It's ok to be angry about capitalism

[Ag3ma]

It certainly quite the thing to defer to the free market and then not actually contribute to it. Governments ought to be just as willing to refuse business to companies that screw them as individuals are. In a way, not going after sucky companies is itself anti-business.

I fear that the free market argument here is "You guys set the rules by which we were able to grab all your money, so us doing that is your fault".

Although a key problem here being that the water companies are not free market: they are regional monopolies. They cannot be allowed to fail because people need clean water supplied and sewage removed. Hence the regulator ("Ofwat"), to provide oversight compensating for the lack of market competition.

From my understanding, Ofwat was relatively on the ball in the early days of privatisation, but latterly not. Although quasi-independent of government, I think it extremely likely that Ofwat's complacency reflects government complacency. And I really mean the Tories here, who are far too smugly hand-in-glove with elements of business and inclined to let them run riot, and who haven't been paying attention to a lot of things due to Brexit and their own, catastrophic, internal psychodramas, chaos and infighting.

 

[Trunkage]

In a way, not going after sucky companies is itself anti-business

I assume you meant anti-Capitalist. Most business are anti-Capitalist by their nature. Eg. The very concept of business requires them to delete competition. Not going after the sucky ones makes sure anti-Capitalist win

I would note, many American Libertarians would disagree with you. They keep pretending the Free Market would automatically get rid of them if the government didn't prop them up. While this is somewhat true, most of the propping up is done by private citizens

But that's mainly because the keep thinking business and capitalism are synonymous when they very much aren't

 

[tstorm823]

I fear that the free market argument here is "You guys set the rules by which we were able to grab all your money, so us doing that is your fault".

The pure free market argument would be that in the absence of rules, people acting in self-interest is a self-correcting system. I don't think such a pure scenario can be real, I think there are many inevitable market failures which require intervention to avoid, but the idea that consumers acting in responsible self-interest moves the market to better results has something to it. If everyone were to refuse to punish the people failing to uphold their part of deals, if everyone denied their self-interest to not be anti-business, there would not even be a theoretical benefit to the free market.

I assume you meant anti-Capitalist.

You are welcome to offer your perspective, but you can also do it without superimposing it onto me. If you would mean "anti-capitalist" in that sentence, it makes more sense to provide that as your own words rather than assume I misspoke.

 

[Trunkage]

You are welcome to offer your perspective, but you can also do it without superimposing it onto me. If you would mean "anti-capitalist" in that sentence, it makes more sense to provide that as your own words rather than assume I misspoke.

Governments getting rid of sucky business isn't pro-business. A Pro-business stance is just handing those sucky business to 'good' ones. Or at a significantly discounted rate. Like in the GFC. They can then fire whoever they want to make it look 'profitable'

Pro-business is also dramatically reducing the interest rate which will make sucky companies profitable. Like what Bush 2 did. Which, in part, lead to the GFC

Getting rid of sucky businesses is good for the economy. That does not mean it's good for other businesses

 

[Ag3ma]

The pure free market argument would be that in the absence of rules, people acting in self-interest is a self-correcting system. I don't think such a pure scenario can be real, I think there are many inevitable market failures which require intervention to avoid, but the idea that consumers acting in responsible self-interest moves the market to better results has something to it.

The consumers are something of a sideshow in this sort of situation - except of course for being the ones who end up losing out.

You have a company, it is bought and saddled with debts so that the owner can extract wealth from it, and then sold on. Depending on circumstances, the consumer may not realise that the company they are acquiring a product/service from is a rotting husk as long as the rot hasn't obviously hit the service/product yet, or they don't have a useful comparison to weigh up the inferiority.

This sort of predatory acquisition has sped up significantly in recent years with private finance vehicles. They are particularly fond of things like monopoly-like utilities, health services, etc. because they know that there is no real customer choice whereby inadequacy can see them punished by loss of custom, and they provide vital services so there's a high chance they will be propped up or bailed out when the collapse occurs. This sort of area is where it should probably not be privatised in the first place, or a regulator should be present and vigorously bare its teeth as required. In terms of us coming for revenge, an owner that screws a company in this situation simply argues "the regulator let us do this, so that's your problem". From a legal standpoint, this is hard to dispute. From a moral one, I think these owners merit some form of punishment, because they knew exactly what they were doing.

In terms of the general thrust of your argument, I would agree that the general principle of consumer self-interest mostly works. Although it often has limitations, which can be the gross inequality of information and power between consumer and company, which often gives the company the advantage to exploit the customer.

 

[Seanchaidh]

This is a meaningless response.

Not at all. "not going after sucky companies is anti-business" depends on the liberal ideological premise that 'business' isn't a normal interest group but some kind of abstract spirit of entrepreneurship or whatever.

 

[tstorm823]

Not at all. "not going after sucky companies is anti-business" depends on the liberal ideological premise that 'business' isn't a normal interest group but some kind of abstract spirit of entrepreneurship or whatever.

Not even a little bit. "Business" isn't a normal interest group because it is many competing normal interest groups. Government contracts at a fixed scale and quantity are a zero-sum game for those bidding on them, so an undeserved benefit given to a bad business is an undeserved loss for all the others.

 

[Seanchaidh]

Not even a little bit. "Business" isn't a normal interest group because it is many competing normal interest groups. Government contracts at a fixed scale and quantity are a zero-sum game for those bidding on them, so an undeserved benefit given to a bad business is an undeserved loss for all the others.

Try iterating this thought experiment. The truth is, it's not a zero sum game at all. It's

Company 1	Company 2	Company 3	Company D	Nestle
0	0	0	+1	0
0	+1	0	0	0
+1	0	0	0	0
0	0	0	0	+1
0	0	+1	0	0

All those +1s can be +2s (same reward with less outlay). What is better for the companies involved: alternating a series of undeserved benefits or rigorous competition? This is the same logic behind tacit price collusion. Rewarding bad businesses is good for the whole collection of businesses; the focus of lobbying by business is therefore the expansion of undeserved benefits, not the curtailing of undeserved ones.

 

[tstorm823]

Try iterating this thought experiment. The truth is, it's not a zero sum game at all. It's

Company 1	Company 2	Company 3	Company D	Nestle
0	0	0	+1	0
0	+1	0	0	0
+1	0	0	0	0
0	0	0	0	+1
0	0	+1	0	0

All those +1s can be +2s (same reward with less outlay). What is better for the companies involved: alternating a series of undeserved benefits or rigorous competition? This is the same logic behind tacit price collusion. Rewarding bad businesses is good for the whole collection of businesses; the focus of lobbying by business is therefore the expansion of undeserved benefits, not the curtailing of undeserved ones.

This is called a "conspiracy theory".

 

[Terminal Blue]

The pure free market argument would be that in the absence of rules, people acting in self-interest is a self-correcting system.

Self-correcting towards what?

 

[Seanchaidh]

This is called a "conspiracy theory".

It's covered in introduction to microeconomics

also, look up the word 'tacit'

 

[tstorm823]

Self-correcting towards what?

Efficiency.

It's covered in introduction to microeconomics

You obviously didn't understand a word of what you were taught, if you believe spreading the money out to more players benefits the individuals. A stable equilibrium being better that gutting your own profits to try to monopolize the industry is not the same thing as actively wanting more competition to stick around.

 

[Cheetodust]

You're absolutely right that it's galling for the public to suck up huge costs for corporate profiteering. Unfortunately, those companies already cut and run with the money and there's no getting it back, so we've just got to deal with the shit. I could perhaps like the idea of the government being particularly vindictive regarding the activities of some of these companies, like apply a vast amount of additional scrutiny of their taxes or quietly disadvantaging them for public contracts.

There is of course also the last kick in the teeth that the shareholders left carrying the live grenade are largely two major pension schemes for public sector workers.

I dunno, Vietnam seem to have come up with a good strategy for dealing with the mega rich conning us.

 

[Satinavian]

I dunno, Vietnam seem to have come up with a good strategy for dealing with the mega rich conning us.

Even Vietnam would not be able to go after e.g. the Australian hedge fund that (among many others) took money out of Thames Water.


Furthermore, all that stuff had unfortunetely been legal. Because the gouvernment did not do its job. There is no criminal to punish.

 

[Seanchaidh]

"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." -a deranged conspiracy theorist

You obviously didn't understand a word of what you were taught, if you believe spreading the money out to more players benefits the individuals. A stable equilibrium being better that gutting your own profits to try to monopolize the industry is not the same thing as actively wanting more competition to stick around.

You misnamed what is obviously a positive sum game as zero-sum. And arbitrarily decided for your puerile analysis that there is a fixed quantity of government contracts even though that quantity is decided by legislative whim.

Giving every company license to be "a bad company" and receive public largesse for doing fuck all is pro-business. Raising standards for bids and so forth is not: there is nothing pro-business about preferring the most competitive companies to win all the contracts. The less competitive companies are still businesses. And they also want to receive all the contracts rather than only some of them. So they will lobby for the size of the trough and to arbitrarily prefer their own company.

Efficiency.

Of what with respect to what? Efficiency is a relational concept. For example an engine has a fuel efficiency (relating fuel consumption to kinetic energy produced) but it can also be efficient or inefficient in other respects, such as the amount of kinetic energy produced per some unit of time, in relation to the weight of the engine, to the amount of some harmful emission, the price of the parts and putting them together, and so on. A company may regard efficiency as the relation between expenditure and resultant income: note that this contains no reference to the quality or quantity of any product whatsoever.

 

[Terminal Blue]

Efficiency.

What does efficiency mean in this context?

This is called a "conspiracy theory".

No. It's a very real incentive governing the behavior of sellers in a market, which is why we have laws prohibiting the formation of cartels (because otherwise, every industry would be dominated by cartels).

Competition between sellers is only desirable when the potential rewards of competition outstrip the associated costs. The great thing about cooperation is that the only people getting screwed over are buyers, most of whom have very little power within the market. It is a positive-sum game from the perspective of sellers.

 

[tstorm823]

You misnamed what is obviously a positive sum game as zero-sum.

Because public water is a notoriously elastic market, right?

 

[Seanchaidh]

Because public water is a notoriously elastic market, right?

relevance?

 

[tstorm823]

relevance?

If you can't figure that out, you're wasting your time.

 

[Silvanus]

If you can't figure that out, you're wasting your time.

Do you think positive-sum games are only possible in elastic markets for some reason? As if two companies both bidding at different times for a public franchise can't both benefit?

I mean, we know they can. Macquarie acquired 7.5bn of debt, paid over a billion in dividends, then sold. Its successor.... then acquired more debt, paid more tens of millions to shareholders, rinse and repeat. At no point is a company going to need to repay that debt from their own pocket, if the government goes through with its plan to transfer the debt directly to the public. A string of companies profited; the public paid.

And no, other companies not winning the contract and thus being unable to fleece the public instead of Macquarie is not an equivalent loss to balance that out. The only pockets being picked to inflate their shareholder bank accounts are those of the public.