Government is the Destroyer of Employment and Wealth

Of all the ridiculous government organizations, the Australian Competition and Consumer Commission (ACCC) must be the most ridiculous of all.

Yet again, its actions prove beyond any doubt that government is the destroyer of employment and it is the destroyer of wealth.

We’ve lost count the number of times we’ve heard pollies and commentators claim the government is creating or even saving jobs with its stimulus package. Or that it’s helping to create wealth in the economy.

The sad but true fact is that it doesn’t and can’t do any of those things.

Late last week the ACCC told supermarket chain Coles that it mustn’t offer customers a 40 cent discount on fuel. You’ve probably read the news articles covering the story. But not surprisingly none of them point out the idiocy of the demand by the ACCC.

Of course, the Coles special offer had strings attached. Customers would have to spend over $300 to get the discount, but still, the chance to get your petrol at 70 cents per litre rather than $1.10 isn’t a bad deal.

Sure, you could argue that Coles just inflates it’s prices to pay for the cheaper fuel. If you think that then you don’t have to take them up on the offer. But if you shop at Coles all the time anyway, then it’s a pretty good deal.

However, according to the ACCC it’s a bad deal and it had to be stopped.

Why? Here’s what the ACCC had to say about the offer:

“However there is a balance to be found between providing consumers with discounts on the one hand, and on the other offering significant price cuts for sustained periods or repeated offers which might have deeper impact on competition in the long term. The ACCC is not satisfied on information currently available that this promotion struck the right balance.”

We love how the ACCC hates the idea of “significant price cuts for sustained periods or repeated offers…“

I’m sure you’re thinking the same thing yourself. “No discounts please, I’d rather pay full price!”

Seriously, it’s only in the mind of governments and hapless bureaucrats that this kind of argument makes sense. It’s all very similar to the abject fear the same dopes had about deflation and falling prices.

If we believe the bureaucrats, falling prices are to be feared. But then these are the same people who insist on institutionalizing unemployment with minimum wage legislation too.

Legislation that makes it illegal for an employer to pay someone even 1 cent below the minimum wage level. The government would rather taxpayers subsidise someone to stay at home rather than allow an employer to hire someone at a lower cost.

But that’s all part of the “prices must rise” mentality.

Anyway, back to the ACCC. You know that red tape and regulation has gone too far when Graeme Samuel and his cronies demand that a company doesn’t reduce prices.

That everyone should pay more for goods even if the company selling them wants you to pay less.

But what about the ACCCs argument that it “might have a deeper impact on competition in the long term”?

There’s a chance it could have a negative impact on competition in the long term. But it would be an impact of the government’s and the ACCCs own making.

What the ACCC is worried about is that consumers could shop at Coles instead of Woolworths, or more importantly that they could shop at Coles instead of the local fruit and veg shop. And that could drive those other businesses to the wall if Coles is undercutting them.

According to the bureaucrats this requires the government to intervene even more – to create further legislation and further rules to ‘encourage’ competition.

We can see how well that works. Their competition policies actually lead to less competition. It drives industries towards duopolies. It creates market dominating companies, reduces competition, and ultimately means a bigger drain on the consumer’s wallet.

In effect, what this decision from the ACCC has done is to ensure the consumer is subsidizing the profits of Woolworths. Because Coles is unable to offer a 40 cent discount, there is no incentive for Woolworths to follow suit.

It can maintain its profit margin. And it’s all thanks to the ACCC.

Instead of you paying $31 this week on petrol, you’ll have to pay the usual pump price of $50. Or however much it costs you to fill the tank.

That’s $19 that you could have spent elsewhere. You may have bought yourself a book or a CD. That would have increased the sales of the bookstore or CD seller. And it would have increased their profits.

Imagine if thousands of shoppers had done the same thing.

Maybe that could have created some temporary employment, or a bit of overtime for existing staff.

Of course, maybe people would have invested their $19 which also could create employment and business investment.

But no. Even though Coles is prepared to sacrifice some of its profits so it can increase revenues in the long run, the ACCC is forbidding it from doing so.

But that’s the illogical nature of unfree and government manipulated markets.

In a free market, genuine competition would keep prices low. Corner stores would be more competitive as they wouldn’t be burdened with the same or higher relative wage costs as a huge supermarket chain.

And a lack of red tape and bureaucracy would make it easier for new companies to enter the market. If for some reason competition falls and prices did rise, an entrepreneur would see the opportunity to undercut the existing players while still making a profit.

That action would drag prices down again. But of course, as we’ve seen, governments don’t like falling prices.

In fact, this whole ridiculous tale proves another thing. That government can’t stimulate an economy without robbing someone else – you – to pay for it.

For example, the Australian building industry has been the beneficiary of money stolen from your wallet by the government. Just so they can keep on building things just for the sake of it. How is it paid for?

From your current or future taxes – in other words property expropriated from you by force.

As we’ve proven above, only the private sector and the free market can stimulate an economy.

In the short term Coles’ petrol discount would have been more of a stimulus to the economy than anything the government can come up with.

And do you know what, it would be better than anything the government can come up with. That’s because a private sector and free market stimulus would be voluntary…

And it wouldn’t have cost the taxpayer a single cent.

Other Stuff on the Markets

The S&P/ASX200 closed at 4,792.80, down by 43 points, while overnight on Wall Street the Dow Jones Industrial Average was up by 96 points to 10,092.19. In Europe the FTSE100 finished at 5,281.54, up by 1.76% and the CAC40 closed higher at 1.69%.

The price of gold in Australian dollars is trading at $1,146.58, while in US Dollars it is trading at $1,046.77. And the price of silver in Aussie dollars is $19.24 and in US Dollars it is $17.86.

The Aussie dollar gained a little versus the US dollar, trading at USD$0.9284, and improved against the Japanese Yen JPY84.14.

Crude oil closed overnight at USD$79.61

For the biggest movers on the market yesterday click here…

Tagged as: ACCC, Australian Competition and Consumer Commission, Coles, employment, Graeme Samuel, stimulus package, wealth, woolworths