"Where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control; history has proven that", Lord Acton (1834-1902) said.
He also expressed concern over the banks vs the people. I would also like to add all companies that manipulate and lessen free-market competition with impunity.
Too many essential industries appear to have a retail-pricing dominance and special deals for the retailer that is contrary to the actual consumers’ legitimate expectations of competitive pricing. Whether it is perception or reality, too many of what we term as essential industries within the capitalistic system appear to need constant up-close-and-personal scrutiny by independent authorities to ensure the market is actually working as it should. Dismantling the Resource Management Act will help, but is 25 years overdue.
Government inquiries into the supermarket, fuel, and banking industries are as a result of consumer demand, but don’t achieve much. Companies are accused of price-gouging when buying and selling within a "free market" by using their (government-sanctioned) market dominance.
That is not capitalism but crony capitalism. This is defined as mutual advantageous relationships between businesses and governments who fail to uphold the competitive ethos. Governments fail us all when picking winners.
The recent revelation of the need for an inquiry into the Australian supermarkets is but one example. Apparently 500 food or household items had their prices raised briefly so the supermarkets could then announce a week or so later (when reducing these items) that they have slashed prices. Most shoppers like a bargain so into the trolley goes the item, plus or minus 20% as the shopper is none the wiser and not a bargain in sight.
The Commerce Commission is likely very unaware that the supplier of goods/food to a supermarket can often receive what is known as a reverse invoice for the privilege of a certain placement in their shop and shelves.
Fuel, like food, is an essential item, yet there is little difference between the supply companies’ pricing structure. The complete separation between manufacture, wholesale and retail is essential.
Electricity is another essential item that is exactly the same, regardless of the company you buy from. The government owns 51% of major generators — Meridian Energy, Genesis Energy and Mercury Energy — so a question does arise as to the whether the government has a vested interest in keeping electricity prices high, as the GST collected increases, along with higher dividends from their majority shareholding.
All of the above increases the debate between the benefits of capitalism, crony capitalism and socialism. Increasingly, people seem to prefer government or local government control over their personal assets. Capitalism simply means you get to make decisions as to the use of your capital. Socialism means officials take over that task for you.
The reputational harm to capitalism done by some vital industries due to overpricing is immense. Of course, their own brand is also harmed but, most importantly, the confidence the public have in capitalism is constantly being eroded.
Rather predictably, socialism or central control of the economy has failed in every country, most notably in oil-rich Venezuela. President Mikhail Gorbachev of Russia once asked British prime minister Margaret Thatcher if he could send his head economist to the UK to find out why there were no queues lining up for bread.
All of which illustrates that all businesses have a vital role to play in maintaining confidence in capitalism, as it is the only political system that delivers a future and economic freedoms to all.
The issue is so important that the crime of undermining confidence in our successful capitalist by price gouging requires a custodial sentence, not a monetary fine which will be of no consequence to a giant commercial company. We need the CEOs and chairs of offending companies to be sentenced to spend a few months in a non-leafy jail as a guest of His Majesty.
Unlike another soft inquiry, that will draw out a certain reluctance to break the vital written and unwritten rules of commerce and true capitalism.
— Gerrard Eckhoff is a former Otago regional councillor and Act New Zealand MP.
