2 thoughts on “The double thank you of the market”

  1. Posted 11/11/2016 at 12:00 | Permalink

    The behaviour of the willing buyer and willing seller in the free market – very well explained.

    However, the market can fail, more often than not, due to the ill-considered actions of Government as it goes about its business of procuring assets for public use.

    It is Government policy to convene Industry Days to relay the details of each individual defence equipment procurement programme to industry – and has been for decades now.

    However, far from serving as a forum for conveying the Ministry of Defence’s requirements to military equipment manufacturers and offering them an alluring prospect of networking with like-minded people with common interests, Industry Days (instigated and hosted by MoD) have become nothing but a gathering of the great-and-the-good (on overheads) from competing firms where talk, in huddled groups, immediately turns to how to carve-up the product market, subvert the competition process, contrive to nullify its use altogether or fix prices!

    A much more effective way of transmitting MoD’s requirements to all-comers in the defence manufacturing industry is through the vehicle of a carefully constructed and worded invitation to tender whose formal release marks the start of the multiple-phase, winner-takes-all competition and concludes with down-selection of the single Defence Contractor for the final Manufacture, In-Service Support & Disposal phase.

    If ITT recipients need to take on first-tier Supply Chain partners for dissected workshare parts of their Technical Solutions, then they should be chosen through open competition, on the basis of best value for money – not at a gathering where price-fixing is on the agenda!

    The Government would do well to heed the words of Adam Smith who wrote in The Wealth of Nations (1776), that “…… people of the same trade seldom meet together even for merriment and diversion, the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”.

    Adam Smith goes on to say “It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary”.
    @JagPatel3 on twitter

  2. Posted 13/11/2016 at 19:39 | Permalink

    Mr Horwitz is an economic theorist but theory must be compared with reality. Brexit and Trump are reality. In reality the market has not only failed, it is being subverted, defrauded and twisted out of recognition. There is no free market; only manipulation. I speak of bank bailouts, bailins (Cyprus), manipulation (forex etc), paper COMEX gold and silver, debt (Greece etc), money creation (the other side of debt), derivatives including re-packaged rubbish, Companies without net assets buying others with 100% debt that will never be repaid (Kraft/Cadbury), one-sided trade deals (TTIP), shooting hot trade wars and sanctions (Ukraine/Russia) and so on. Even in classical theory the market no longer works for Europe/America. This is because newly industrialized countries are simply more efficient in the use of the factors of production, ie cheaper. That is why we now have the very rich and the very poor in the US/UK. Within the EU, classical theory expects all the excess labour in Greece, Italy, Spain and Portugal to move to Germany. People do not want to move for a variety of reasons, however. So theory is useless. More fundamentally, the US/Europe no longer enjoy a monopoly on capital, technology and market dominance based on these. Thus the international market works against us. That is why the US wants TTIP and the Trans-Pacific trade agreement which are heavily weighted in the US’s favour and why the EU and US both hate Brexit. It’s a carveup in favour of the rich, not a free market, and one can see why. The free international market doesn’t work and it never did.

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