Why Business Hates Capitalism

One of the most engrained myths of our age is that businessmen like capitalism. The reality is that nothing could be further from the truth. As Professor Quigley points out in his classic Tragedy & Hope... “Business hates competition. Such competition might appear in various forms...[making] planning difficult, and [jeopardising] profits. Businessmen prefer to get together with competitors so that they can cooperate to exploit consumers to the benefit of profits instead of competing with each other to the injury of profits.”

In the same book he makes a similar observation about organised labour; another great myth, one perpetuated to this day by fans of Karl Marx, is that of the class struggle, but as Quigley points out, what really happened and is happening is not a struggle by the filthy capitalists to keep the workers in their place but “a cooperative effort by unionized workers and monopolized industry to exploit unorganized consumers by raising prices higher and higher to provide both higher wages and higher profits”.

If you want to see a classic example of this, look no further than what is happening now with the black cab business. A company called Uber has come up with an app that enables people to order mini-cabs at discount prices. That’s the bad news for taxi drivers; the even worse news is that big companies – Amazon and Google big – have given it the thumbs up. This has resulted in protests from London to Kuala Lumpur.

London black cab drivers have to complete a course called “The Knowledge” which is exactly what it sounds like. In addition to that, they are vetted by the police. A few years ago there was a scandal when a black cab driver named John Worboys was exposed as a serial rapist. Black cab drivers are held in such high regard that his victims were not taken seriously; the same cannot be said for women who have been attacked by unlicensed drivers.

It is one thing for a profession to be held in high regard, but black cab drivers want – or appear to want – special privileges. In particular they claim with some justification that the Uber app is a meter, and insist they should be the only people allowed to offer metered rides.

Murray Rothbard tackled the same issue in his classic 1984 speech on the Federal Reserve. Businessmen regularly form cartels, but in practice cartels are unstable, because someone always gets greedy and lowers his prices in order to increase his market share. In practice, the only way a cartel can be maintained is by legislation, ie a legal monopoly. That is what black cab drivers have at present. Should they be allowed to continue exploit it? Clearly they think they should, but the riding public appears to have other ideas.

Taxi drivers are not the only people whose monopoly is currently under attack; the banks are also under pressure, but while most people will feel at least a smidgeon of sympathy for working men and women who earn their livelihoods by the sweat of their brow driving cabs at all hours around the world’s great cities, few if any will have any sympathy for these perfidious institutions. Although the banks have what the great Major Douglas called the monopoly of credit, they don’t quite have it all their own way with transferring money from country to country. There are other outfits such as Paypal and Western Union. Recently however a company called TransferWise has appeared; it has been advertising heavily here in the UK, and its rates compare extremely favourably with the usual bank rip offs. There has been no public condemnation of TransferWise to date, probably because the banks realise that if taxi drivers may garner some limited support, they will receive none.

Of course, if they are losing business, they can always lower their prices!

[The above article was published originally on June 11, 2014].

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