not have a viable business model and, if your only measure of the value of that product or service is financial, then you would be mad to do it.

But there are things that cannot be measured in purely financial terms, but somehow this seems to have come as a complete shock to most of the people, from whatever political allegiance they claim to represent, who seem to have failed to grasp this simple fact.

I don’t care how much a Ferrari costs, I don’t need one. If I can’t afford an iPad because Apple seems to think it is worth double what anyone else is offering that’s fine – I won’t die if I leave it in the shop. The point is – it matters little to me who runs those companies (so long as they actually contribute to society by paying their taxes for the infrastructure we pay for to support their ability to trade at all.)

But I do care who provides me with water for example or who decides whether my children receive hospital treatment or not – and what I am absolutely sure about is that I don’t want some commercial organisation deciding whether I live or die or not!

Many people will argue that this is commercial naivety  There are things that we simply cannot afford to provide anymore, we need to ‘balance the books’ we cannot continue spending on health, education, welfare without the commercial discipline imposed by ‘the market’.

I beg to differ – those of you out there who believe that the free market and the commercial imperative are what is needed in our society are, in my view, the naive ones.

I go back to my point that a commercial operation has to consider COST versus RETURN and that is exactly what they do – to the detriment of the rest of us.

Here’s the trick – you privatise the profits and leave the costs in the public sector. Brilliant!

Take the Royal Mail, allow TNT and their ilk to ‘compete’ (what we mean by compete is actually ‘cherry pick’) for the easy profitable bits – for example picking up volume business mail from one location and dumping it at another location – highly profitable and then dump the expensive bit (what is known as ‘the last mile’ actually getting the letter to the individual recipient) – back on the Royal Mail. Fantastic – not only have we created a hugely profitable business by keeping the costs in the public sector thus allowing our business to declare huge profits and pass on dividends to already rich shareholders and perpetuate the myth that the public sector is inefficient as they struggle to fulfil the expensive elements while the profitable bits are hived off to private enterprise.

We see this wherever private industry becomes involved in a natural monopoly – like trains, the public purse now spends something like 6 times more to subsidise these private companies than we did when they were entirely in public hands so could benefit from the profitable bits as well as incurring the costs.

Water, gas, electricity – we allow private companies to receive subsidies or pass on the costs of Research & Development, infrastructure renewal or ‘greening’ efficiencies to the hard-pressed consumer while their profits grow.

But they create jobs I hear you say?

Really?

As the vast majority of welfare recipients are actually in these jobs allegedly created by the private sector, is it not obvious that welfare payments are not designed to help impoverished people but are a direct subsidy to companies who have a flawed business model as they cannot apparently afford to pay a living wage to their workers?

Still at least as these companies generate profits the State benefits by an increased tax take? – well I can’t even bring myself to make the statement as dear old Basil Fawlty would put it ‘Sybil Fawlty, specialist subject, the bleeding obvious.’ – These people spend a minor proportion of their unearned income paying other well-healed people to invent ways to ensure that the public purse sees the absolute minimum of that profit – and every year the situation gets worse.

So, back to the Royal Mail (where during privatisation some genius spent millions rebranding to Cognito before spending more millions changing it back) is busily being destroyed by ‘the free-market’ I can at least know that my writer friend now has his proof and is busily working away on another story.

Simple rule it seems to me – NEVER transfer anything to the free-market where people die when it goes wrong. Get rich selling your iPads, Apple, charge what you like for your horrible coffee Starbucks and you people running ebay, Google and Facebook carry on doing what ever it is you do if actually you think it is valuable to people daft enough to pay for it – but if you can’t pay your taxes get the hell out of our society if you actually don’t want to be a contributing part of it.

And let’s simply take back, without compensation, into public ownership things that really matter to the well-being of our nation and stop these parasites feeding off the decaying corpse of what we once called ‘Society’.

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About societyfirst

A blog dedicated to the desire for a more equitable and caring society which explores opportunities to create a better way of life for the majority of our people.
This entry was posted in economics, Education, NHS, politics, social justice, Society First, welfare state and tagged , , . Bookmark the permalink.

One Response to Modern Capitalism – the myth of efficiency

  1. thehobbesian says:

    Brilliant! The free market façade is built around a set of powerful arguments, so powerful in fact that many people never realize that it is nothing more than a façade. They use economic science to justify their views when it helps them, and criticize people who base their arguments in emotion or appeals to “justice”. However, whenever economic science doesn’t justify certain aspects of their views, they reverse roles and instead make an emotional appeal to the “evils” of governments and make their own silly “justice” argument. Unfortunately, they have a stranglehold on the cultures of the English Speaking world, which is why common sense arguments like yours are often overlooked by these people. Our minds have been terribly distorted.

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