THE PRIVATE SECTOR
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Like the bishops and kings of old, modern governments increasingly find themselves playing second fiddle to the all-important market – where producers and consumers come together and where prices are set and regulated by supply and demand. Money – and human nature – is at the heart of everything. All businesses need money in order to finance the expansion of their means of production and the consumer also needs it to buy more and more of the things they produce. Industrial nations, like Britain and her E.C. partners, the USA and Japan, all make steel, motor cars, chemicals, and many other commodities on a very large scale. This means having big corporations – the grouping together of many smaller businesses and companies – which in turn, because of their sheer size, employ vast numbers of people who understandably also group together – in trade unions. From their united position of strength, the unions can undertake wage-bargaining, negotiate favourable conditions, and otherwise protect the interest of their members in the labour market. There are of course smaller businesses in the private sector – like farming, specialist shops, and other consumer services – which work better on a small scale. |
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NO COMPETITION But, like money, the market is becoming more and more of an idea than a reality. The undeniable trend in the private sector is for bigger and bigger businesses, the ruthless elimination of competition, and, consequently, no effective market regulation of prices. The corner shop is being replace by the drive-in supermarkets, the small builder is being squeezed by the property developers, there are fast-food franchises and shopping malls in every town with the same retail outlets as everywhere else – all controlled by a few really big organizations and each financed by selling part-ownership to thousands of shareholders. Whenever the market fails to regulate prices it is usually because demand for a certain commodity is high and there is no real competition among suppliers. WHAT CAN HAPPEN When OPEC – the Organization of Petroleum Exporting Countries – got together and decided to raise their prices by 66% in October 1973 and a further 100% in January 1974, no one could stop them and governments worldwide had to intervene. Up until then, oil prices had been arguably cheap and many many economies were enjoying a period of rapid growth. This ‘boom’ came to a very abrupt end. In Britain, the government formed the Social Contract with the trade unions to freeze wage demands and match the fall in the national income caused by the oil price rise. Public sector borrowing was reduced and so was the growth rate in the money supply. This led to cuts in public spending and to devaluing the pound. Drastic measures, but they were largely successful. By 1977, inflation fell, the balance of payments increased, and sterling appreciated. However, by 1979, faith in the market returned. The private sector was itching to make more profits again, nobody wanted prices and incomes controls. Wages rose, output rose, consumer spending rose, but so did inflation and unemployment! |
