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Free market vs socialism: supply and demand

In a free market, supply always rises to meet demand: If someone is willing to pay for it, somebody is willing to provide it. If too many people are providing the same, either prices drop, or suppliers need to develop a premium quality product or service to maintain their attractiveness. Either way, the consumer wins.

Under socialism, supply is controlled by the government. If demand rises, supply doesn’t rise unless the government takes notice. And the government only takes notice when it becomes critical – in other words, when it’s too late. That’s why the NHS is forever in crisis, public transport is always inadequate, and housing is always in short supply.

And under socialism, when demand falls, supply remains high, leading to overproduction, waste, and ultimately the collapse of the industry. This is why the UK coal and steel industries collapsed. This was why the Soviet economy collapsed, and why every socialist economy will collapse.

The worst thing about socialism is – the worse the problem gets, the more control the socialists demand. If the NHS is not meeting supply, the solution is always, “more government intervention”. If not enough houses are being built, the solution is also “the government must build more houses”. Both the Tories and Labour are guilty of this. All of mainstream politics is guilty of this. And they don’t care. Because the more they promise, the more power they get. The more power they get, the more they will get away with promising. It’s a self-perpetuating cycle. You will have never heard a politician say “there are not enough hospitals, let’s encourage the growth of the private healthcare industry.”

You might think: “house development is private!” or “the trains/buses have been privatised!”. Yes, but privatisation is not the free market. The housing and rail industries are still heavily regulated and controlled by the government. The industry cannot simply build houses or train tracks without government first mandating it. It is a crony industry, where developers chase profits on the tailcoats of government decisions.

To be clear: I am against privatisation. The free market approach does not require that government-owned assets or industries to be privatised. The free market approach only requires that government does not monopolise the industry. If the public provision of services has to compete fairly against the private provision of services, there will be a free market.

What is fair competition? No monopoly over industries, such as with GP services, house planning, and railway operations. No taxpayer bailouts for failing companies, be it British Steel or Royal Bank of Scotland. No subsidies for unprofitable industries, be they farming, renewable energies, or even fossil fuels. The end result is that industries compete on an equal footing regardless of ownership, so that efficiently-run private businesses are not strong-armed out of the industry by government fiat, or priced out of the industry by inefficient businesses which survive only because of subsidies.

I’ve seen it work. It works beautifully. Unfortunately, nobody shouts about it. That’s because nobody complains about something working well. When something works well, we tend to take it for granted. That’s just the sad reality of human nature.

This post was originally published by the author on his personal blog: https://hoongwai1984.wordpress.com/2019/09/23/free-market-vs-socialism-supply-and-demand/

About Hoong-Wai

Profile photo of Hoong-Wai
Software analyst. Engineering graduate. A social progressive at heart, and a former atheist. Believes in protecting life and liberty. Recently developed a strong interest in economics despite having given up the subject many moons ago. UKIP parliamentary candidate for 2017. Emigrated from Malaysia to the UK in 1998.

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