Taking the pithy comment offered by Brad Taylor in response to yesterday's post about rent-seeking in the party-pill sector—"Corporatism in everything."—and expanding it into what will hopefully be a long and fruitful series of blog posts, I've decided to highlight instances of companies seeking illegitimate advantage in the market through government intervention.
It's commonly supposed that big business dislikes regulation. Intuituvely, the idea seems plausible enough. There's only one problem: it's wrong. Almost exactly wrong.
Big business can absorb pernicious regulation fairly easily: they have in-house legal departments, they have various economies of scale working in their favour, and the cost of compliance with regulation per unit of output is trivial when compared to what their smaller competitors suffer. Big businesses, all too often, love regulation. They especially love rules and restrictions that shaft their competition.
So what I'm going to do is this: every now and then, when I spot a particularly egregious example of corporatism—a good name for this general phenomenon, distinguishing the practice from capitalism—, I'm going to highlight it here.
Different examples have different characteristics. Yesterday's was a bootleggers (Matt Bowden) and Baptists (Peter Dunne) story. Today, I have a cute little example of the idiocy of protectionism.
"Product dumping"—exporting stuff for less than what you sell it for domestically—is supposedly some big bad thing, presumably because it provides consumers with affordable goods while giving people in the developing world jobs: two truly horrible outcomes that no man with a genuine commitment to social justice can tolerate.
So, the powers that be became persuaded by vested interests—an unholy alliance of corporates and unions—to place levies on products so "dumped".
Enter Michael McCormack, an Island Bay artist. He designs diaries adorned with Wellington scenes, has them printed in China, and sells them here. Everyone wins, right? He makes a bit of money to finance his passion, some printers in China get paid employment, and consumers get pretty diaries. Right?
Oh no. He gets slapped with an anti-dumping levy, because he doesn't sell the diaries to all those people in China desperate to have scenes of Wellington life in their stationery.
But when he had another run made in China for 2009, he was surprised to find he could not pick them up until he paid a 53 per cent "anti-dumping" levy.
Talks with the Economic Development Ministry revealed that, with a few select items such as diaries, a levy has been enforced to deter countries selling items in New Zealand at cheaper prices than they do at home.
The ministry made no distinction between Kiwis who outsourced orders and other importers.
McCormack has got a wonderful attitude: instead of thrusting his hand out for free money, he turns some of his talents to making stuff that people want to buy. Even better, he accepts that there's some commercial risk in doing so: not all his diaries sold this year, but "Mr McCormack said his bugbear was not the leftover stock, which was to be expected in the risky publishing game, but more about the levy and the opportunity lost to build a market."
So this story has a hero. Where, you might ask, is the villain? Read on:
The diary duties were imposed after a complaint from the New Zealand industry, of which Croxley Stationery is the largest producer.
Of course. Some dude having two thousand diaries printed in China is obviously a threat to the local printing industry. So the industry calls in its mates at government to punish him.
Well done Croxley: you fail at capitalism. You've just been schooled by a struggling artist.
UPDATE: Inspired comment below by Matt:
The source of the problem is abusive government. Croxley cannot do harm like this unless officials are stupid enough or corrupted enough to wheel out 53% (I love that number - not 50%, not 30%, but 53.0% - no doubt the product of some bureaucrat spreadsheet with Solver set to maximise "fairness" in cell AC640).
UPDATE: now cross-posted at Fr33 Agents!
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