Quotulatiousness

June 19, 2012

Big business loves regulation: it keeps competition at bay

Filed under: Business, Economics, Government — Tags: , , , , — Nicholas @ 08:04

Jan Boucek at the Adam Smith Institute blog, with a couple of examples of big business welcoming additional government intervention in their markets:

First out of the trap was Barclays CEO Bob Diamond. In an interview Wednesday with Bloomberg, he reprised his long-standing mantra that “strong banks, like Barclays, want strong regulation.”

This sounds good in our current age of finger-pointing and bank-bashing but serves Barclays well if high barriers to entry keep out more competition from Diamond’s industry.

Then in an interview Friday with The Financial Times, the outgoing head of retail at Royal Bank of Scotland Brian Hartzer suggested regulators should forcibly end free current accounts. He smoothly phrased it in terms that chime with today’s sentiment: “Regulatory intervention might be helpful in forcing banks to the table” and “A large proportion of customers are being cross subsidised — we think that’s unfair.”

Of course, what Hartzer proposes means banks no longer having to compete on price for their most basic product.

Both these sweetly melodious proposals for more regulation need to be treated with Adam Smith’s “most scrupulous” and “most suspicious attention” because they’re music to the ears of our discordant political maestros.

The closer big business and government become, the stricter the regulations against individuals and firms trying to compete with the big businesses. Small firms are almost always disproportionally impacted by industry-wide regulations (and that’s by design), which makes them less able to compete with the established firms. Regulators are more help to big companies than clever advertising, innovative product development, or good customer relations.

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