Vince Cable? Meet Harry Reid. Exhibit A on why you need to re-read Adam Smith


Remember last year at the LibDems conference when Vince Cable gave a speech to show that despite being the Business secretary, he hadn’t sold out and was still down in the trenches with the rank and file?  In his attack on the free markets he championed government regulation by paraphrasing Adam Smith saying:

“Capitalism takes no prisoners and kills competition where it can, as Adam Smith explained over 200 years ago”.

Adam Smith actually wrote:

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.

In reply to Vince Cable, Dr. Eamonn Butler wrote that Vince Cable should have gone on to read the following paragraphs of Adam Smith’s, the Wealth of Nations.  For Adam Smith points out that while all businesses would love to create monopolies and raise prices accordingly, they are prevented from doing so by competition.  I know in my business I would love to be the monopoly provider of my service.  I would even settle at collusion with a couple of other competitors as well, as long as it could be guaranteed that we were the only game in town.  We could charge high prices, offer a bare minimum of service, not have to change or innovate – and earn some lovely fat monopoly profits in the process.  Unfortunately, the market here for my service is highly competitive and so I have to constantly update and add to the services I offer my customers, while charging the most competitive prices I can.  It’s the big players in the market who are pushing for government regulations to make it more difficult for a smaller company like mine to provide innovative services to the public.  And that was Adam Smith’s point.  Big Business loves Big Government.  In a competitive market, more innovative players keep coming into the market, threatening the existing players’ market share and preventing monopoly prices from being charged.  In the name of protecting the consumer, regulations can be used to keep out new and more nimble companies and protect the big boy’s monopoly profits.

A fine example of this in action happened last week over in the United States when the FBI closed down three on-line gambling operations.  Tim Carney (H/T Ricochet) over at the Washington Examiner thinks this happened partly as a result of the big casino operators drive to create a government-protected monopoly in the lucrative on-line gambling market.  Last year Harry Reid, the Democrat Senate majority leader, won the Nevada elections with considerable help from the Casinos.  They donated large sums to his campaign and provided buses to transport casino workers and other voters to the booths.  It’s now pay back time and Harry Reid is pushing legislation to legalise on-line gambling, but with the catch that to ‘protect the consumer’, on-line gambling can only be operated by:

“providers that have an established track record of complying with a strict regulatory environment, have an established track record of providing fair games to consumers, and have significant goodwill and assets at stake, in addition to their Internet poker assets, to ensure they would comply strictly with the new regulatory regime.”

Or in other words, the big casino operators.

As Tim Carney noted, the Politico reported:

The House Republicans will go crazy if this is in the bill,” said one senior congressional aide, declaring it “a total, 100 percent payback” for the support Reid received from gambling interests. The aide asserted that lobbyists or the Las Vegas-based casino operator Harrah’s, now known as Caesars Entertainment Corp., even helped write the legislation.

“You could call him ‘Harrah Reid’ at this point,” the aide quipped.

Anyway Vince, I hope you took up Dr. Butler’s suggestion and have read his, Adam Smith – A Primer.  But judging from your performance since then, I somehow doubt that you have.


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