Australian Commentary (47) – The Benefits of Deregulation

The moral principles and precepts contained in the scriptures ought to form the basis of all our civil constitutions and laws. All the miseries and evils which men suffer from vice, crime, ambition, injustice, oppression, slavery, and war, proceed from their despising and neglecting the precepts contained in the Bible.[1]

I recently had a conversation with a friend of mine, a mechanic who works on a Queensland dairy farm. He claimed that all the supposed benefits of deregulation in the Australian dairy industry are nonsense. It hasn’t worked for dairy farmers at all, and they now get less for their milk than before.

His assertion got me wondering: what’s happened? And as we talked, my friend acknowledged that the dairy farmers had sold off the milk processing part of the business, which meant they had become price-takers. They could no longer determine the price they received for their milk. Thus they were doing it tough.

But my friend didn’t really make the connection. He thought that the devil was in the deregulation, not in the unwise choice the farmers had made in selling off the milk processing part of the business. As far has he was concerned, deregulation was a disaster.

What we needed he claimed, was more government regulations controlling businesses. He pointed out what happens with the big supermarket chains such as Coles and Woolworths, with billion dollar budgets. They can come to a town and build a new supermarket, drop the prices for their goods below what the competitors are selling for, and by losing money over time, drive competitors out of business. Then, they can jack up the prices, and guess what? They have a monopoly. Everyone (to some degree) has to buy from them.

I accept that this probably happens, and an emotive term has been coined to describe this: “predatory pricing.” Companies act like predators in the market-place. Because they are so big, they can lose money in one place where they have built a shop, even for years, so that they can capitalise on this in years to come, when they have driven their competitors out.

Is this good, or bad, morally, or ethically?  I think it’s neither. It’s business.

In a free country, people are free to sell whatever they own at whatever price they wish, with no interference from a government department. Companies want to please their shareholders, for whom profit is just about everything. They will run their business to achieve profits, in the long-term.

Labelling this as “predatory pricing,” the government regulator (known as the Australian Competition and Consumer Commission, or ACCC) intervenes sometimes in these cases. “You’ve been naughty boys, you wicked supermarkets! Here’s a million dollar fine.”

This is what I’d like to say to my mechanical friend Bill, next time:

Bill, let’s say you stop working at the dairy farm, and set up a mechanical business in town, called Bill’s Mechanical Services. You do some work for the Taxi company at $75/hour, and charge them $300 for a 4 hour job. They say to you, “Wow, that’s great Bill! I was paying $400 for that job down the road! You’ve got all my work, now.”

A month later you get a letter from the ACCC, asking you to appear at a summons. The mechanic down the road is taking you to the ACCC for, “Predatory Pricing.” You’re in trouble for undercutting your opposition! Mechanical predators be warned!

Bureaucrats paid by us taxpayers, love to stress how important they are for the world to operate successfully, but their self-interest is blatant. We need less government regulators, not more, less bureaucrats making claims that it’s utterly essential that we stay in tune with their views on social cohesion, or some other drivel. We’ll all be better off when they are all compelled to get a proper job in the free market, where they can’t act as social parasites any more.

This is how we’ve been conned. We thought that government regulation would help us, but it does exactly the opposite. By interfering in the marketplace, it makes it more difficult for businesses to do what they are good at doing- providing a service to the customer, at the best price. The price of things goes up for the consumer, we pay more in taxes, and we have a new kind of tyranny: a bureaucratic one.

Bill the Mechanic can then be typified as Bill the Predator, for merely doing what he was good at: serving the customer at the lowest price.

What can be done?

Think of it this way. A cheap bureaucrat comes for about $100,000. That’s 10 for a million dollars, 100 bureaucrats for 10 million dollars. Get rid of 1,000 bureaucrats, and you’ve just saved $100 million. That’s getting to be pretty serious coin in anyone’s language.

This is how regulation costs us: in the wages of the bureaucrats we pay for, and in the costs they  inflict on the community.

It’s time we pressed for change.

[1] Noah Webster, quoted in Gary Demar, “God and Government,” Vol. 1, 2001, p.4.

Comments are closed.

Copyright © Christian Family Study Centre