This page has been archived and commenting is disabled.

Guest Post: Competing For State Contracts Is Not Competition

Tyler Durden's picture




 

Submitted by John Aziz of Azizonomics

Competing For State Contracts Is Not Competition

Here in Britain, we hear the word competition a lot. Since Margaret Thatcher, there has been a general trend — in the name of competition — toward the selling-off of utilities such as water, railway, electricity and telecoms providers. More recently, there has been a trend toward government services being provided by private companies, such as the bungled Olympic security arrangements contracted out to multinational security giant G4S, as well as work capability assessments contracted out to French IT consultancy ATOS, and the contracting-out of some medical services.

The way this works is that the government provides the funding for services, which private sector companies then bid to undertake. This is also the way in which defence contractors have historically competed for defence contracts, a sector which is renowned worldwide for its profligacy, waste and inefficiency.

This is a bizarre arrangement. Competing for government contracts is nothing like the free market. In a true market environment businesses compete for the custom of individuals based on their ability to provide the best products and services. Individuals spend their money to satisfy their needs. New businesses can generally enter the marketplace at any time, and take business away from existing competitors. Competition is beautiful, because it allows economies to quickly adjust capital, labour and resource allocation to the preferences of society based on which goods and services people choose to purchase.

Under a model where private contractors compete for government cash, this is impossible because contractors are essentially bidding for a state-backed monopoly. State bureaucrats determining which contractor will get the money is not competition; there is no market mechanism, there are no consumer preferences. Contractors are just bidding for handouts from the taxpayers’ purse based on the preferences of economic planners. Consumers cannot take their custom elsewhere, because the custom is involuntarily coming out of their taxation.

This has also been the reality of privatisation. Although I am no fan of government-controlled industry, the reality of privatisation in the UK has been the transfer of state monopolies into private hands.

One very clear example of this is telecoms infrastructure. BT Openreach, an arm of the privatised BT, has a complete state-enforced monopoly on telephone exchanges. Other telecoms providers have to lease their infrastructure in order to operate.

And the same for railways; rail lines are sold off as monopolies for ten-year periods. For travellers who want to travel by rail from one destination to another, there is no competition; there is only a state-backed monopoly operating for private profit. No competition, only endless fare hikes, delays and a complete lack of market accountability as contractors take the government cash and do whatever they want.

Ultimately, the state-backed-monopoly model seems to manifest the worst of all worlds. Costs for taxpayers remain high, budget deficits continue to grow, and utilities remain inefficient and messy. The only difference appears to be that taxpayers’ money is now being funnelled off into corporate pockets.

A free society cannot be based on economic planners allocating resources based on a bidding process. A free society is based on the state letting society allocate resources based on the market for goods and services that people want and need.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 08/04/2012 - 09:52 | 2677832 veyron
veyron's picture

Crony capitalism at its best.

Sat, 08/04/2012 - 10:03 | 2677848 Vic Vinegar
Vic Vinegar's picture

4 min between article posting and your comment

not that it's impossible

But perhaps Michael Phelps is impressed with how quickly you moved

Sat, 08/04/2012 - 10:54 | 2677904 engineertheeconomy
engineertheeconomy's picture

Who did you blow for 4 minutes Vic?

Sat, 08/04/2012 - 11:55 | 2678017 Raymond K Hessel
Raymond K Hessel's picture

We've had this arrangement in the US for nearly a century.  

Here, they are called authorities.  Examples are the Tennessee Valley Authority and many major mass transit companies, like NYC's MTA.

A few years ago, Mickey Bloo nationalized the private bus companies into the MTA, just because.  No interruption in service because the service was already laid out by central planning.

Now there's Megabus and this private company is increasing revenue by making the trip from Manhattan to the Jersey suburbs cheaper.  The local authorities would say that Megabus is stealing revenue from the Port Authority of NY/NJ.  This is not a joke.

I really want to system to go full tilt.  I think Ayn Rand had it right and Japan is the example.  If we don't go full retard on socialism, this game will never end.

Vote Obama 2012 so we can finally shit can this country and start over.

 

Sat, 08/04/2012 - 12:19 | 2678054 malikai
malikai's picture

I suggest you quit your job, apply for disability and all welfare benefits possible, use the proceeds to buy gold, and sit on your ass all day blogging about how evil "The Rich" are.

If enough people do it...

Sat, 08/04/2012 - 15:56 | 2678421 AldousHuxley
AldousHuxley's picture

Here in USA, Halliburton did not even compete for state contracts with ex-CEO being the VP with Cheney rollling out red carpet for them to take the money.

And then Halliburton moved out of USA and to arabland.

 

consider UK lucky.

Sat, 08/04/2012 - 20:00 | 2678722 MisterMousePotato
MisterMousePotato's picture

Like so many others, I was so relieved and happy when Halliburton stopped getting all those no bid contracts once Cheney was no longer vice president.

(I'm not even going to add the sarcasm off tag.)

Seriously ... you couldn't turn on the radio or TV 2000-2008 without hearing, "Halliburton, Halliburton, Halliburton, ad infinitum, ad nauseum." When was the last time you heard the word "Halliburton" on the radio or TV? Coincidence?

Sat, 08/04/2012 - 22:30 | 2678907 Anusocracy
Anusocracy's picture

A private, government sanctioned monopoly, like crony capitalism, is just another manifestation of nepotism.

A gift of cultures long past adapted to modern economies.

Sat, 08/04/2012 - 13:04 | 2678143 A Nanny Moose
A Nanny Moose's picture

I am considering the same strategy, of giving either party the super majority it needs, in order for the State to finally eat itself.

The problem with this strategy...

Upon failure, the excuse alway proffered by the ideologues, is that Socialism was never practiced as idealized. Nevermind that it cannot be, and that they remain ignorant to the natural outcome. When it does fail, the witch hunts begin. Perhaps this time it will be different, and people will understand that voluntary assoiation and reason, rather than force, are the way to get things done. I don't think are yet evolved enough for such an outcome.

Perhaps, by following your strategy, we can create a teachable moment. God help us all if it backfires.

Sat, 08/04/2012 - 10:37 | 2677883 ITrustMyGut
ITrustMyGut's picture

Crony cap indeed! The current model... is well stated in this article. "privitaztion" in this absolute 3rd world level of corruption.. is a farce...  Aziz is spot on! I witness it everyday.

Massive profit for insiders, secured jobs for the gov retireees... see how many pentagram Generals end up at lockheed, Raytheon, etc...

 

ITS ABSOLUTE ROBBERY of  the public coffers.. ( Not that there are any coffers any more, only IOUs )

 

its like the "leasing" out of turnpikes and highays.. see IL... current gov officals and insiders rape billions in profit... and the people...pay again for the "priveledge " of using roads they paid for to be built!

 

any privitazion effort can not be managed by the corruption..the effort is meant to eliminate!

Sat, 08/04/2012 - 10:52 | 2677901 derek_vineyard
derek_vineyard's picture

I'm a contractor and have sometimes suspected bid collusion, but actually think that for the most part the system is fair. If there is a rigged system, I'd love to be on the inside.  But I've seen too many competitors lose money with bad bids on multi million dollar contracts.

Sat, 08/04/2012 - 11:00 | 2677917 Hmm...
Hmm...'s picture

There is a difference between "privatisation" and "bidding for a contract"

I think that in general across the country there is a fair amount of competition when it comes to contract bidding.

however, privatisation is often really a transfer of wealth from public to private hands, and is IMO usually a detriment to the state.

The problem with private contractors bidding for contracts IMO is that they usually end up more expensive.

For instance, look at how much the Prison system costs when run by the government, and then compare to when they contract it out.  The Private system is WAY more expensive, for many many reasons.  this of course is ignored by many who use the blind mantra 'government is always inefficient', but in many instance it just isn't true.  I've especially noted this with Prisons and also with Parking Meters.

Sat, 08/04/2012 - 20:04 | 2678726 MisterMousePotato
MisterMousePotato's picture

Changed mind. Sorry. Was comparing apples to, well, apples.

Sat, 08/04/2012 - 19:39 | 2678694 Prometheus418
Prometheus418's picture

That is called "Pay to play."

The system is not very fair in reality.  If you don't have deep pockets, you never get to preferred vendor status- you just get to lose money without an eventual payoff.

Every gov't contractor loses money on the first (N) contracts they are awarded.  After a certain period of time, they start getting contracts that are stupidly lucrative to make up for it.  I don't know what the logic (if any) is behind this, I just know that it is how the system works.

 

Sat, 08/04/2012 - 10:57 | 2677910 Hmm...
Hmm...'s picture

Although I agree with much in this article, I think the author misses something.

The issue isn't that the companies are competing for state contracts... for that IS (or can be) Capitalism.  The State in theory can look out for itself.

The Problem is that the companies "competing" become monopolies or oligopolies... either due to their size or their political connections or due to Government decree (such as the state allowed rail monopoloy). 

In other words, the problem is the MONOPOLY or OLIGOPOLY, and not the "state" aspect.

Prior to strong Federal Governments, we had this exact same problem in the private market, with Private Oligopolies and Private Monopolies.  In fact, the natural end point of "true capitalism" is and always has been Monopoly.  this happened/happens again and again throughout history, and it is the reason why we have anti-trust and RICO laws.

Long story short, the problem is MONOPOLY or OLIGOPOLY, whether or not State Run.

True free markets will never and can never exist, just as true communism can't.  These are utopian ideologies and not actually attainable.

 

Sat, 08/04/2012 - 11:22 | 2677951 BigJim
BigJim's picture

The reason these privatisations create virtual monopolies is because many of the industries that were privatised were only able to come into existence via state intervention in the first place.

So, for instance, once land is parcelled out into private ownership, it's extremely difficult/impossible to build new roads/gas pipelines/telephone lines/sewers/water pipelines without the state implementing 'eminent domain', as you'd have to get the agreement of all landowners to use/buy their land (or bits of it) from them.

This to me is one of the arguments against full anarchism (besides the power vacuum creating incentives for predators to gang up and become proto-governments themselves)

Sat, 08/04/2012 - 11:33 | 2677972 CrockettAlmanac.com
CrockettAlmanac.com's picture

 

So, for instance, once land is parcelled out into private ownership, it's extremely difficult/impossible to build new roads/gas pipelines/telephone lines/sewers/water pipelines without the state implementing 'eminent domain'

 

If a road is needed then folks will be happy to have a road constructed in their locality. Communities live or die based on access and location. Why would people who need a road refuse to allow a road to be constructed? Same goes for the various utilities.

Sat, 08/04/2012 - 12:18 | 2678050 toady
toady's picture

'Folks' may agree a road or other improvement are needed, but there will always be one, or a handful, of assholes that won't allow it. Be it money,(usually) power, or just plain old stubborness, people will stand in the way of the majority.

It was pretty rough here in AZ in the recent past, but the cities have finally realized that all roads, utilities, etc. must be a part of the plan before any sale/building permit because individuals will screw over their neighbors.

Sat, 08/04/2012 - 13:11 | 2678155 AnAnonymous
AnAnonymous's picture

It is more than that. The system calls for not allowing the road building.

Basically, the owner of the last bit of terrain required to build the road is worth as much as the rest of the project.

A road is decided up to 99pc, one owns the last necessary 1pc. Without the 1pc, nothing happens.

It would be stupid not to push such favourable position and in all cases, contrary to the system itself.

Sat, 08/04/2012 - 13:51 | 2678201 CrockettAlmanac.com
CrockettAlmanac.com's picture

 

 

'Folks' may agree a road or other improvement are needed, but there will always be one, or a handful, of assholes that won't allow it. Be it money,(usually) power, or just plain old stubborness, people will stand in the way of the majority.

 

The Road Company wants to build a road from Great City to Big Town. They plug geographic data and real estate records into a computer. The computer suggests three routes: one through Littleburg, one through Smallville and one through Distant Acres. The town which is lucky enough to have the road pass through it will have improved access to distant markets. That town will be able to sell its goods far and wide. Travelers will come through town and spend money. Soon all three towns are competing for the right to let The Road Company construct a road in their town. Those who do not wish to have the road come through are few and far between. If they hold out more money can be offered, the community can bring social pressure to bear and ultimately any hold outs can simply be bypassed by an alternate route. One of the three towns will get the road and they will be damned glad they did.

 

It was pretty rough here in AZ in the recent past, but the cities have finally realized that all roads, utilities, etc. must be a part of the plan before any sale/building permit because individuals will screw over their neighbors.

 

Right. The good, decent politicians who everyone knows are fonts of the greatest virtue will set up a system for the benefit of all the bad, smelly little citizens. Sometimes I wonder why our overlords even let us live since we are so nasty and evil.

 

 

Sat, 08/04/2012 - 13:54 | 2678241 AnAnonymous
AnAnonymous's picture

The Road Company wants to build a road from Great City to Big Town.

_________________________

Ah, benefits of sitting between two big consumption centers. You know, this is what creates ghost towns.

There are very little motivation to stop to a small city when the bigger one absorbs all the supplies.

A big city, more demand, then less risks of plummetting prices due to smaller demand.

Usually, a shippment from a big city to a great city is first consumed in the great city and the remains are redispatched toward the smaller in between cities.

Big centers of consumption, the story of the development of the US of A.

________________________________
Those who do not wish to have the road come through are few and far between. If they hold out more money can be offered, the community can bring social pressure to bear and ultimately any hold outs can simply be bypassed by an alternate route.
________________________________

Funny bit indeed. Social pressure? Why not? Second, it is also the game of this kind of situation to produce the situation when the hold outs can not simply be bypassed by an alternate route. Physicall world constraints.

--------------------------------------------

The whole example though is very funny as it reeks of US citizen economics.

All in all, it is introduced as the smaller place to benefit largely from the construction of the road, even more as the big cities. Maybe the smaller places should be incenticed to pay for the road development instead of the big cities.

Of course, it is US citizen economics.

In the reality, the smaller places are going to be drained from their wealth as they can not consume them as fast as the big places can and they will only consume the remains of the consumptions by big cities.

Their production will be shipped first to big cities (better, steadier prices as bigger demand)etc

Sat, 08/04/2012 - 11:40 | 2677983 Hmm...
Hmm...'s picture

BigJim, I don't disagree with you, but even without Privatisation we still end up with Oligopolies and Monopolies.

The natural state of Capitalism is an Oligopoly and/or Monopoly, with or without a State.  That's what competition does, it creates a winner.  And once a winner gets far enough ahead, it uses its resources to squash competition instead of building a better product.

We see this throughout history, it's where the words "Robber Barons" came from.  This was the rationale for anti trust laws and RICO laws...

in the past, the State tried to counterbalance this, but today no more.  Now the big corporations have simply coopted government, and use it as a hammer to pound out competition.

Unfettered capitalism leads to the Koch Brothers.  In our case they simply coopted the State creating crony capitalism and corporatocracy.  However, a lack of a Federal Govt would not prevent this.  If we had no Federal Govt, then they would simply buy their own thugs.  This is what happens in destabilized countries around the world.  (the big corporations simply buy their own militia and LITERALLY kill their competition). 

The problem is monopoly.  The monopoly can be state supported, state indifferent, or fought by the state... but the problem with monopoly exists across ALL political and socioeconomic spectrums.

Sat, 08/04/2012 - 11:51 | 2678009 CrockettAlmanac.com
CrockettAlmanac.com's picture

 

 

This article may disabuse you of such notions:

 

The Truth About the "Robber Barons"

 

As common as it is to speak of "robber barons," most who use that term are confused about the role of capitalism in the American economy and fail to make an important distinction — the distinction between what might be called a market entrepreneur and a political entrepreneur. A pure market entrepreneur, or capitalist, succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, direct or indirect. The key to his success as a capitalist is his ability to please the consumer, for in a capitalist society the consumer ultimately calls the economic shots. By contrast, a political entrepreneur succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors.

 

http://mises.org/daily/2317/

Sat, 08/04/2012 - 12:17 | 2678049 Goatboy
Goatboy's picture

You are still missing the point... and no amount of hiding behind terminology and scientific classifications will make it true.

Whole competition thing at the very top (state included or not) is not goal in itself, as some people like to believe. Final goal is to gather enough power (of all sorts, including lethal) in order to dominate others and make your life and lives of those you care about easier and of better quality. Competition does not lead to satisfied customer (that's very beginning) but to a satisfied entrepreneur who spends less energy to keep living cozily. 99.9% will fail and keep serving customers, the rest will become kings (literally or metaphorically).

Its very hard to draw any final conclusions in this context as it is very messy most of the time. State present or not.

What is so hard to understand?

Sat, 08/04/2012 - 13:54 | 2678225 CrockettAlmanac.com
CrockettAlmanac.com's picture

 

Whole competition thing at the very top (state included or not) is not goal in itself, as some people like to believe. Final goal is to gather enough power (of all sorts, including lethal) in order to dominate others and make your life and lives of those you care about easier and of better quality. Competition does not lead to satisfied customer (that's very beginning) but to a satisfied entrepreneur who spends less energy to keep living cozily. 99.9% will fail and keep serving customers, the rest will become kings (literally or metaphorically).

 

But the career of J.J. Hill is not one of domination. He grew his railroad by creating a system where his workers, customers and shareholders all profited. Meanwhile the government subsidized railroads operated mainly through fraud and deception. Did you even read the article?

 

 

 

What is so hard to understand?

 

That's what you should ask yourself as you look into the mirror. If domination of others is the goal of the bad people whom you fear then doesn't instituting a government and giving a few of those bad people absolute power with which to dominate everyone else the worst possible choice?

 

Sat, 08/04/2012 - 15:40 | 2678380 Goatboy
Goatboy's picture

You are pushing me to defend government monopoly on violence. Defending government is not my idea. I am saying that functioning of government could at least be legitimately criticized according to its mandate. But once something sufficiently vital (as railroads) becomes private, in a system where highest value is private property all we can do is endure it.

Here is a real world example of how impotent system is, this way or the other. My best friend owns domestic travel agency. For years his agency had a spontaneous monopoly in one of cities abroad (for domestic clients). His services were above average but prices quite expensive. Thats how things were. Few years ago some other agencies started offering that same destination, with much lower prices and marginally lower quality of service. Now, free marketeers would like to say that naturally his prices have to go down. Its somehow natural. Not so. He made a simple calculation:

1. Expand huge energy to further increase quality of service.

2. Lower prices, thus much decreasing his profits and lifestyle he got used to.

3. Expand minuscule amount of energy and contact owners of those other agencies to make a deal on price levels.

Logical conclusion was 3. and thats what he did successfully. All others joyfully agreed and anyone who would complain about it is free to start another business attempting to dethrone them. And state of the world shows you that that very rarely happens.

Can you not see that it doesn't work, this way or the other (government or not) ? Huge majority of people, if not all, make decisions based on path of least resistance.

Stating that entrepreneur's goal is to serve customers is total delusion in majority of cases. His goal (logically) is to improve his own life and if possible evade pressure of customer expectations. Thus, means (serving customers) is not a fixed parameter in this equation. Fixed parameter is goal of attaining better life for himself. Once he has option to switch means to a less burdensome one, he will do it.

What is the source of religious belief that entrepreneur lives to serve his customers? 

Sat, 08/04/2012 - 15:48 | 2678405 AnAnonymous
AnAnonymous's picture

What is the source of religious belief that entrepreneur lives to serve his customers?
_______________________

'Americanism'

---------------------------------------
His goal (logically) is to improve his own life and if possible evade pressure of customer expectations. Thus, means (serving customers) is not a fixed parameter in this equation. Fixed parameter is goal of attaining better life for himself. Once he has option to switch means to a less burdensome one, he will do it.
----------------------------------------

An entrepreneur is also a consumer of his own labour/services. And indeed, most of the times, he expects different things from the consumption of it than the entrepreneur's customers.

And both compete.
It is what the entrepreneur expects against what the customers expect. And entrepreneurs can also play customers vs other customers.
Accepting that point would destroy most of the ill applications of game theory as performed by US citizens. As they seldom accept that a supplier can also play customers vs customers, just like US citizens expect customers to play suppliers vs suppliers.
__________________________________________

Sun, 08/05/2012 - 14:49 | 2678910 CrockettAlmanac.com
CrockettAlmanac.com's picture

 

Stating that entrepreneur's goal is to serve customers is total delusion in majority of cases. His goal (logically) is to improve his own life and if possible evade pressure of customer expectations. Thus, means (serving customers) is not a fixed parameter in this equation. Fixed parameter is goal of attaining better life for himself. Once he has option to switch means to a less burdensome one, he will do it.

What is the source of religious belief that entrepreneur lives to serve his customers?

 

The businessman's goal is to make as much profit as possible and the only way to do so is to offer a deal which will satisfy the customer while maintaining the highest possible profit margin. The goal of the customer is to be served while paying the lowest possible price. He will only pay if he is satisfied and he can change his loyalty based on his own preference. The business and the customer attempt to make a deal which will satisfy each party. If an agreement is reached then the deal is done. If no agreement is reached then the parties will make other arrangements. I don't see anything remotely religious about that. Why do you?

 

I don't have enough information to cogently discuss the travel destination cartel operated by your friend but I can't imagine that it survived in the Internet age. The expansion of the market through technology increased the number of competitors and gave potential customers a greater knowledge of what services are available at various price points and levels of service. The bottom line is that if your friend offers a service for which his customers are willing to pay then he will do business. If he does not offer a deal which the customer finds sufficient unto his needs he won't do business whether he operates a cartel or not.

Sun, 08/05/2012 - 14:55 | 2679882 Goatboy
Goatboy's picture

I do appreciate (without irony) free market priciples in small/village communities but you refuse to accept how utopian it becomes in complex modernity.

As you mention in second paragraph, this is Internet age. Almost every product/service could be (and will be!) put in publicly accessible data bases capable of sorting and filtering as anyone pleases. How long does price spiral needs to go down before individual producers/retailers/providers start giving up and too many things come to a stop? What is to stop this race to the bottom? Is race to the bottom our goal? "Economic theory" supposed perfect or near perfect knowledge of participants. Throughout 20th century we saw how far that was from truth. Propaganda/media/consumerism efforts witness for that period. And everything worked as long as we didnt have proper knowledge (only scientifically managed one, through media). Cant you not see that there is no "economically justified" place for majority of people when good information is available?

I will not reply further if you keep seeing bigger picture only when it suits your arguments (as in Internet comment).

Sun, 08/05/2012 - 16:20 | 2680067 CrockettAlmanac.com
CrockettAlmanac.com's picture

 

I do appreciate (without irony) free market priciples in small/village communities but you refuse to accept how utopian it becomes in complex modernity.

 

Freedom is a natural right and a natural requirement. Man can not thrive without liberty anymore than he can thrive without food and shelter. One can suggest that because the world is a large and complicated place the procurement of essential conditions may be problematic but one can not suggest that the complexity of the world requires one to forgo the necessities of life and still expect to remain among the living.

"Liberty or Death," is not merely an evocative slogan of a bygone era, it accurately describes the options which lay before you and before all individuals in every land and in every generation.

 

 

 

Sun, 08/05/2012 - 17:54 | 2680231 Goatboy
Goatboy's picture

What you just said is meaningless rhetoric planted to justify economic violence against weak and oppressed. Our "freedom" is always and totally limited by information we are exposed to. Is it not so? We are limited by available information as much as by thirst. No water, no life. You are free to die, as some (reactionary minority) of those who own the current system would like you to repeat. Factually, freedom does not exist. You are only "free" to choose options about which you were previously informed. If no one exposed you to language you would not speak. If no one told you there are 50 states in US, you wouldnt know. Have you personally been to all 50? You cannot choose anything before you saw or heard of it. How is it freedom in true sense of the word if it depends so heavily on environment? Some people with higher human potential (physical and/or intellectual) than you and me live like complete idiots just because they were born in Bangladesh or Congo. Where is their freedom? What are you free to do? Many things you are "free" to do (thanks to previous conditioning outside your reach) I am not "free" to do as I know nothing about it.. and vice versa. Get my point?

I have no intention of hurting your romantic ideals but "liberty or death" is indeed completely pathological statement. You need to precisely define "liberty" in order to make it less pathological. And I guarantee, among 1000 of world's people you'll get 1001 definitions of liberty as it does not exist. It always was and will be meaningless for 99% (psychopaths (not just rich) excluded) once they eventually get to such decision in their lives. Its like saying "love or death". Not to mention artificial, ideological aspect of reducing alternatives and flexibility. It wont bring anything good (long-term benefit to lives of majority of people) just further violence, death, deprivation, injustice.... confusion.

 

Sat, 08/04/2012 - 13:05 | 2678144 AnAnonymous
AnAnonymous's picture

A pure market entrepreneur, or capitalist, succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, direct or indirect. The key to his success as a capitalist is his ability to please the consumer, for in a capitalist society the consumer ultimately calls the economic shots. By contrast, a political entrepreneur succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors.

____________________________

In the same vein, human beings have rights. Non human, sub human beings have not.

In a population composed only with so called market entrepreneurs, providing a service to politicians leading them to bend the legislation would be itself the provision of a new service, fitting the bill.

The worst misrepresentation though: harming the competitor.

Competition is all about eliminating the concurrence.

That is the final goal of competition. And therefore, harming a competitor, destroying its competitiveness is all part of a competition process.

US citizens would like to sell the idea that the only way to progress in a competition is by getting oneself more competitive, hiding that decreasing the concurrence's competitiveness is integrally part of competition.

Sun, 08/05/2012 - 11:39 | 2679416 akak
akak's picture

 

In the same vein, human beings have rights. Non human, sub human beings have not.

"Sub humans" such, as, say, Tibetans as viewed throught the eyes of superior ubermenschen Chinese eyes, yes?

Sat, 08/04/2012 - 13:14 | 2678160 AnAnonymous
AnAnonymous's picture

The natural state of Capitalism is an Oligopoly and/or Monopoly, with or without a State. That's what competition does, it creates a winner. And once a winner gets far enough ahead, it uses its resources to squash competition instead of building a better product.

______________________

Slight correction: use of resources to squash concurrence is done all the way in a competition process. It is how one advances in a competition: by eliminating the concurrence.

As a side note, even though it is olympic times, with many competition processes going on, US citizens prefer to ignore the most obvious: a competition is an elective process to determine one solution over others, pushing for monopoly.

Only one winner in the Olympic games events.

Sun, 08/05/2012 - 06:21 | 2679162 Offthebeach
Offthebeach's picture

Robber Barons to a man all went broke. Most heavily borrowed to attempt to corner some marginal government sponsored scheme. Think sub prime lending/college student loans.
Progressives, leftists, RINOS love government schemes. It gives them physical pleasure, jobs and power they in a free market wouldn't have. Greedheads, unions love it for the corruption .

Sat, 08/04/2012 - 12:52 | 2678119 AnAnonymous
AnAnonymous's picture

Crony capitalism at its best.

___________________

'American' spirit at its best, you know, communauty spirit.

Sat, 08/04/2012 - 09:54 | 2677833 Spastica Rex
Spastica Rex's picture

I want my MTV.

Sat, 08/04/2012 - 09:57 | 2677841 Vic Vinegar
Vic Vinegar's picture

Do you really think ORI is a guy to look up to?  Cuz I think that guy is a hyper-doomer.

Ain't no way you are getting laid spouting out lines about the 33rd parallel.

Sat, 08/04/2012 - 10:57 | 2677909 engineertheeconomy
engineertheeconomy's picture

Troll

Sat, 08/04/2012 - 11:15 | 2677934 Uncle Remus
Uncle Remus's picture

Try it in Sedona...

Sat, 08/04/2012 - 09:54 | 2677835 Vic Vinegar
Vic Vinegar's picture

F: Marg Thatcher

M: Pippa

K: Kate

Crazy but not worse an idea than anything else from the bots here

Sat, 08/04/2012 - 10:58 | 2677912 engineertheeconomy
engineertheeconomy's picture

How much does the Gov pay you to attack this site Vic the Troll?

Sat, 08/04/2012 - 09:54 | 2677837 Atomizer
Atomizer's picture

How’s that Olympic militarized zone working out Britain? Bet you have billions trickling into your coffers..

 

Hahahahaha!!!

Sat, 08/04/2012 - 09:57 | 2677842 Vic Vinegar
Vic Vinegar's picture

it's actually working out pretty well.  the olympics are fun tv

Sat, 08/04/2012 - 10:00 | 2677844 GMadScientist
GMadScientist's picture

And maybe just maybe some things shouldn't be quite so hastily outsourced?

http://www.guardian.co.uk/world/2012/aug/03/nuclear-uranium-tennessee-se...

Ladies and gents, the next 'false flag' will be brought to you by something worse than Timmah McVeigh...multinational corporations in need of a "purpose".

Sat, 08/04/2012 - 10:01 | 2677846 Vic Vinegar
Vic Vinegar's picture

So you are suggesting not to shit on multinationals.  thanks for the pro tip

Sat, 08/04/2012 - 10:06 | 2677849 Vic Vinegar
Vic Vinegar's picture

Please please please Tyler

kick me out of here 

at least for this weekend

I don't want to disrupt doomers from making witty comments on this site

I mean the agent provoceteurs need somebody to plant seeds with

Sat, 08/04/2012 - 10:08 | 2677852 Vic Vinegar
Vic Vinegar's picture

It's ok if you wanna give me a permanent vacation too

speaking of which how sweet was this Aerosmith album

http://www.youtube.com/watch?v=CBTOGVb_cQg

Sat, 08/04/2012 - 10:14 | 2677861 engineertheeconomy
engineertheeconomy's picture

Your braincells are on permanent vacation

Sat, 08/04/2012 - 11:00 | 2677916 takinthehighway
takinthehighway's picture

The last real quality album from Aerosmith was "Rocks".

Saw them three times - '75, '76, '77 - and every time, the opening act, Frank Marino and Mahogany Rush, blew them off the stage.

http://www.youtube.com/watch?v=_56cgFccCPk

Sat, 08/04/2012 - 11:01 | 2677919 centerline
centerline's picture

This place needs lightning rods.  No way your going to be kicked out.

Sat, 08/04/2012 - 10:06 | 2677850 aleph0
aleph0's picture

Did anyone see the "Inquirey" into a UK Govt. Security contractor firm , where the CEO said they "only" made 7 Mio. GBP Profit.

He was asked what the management fees were .. he said he "didn't know" .
Then somebody produced the paperwork which showed MANAGEMENT FEES were 57 Mio. GBP.
No wonder he'd "conveniently forgotten". 

I remember the days when British Rail was at least safe , affordable and working , albeit late at times.

The last UK train ride I took was from Gatwick to the South some years ago.
I seriously thought we were going to leave the track .. and I'm no scaredy !

After "privatization" of BR ... "many" management  salaries were "adjusted" to over 500,000 GBP IIRC.

Im also surprised that "Atlas Shrugged" hasn't been banned yet .

FWIW

Sat, 08/04/2012 - 10:09 | 2677854 Vic Vinegar
Vic Vinegar's picture

McKayla Maroney: would you fuck her or not?  I would assuming I were in a state that recognized the legality of our sexual congress

Sat, 08/04/2012 - 10:08 | 2677853 toady
toady's picture

25 years ago I worked construction and got a peek at state contract competition in the US. My boss, the owner, had foolishly started his business under his own. He quickly figured out that he needed to be a minority to get state contracts. He moved the business under his wifes name. She was also Mexican, so she was counted as a ' double minority', so the extra consideration this status bought caused the contracts to start rolling in. (He would get reemed in the divorce later because she was the 'owner', but that's anither story.

We quickly realized that you could bid way too low and go over budget with no repercussions, so we did.

We also found that the state 'liked' us aftrr a while and someone would call and give us a chance to modify our bid if we were under bid.

I kept wonder why we never got in trouble for these shenanigans, but we never did. The wife got the company in the divorce and I left. I heard almost everyone did and the company went under.

Sat, 08/04/2012 - 10:10 | 2677855 Vic Vinegar
Vic Vinegar's picture

Nice comment.  I really don't want to troll on it

Sun, 08/05/2012 - 15:46 | 2680000 billsykes
billsykes's picture

you are a fucking idiot.

Sat, 08/04/2012 - 10:57 | 2677908 takinthehighway
takinthehighway's picture

I worked for government at the city and county levels and saw much the same as yourself.

Another way governments got screwed was in accepting the lowest bids for things. What usually happened was that a company would lowball on the piece of equipment, then make it up on parts and service. Plus, the specs for the equipment were written so loosely that you generally wound up with a tool of marginal usefulness and quality. We quickly learned to write our bid specs around the desired machine, which automatically eliminated many bids.

I've often wondered how much waste would be eliminated if governments were required to accept the SECOND lowest bid - seems as though a company would have to submit a fairly honest bid, as a real lowball bid would be rejected immediately. Sure, you'd probably still get raped for parts and service, but at least you'd maybe have a better piece of equipment that wouldn't require as much repair.

 

Sat, 08/04/2012 - 11:41 | 2677986 nevadan
nevadan's picture

Excellent point.  Taking the lowest bid practically guarantees getting an inferior product or a contractor that doesn't have the necessary qualifications.

Sat, 08/04/2012 - 12:52 | 2678120 billsykes
billsykes's picture

Yes this is exactly how it works.

Bid to spec. if anything is out of spec, and it always is, delay, charge as if each out of spec thing is an individual job, inflate the materials and fuck them without mercy. 

No one ever makes money on the main bidded job, its the out of spec work that makes the margin.

Personally I hate the lowest bidder practice, from the outside I was pissed that gov't/city would seemingly be so arrogant to expect you to pay to work the job- but I didn't know about what really goes on.

The gov't/city and big businesses that do RFP's would really be better served by having a consulting company spec up what they need and then find the best company for that job, plus minus 30% has to be expected as it is capitalism and companies need to make a profit, but in grinding the shit out of the bidders they get sloppy work that is way out of anything budgeted for.

That G4S company has 675,000 employees and they cannot get enough workers for 1 event they knew about 4 yrs ago?

My ass they cannot find workers, more like they under bidded to win the contract and have to fuck over and misrepresent to fulfill their contractual obligations.

 

 

 

Sat, 08/04/2012 - 18:03 | 2678579 Colonel Walter ...
Colonel Walter E Kurtz's picture

As someone also in construction, and familiar with state bidding procedures, weren't those bids publicly opened so that all could see the price? That is what stops most of the potential corruption.

 

Sat, 08/04/2012 - 18:39 | 2678614 toady
toady's picture

That was 25 years ago and I was a heavy equipment operator, so I wasn't deep into the paperwork. Most of what I said above I picked up over beers on payday. I can't say one way or the other, sorry...

Sat, 08/04/2012 - 10:11 | 2677856 francis_sawyer
francis_sawyer's picture

Whoever provides the best hookers & blow wins the contract...

Sat, 08/04/2012 - 11:08 | 2677925 toomanyfakecons...
toomanyfakeconservatives's picture

Better be underage and uncut...

Sat, 08/04/2012 - 10:12 | 2677859 LetThemEatRand
LetThemEatRand's picture

Even worse than noted by this author is "privatization" of prisons.  Just what we need -- an industry lobbying Congress for more arbitrary criminal laws and longer sentences because there's profit in it.

Sat, 08/04/2012 - 10:16 | 2677863 francis_sawyer
francis_sawyer's picture

Won't that be a hoot when Goldman Sachs & JPM get into the prison running business for the profits...

Sat, 08/04/2012 - 10:35 | 2677879 reload
reload's picture

GoldMan is already in the Old folks `home` racket in the UK. A truly nasty business on the money side of things, my Father in law who suffers from dementia is in an establishment financed by them. They had a serious attempt to gain title to my elderly monther in Laws property via triggering a small print clause in the terms of his care. Our family solicitor could not believe the stunts they were attempting. Fortunately they failed in this case, but I suspect they often don`t. Old folks are easy prey for the squid and their ilk.

Sat, 08/04/2012 - 12:42 | 2678099 AurorusBorealus
AurorusBorealus's picture

I hope England does not have an FHA that guarantees "reverse-mortgages" to the elderly to help "finance" their healthcare.  The carnage that this has wrought in America is a story that has yet to be told.  Unscrupulous, carpet-bagging lending agents signing up demented elderly for home loans (guaranteed by the tax payers).

Sat, 08/04/2012 - 10:40 | 2677886 fonzannoon
fonzannoon's picture

Anyone else notice the canadian dollar just hit parity yesterday with no qe? The autralian dollar is well above parity too. All this talk about a strong dollar and yet it seems anything other than the euro vs the dollar is starting to slide away.

Sat, 08/04/2012 - 14:07 | 2678259 Haager
Haager's picture

The turning point was in June for USD and medio May for Euro.

Swedish Kronor, Australian Dollar, New Zealand Dollar, Turkish Lira, compared to Euro and USD.

 

 

Sat, 08/04/2012 - 11:07 | 2677923 centerline
centerline's picture

Deathrace on prime time.  Coming soon.  Or, maybe we once and for all figure out how to compete with Chinese slave labor.

Sat, 08/04/2012 - 11:07 | 2677922 toomanyfakecons...
toomanyfakeconservatives's picture

I have an idea. Let's allow the private prisons to set up call centers in their basements and sell prisoner labor to companies like American Express. Surely the prisoners won't memorize any of AE's customers names, addresses, and personal details and go murder them after they are released. Oooops, wait a minute, that's all been done already.

Sat, 08/04/2012 - 11:10 | 2677926 centerline
centerline's picture

Close.  Think underwear, shoes, iProducts, etc... Made with love right here in the USA.  lol.

Sat, 08/04/2012 - 11:14 | 2677931 Dr. No
Dr. No's picture

How is that different than privatization of war?  They are doing it now with the military.

Sat, 08/04/2012 - 10:37 | 2677882 Winston of Oceania
Winston of Oceania's picture

These types of arrangements prove that big Gub'ment and corruption go hand in hand. The reason is quite clear if you think about it for a moment; accepting that an oligarchy rules over us all you must then consider that they are also human. They have families and need something for their children to do once they are useful. That is where Gub'ment agencies, large multinational corporations and the large charities come in. After all, you can't expect the elite to work for or even on the same playing field as one of the unwashed...

Sat, 08/04/2012 - 10:54 | 2677905 agent default
agent default's picture

This is nothing.  Enter the strange and magic world of this thing called "Defense".  Then you will know cronyism. Not delivering, not even bothering to  deliver, and spending millions on a project anyone with any real military experience will tell you it's a dead beat from the get go.  And when finally something starts to look as if it is going somewhere, cancel it, and start allover again from scratch with a different contractor.  The proverbial $10K hammer is an understatement.

Sun, 08/05/2012 - 04:07 | 2679124 Inthemix96
Inthemix96's picture

Good point winston,

Take a good hard look at British MP's.  Not one of them today has had any type of meaning full career outside of politics.  Lets take Camoron for example, comes from an extremely rich connected family, who pops off to Eton to study some socialistic bollocks, who then ends up as an intern for some obsure political candidate, who is then groomed for the position of top tory candidate to be our next PM.

I have been deliberately vauge here but the meme is the same for all of them, especially the emotionaly unstable, and down right fucking thick Nick Clegg.  They have no contact or experience of the actual world they inhabit, they have never had to struggle to just get by, they have been molly coddled all their lives and have probably never met with anyone out side their collective circles.  They cannot grasp the real world, warts and all, because they have never been part of it.  Then they expect in there early 40's, that are infinately wiser than actual producers, that they somehow understand how the real world works and functions?

But thanks to the internet, and just by plain observation, they are being shown for what they really are, shallow, incapable through real world experience, they know nothing in regard to the people they supposedly serve.  I would put money on this one point.

Do you think David Cameron, or Nick Clegg could change the plug on a kettle?  Fifty quid says no.  Arseholes, every last one, if we are to have supposed leaders, my bet would be someone who has known the school of hard knocks and knows how get by on their own without massive piles of cash sitting behind them with friends in high places.

Just my own opinion like.

Sat, 08/04/2012 - 10:41 | 2677893 THE DORK OF CORK
THE DORK OF CORK's picture

British Rail was not so bad..... ok they went on strike a lot but the fares were cheap.

www.youtube.com/watch?v=T72METbvFqw

Sat, 08/04/2012 - 10:56 | 2677907 DavidC
DavidC's picture

I'm fortunate enough to get free car parking at the office. I drive 70 miles from Cambridgeshire, England, to the edge of Canary Wharf, London (no, I do NOT work in banking!) and I am allowed to work one day a week from home.

When the rail fares were raised (as usual) at the beginning of the year, I worked out my travelling costs, comparing rail (season ticket)/station car parking (season ticket, it used to be free but is now over £6 a day on a non-season ticket basis) to my petrol costs.

My yearly travel costs came in at just under HALF what it would cost on public transport. In addition, my travel time from home to office would be just over two hours by public transport on a GOOD day. On a BAD day it will take me two hours by car, generally about 1 hour twenty minutes. With the money I save I could buy a good second hand car each year if wear and tear forced it and STILL have money left over.

Anecdotal? Yes. An indication of commuters trapped by travel costs (we have to go where our skills and experience can be used)? Yes. A confirmation of Jon's point about lack of competition on the railways? Absolutely.

DavidC

Sat, 08/04/2012 - 11:04 | 2677921 fonzannoon
fonzannoon's picture

David I think what you are saying leaks into another point as well. Having bought my house 5 years ago as well as all the other mid 30's friends I have (the last generation to be able to buy a house) I am totally stuck. My wife works as well and if either one of us were presented with an opportunity that required us to move, we would not be able to.

You have to be good at what you do and lucky enough to have avoided the housing landmine a lot of us stepped on.

Sat, 08/04/2012 - 11:16 | 2677939 Dr. No
Dr. No's picture

Do not feel trapped. If you need to move, move.  Dont be a prisioner.  There are always options.

Sat, 08/04/2012 - 11:32 | 2677968 fonzannoon
fonzannoon's picture

Yeah you are right Dr. No. 100%.

Sat, 08/04/2012 - 12:06 | 2678037 Raymond K Hessel
Raymond K Hessel's picture

I'm moving away from transit blighted NYC out west where my commute will be cut by two thirds.  

NYC, keep your criminalized soda and legalized pot; keep your casinos that vacuum up poor people's pennies; keep your gerrymandering; keep your bullshit crime stats; keep your high costs, high taxes, strong unions; keep your Yankee mayor who gave us a painted whore instead of a New Shea Stadium.

Keep it all you fucking humps, because I'm outta here.

Sat, 08/04/2012 - 11:19 | 2677944 engineertheeconomy
engineertheeconomy's picture

Engineered transfer of wealth continues, when you eventually sell your house for a million bucks, you will be able to afford to buy a loaf of bread with it

Gold, Silver, Palladium, Platinum, Rhodium... and fertile farmland

Sat, 08/04/2012 - 11:13 | 2677930 reload
reload's picture

Anybody else think it is wrong that the rail franchise companies can quite legally sell MANY more season tickets for peak time trains - than they have the ability or intention of providing seats for.

On a lot of the busy commuter routes it is very rare to get a seat, unless you travel well before dawn or get on at the far end of the line from the destination.

Complete joke, but perfectly OK if you are a government franchised monopoly.

Sat, 08/04/2012 - 11:46 | 2678001 CrockettAlmanac.com
CrockettAlmanac.com's picture

Fractional reserve transportation.

Sat, 08/04/2012 - 11:01 | 2677915 vinu02
vinu02's picture

Does states have money left for work, they keep bailing out ailing banks.

btw. http://stks.co/j3CR Since 1972 Dow is up 12144 (1275%) ; Since Oct 3rd,2011,its up 2182 (20%)

Sat, 08/04/2012 - 11:01 | 2677918 Haole
Haole's picture

<---- Canaccord Capital bankruptcy soon?

<---- No chance of Canaccord Capital soon?

Sat, 08/04/2012 - 12:38 | 2678092 RockyRacoon
RockyRacoon's picture

You forgot door number 3:  Who cares?

Sat, 08/04/2012 - 11:15 | 2677937 Itch
Itch's picture

What about the new idea the FSA is preparing to put forward. They want to convince the public that new banks dont enter the market because they will have to supply current accounts for free, like most, if not all other UK banks currently do. Hence if banks start charging more for current accounts, we will get more competition! YAY. And what about the contradiction here; competition should drive the price of products and services DOWN, now they want customers to start paying for more competition. Pff, call me a cynic... 

Sat, 08/04/2012 - 11:26 | 2677959 aleph0
aleph0's picture

Yes, it's a complete joke (NOT).

Still, it could be worse , like in Germany....

Ca. 12+ years ago, I remember when a well-known BIG German Bank was CHARGING it's customers for payin-IN CASH onto their OWN bank accounts.
The fee was 5 DM for each transaction IIRC.

The bankstas raked in the cash - literally - until ONE GERMAN customer - in Stuttgart - decided to complain  .... took them to court .... and won.
The bank had to pay all those 5 DMs back to all customers.

Just shows what ONE person can achieve by speaking up.

 

Sat, 08/04/2012 - 12:08 | 2678038 Winston Churchill
Winston Churchill's picture

You obviously have not been in business.

Until recently banks always charged business accounts for deposits,

cash more than cheques,but both cost.

Sat, 08/04/2012 - 11:22 | 2677949 Winston Churchill
Winston Churchill's picture

I'll forgive John Aziz for his youth.

The current situation is actually better than it was.

Pre Thatcher in the UK it was a Joke.

All contacts at local (county and town)were always done on the basis of nepotism, or

parcels of cash furtively exchanged .Saw it with my own eyes.

On contracts I did at national level, I was always given the nod about competing bids,

but in my case,because they wanted my superior products,not for personal benefit.

On international bids,many times I would get telex's(I'm an old bastard)  asking me to increase

the bids,to allow for  'grease' to the buyer.

Nothing new in this world,excepting the occupants learning about it.

Sat, 08/04/2012 - 11:40 | 2677984 centerline
centerline's picture

And a whole lot more occupants.  This is the key factor.

Sat, 08/04/2012 - 13:57 | 2678245 optimator
optimator's picture

and make sure you call on the people that write the specs so you can "help" them write those specs!

Sat, 08/04/2012 - 12:01 | 2678032 blindman
blindman's picture

competition.
http://www.etymonline.com/index.php?allowed_in_frame=0&search=compete&se...
.
competition c.1600, "action of competing," from L. competitionem (nom. competitio) "agreement, rivalry," noun of action from competere (see compete). Meaning "a contest for something" is from 1610s. Sense of "rivalry in the marketplace" attested from 1793; that of "entity or entities with which one competes" is from 1961, especially in business.championship 1825, "position of a champion," from champion + -ship. Meaning "competition to determine a champion" is recorded from 1893.
.
compete 1610s, from M.Fr. compéter "be in rivalry with" (14c.), or directly from L.L. competere "strive in common," in classical Latin "to come together, agree, to be qualified," later, "strive together," from com- "together" (see com-) + petere "to strive, seek, fall upon, rush at, attack" (see petition). Rare 17c., and regarded early 19c. as a Scottish or Amer.Eng. word. Market sense is from 1840s (perhaps a back formation from competition); athletics sense attested by 1857. Related: Competed; competing.
.
strive. in. common. alien concept?

Sat, 08/04/2012 - 12:58 | 2678134 AnAnonymous
AnAnonymous's picture

Growing better and better...

Woooo. In a free market, companies can enter anytime to provide exactly the same product as another company.

London 2012 is a one shot event. Anyone providing services there provides with a de facto monopoly.

So basically, the event starts and bids for securizing the sites should be perpetual and recurring, to allow new entries to provide the same service on the same places at a cheaper price?

What would be the standard? One day security offer? One hour? One minute?

A company would start providing a service just to be asked to pack up because a few seconds later, a new company would offer a better price...

How fantasical.

US citizens are expansionists. As such, they easily dismiss one property of the physical world concerning space and unicity of position.

But hey, who cares? It is how it works in US citizenism.

Sat, 08/04/2012 - 14:06 | 2678257 r00t61
r00t61's picture

One of the problems with computers is that they never get tired of spewing out Turing Test-babble like the above.

Sat, 08/04/2012 - 12:58 | 2678136 q99x2
q99x2's picture

Privatise. Reduce the consumption. Maximise the profits. And, depopulate the earth. Hard to beat that.

Sun, 08/05/2012 - 20:34 | 2680522 snblitz
snblitz's picture

You could try to book 'The Myth of the Robber Barons'.

It addresses two types of entrepreneurs.   Economic and political.

The problem one runs into with privatization is as the author argues, the government monopolies are simply transferred to political entrepreneurs (or private monopolies).

However, in the US the private entrepreneurs generally came into existence prior to any real government control.  So the government actually had to drive out the free market forces to establish a monopoly in an already existing market (promises of lower prices and fairer wages usually, both lies).

Later the government then passed their monopolies on to political cronies.   It is simply another manifestation of what is called 'crony-capitalism' today.

Where I live there are very few 'socialized' or 'monopoly' services.  Sheriffs and electricity might be considered socialized but all the rest is private.  I say might because the sherriffs will not really show up for anything important and power can be had via a monopoly or via private.

For example, I can buy propane to heat my house/water/stove or make electricity  from any of 10 or so companies.

 

Do NOT follow this link or you will be banned from the site!