Let’s go on a slightly different tack to finish the week.
I want to thank you for your comments and feedback. I read all the emails you send. I just don’t have time to respond. But keep them coming. It’s good to know that you’re enjoying the content. Or not, in a few cases…
This is probably a good time to remind you of the underlying theme of The Rum Rebellion. On the surface, it’s about money and economics, but more deeply its about the arm wrestle for control of economic resources between government and free enterprise. You can read the background on how the actual Rum Rebellion relates this, here.
This is where it gets interesting. Most people are ideological about it. You either believe in free enterprise, or in the desire of elected governments to impose control over free enterprise to make the system ‘fairer’.
Very loosely speaking, you are either on the right (free enterprise) or the left (greater government control).
I am on the right in this debate. Less regulation and government control in our lives is conducive to promoting individual freedoms. Less government control and taxation (redistribution of wealth) promotes self-reliance and personal responsibility.
If too many of us (not the genuinely needy) come to rely on government to help them, or make things ‘fairer’, it takes responsibility and action away from the individual to improve things on their own. Reliance on others (when not genuinely needed) makes us, individually and as a society, weaker over time.
The other point to note here is the importance of the profit motive. When individuals are incentivised by profit, capital is allocated more efficiently, and society is more productive.
When government controls capital (or the ‘means of production’) there is no profit motive. There is no incentive for individuals to be efficient, or work extra hard. Because whether they work hard or take it easy has no bearing on their reward.
But here is where I (and The Rum Rebellion) depart from ideology. I don’t think a completely free market works either.
Let me explain…
Capital is a strange beast. It naturally moves to where returns are highest. But high returns promote competition, because new capital wants a piece of the action.
These high returns get competed away, unless there is a competitive advantage to sustain them. Before the ‘democratisation’ of capital, through society’s widespread access to stock markets and share investing, the ‘capitalists’ controlled the capital.
What did these capitalists do to preserve their high returns? Everything they could to thwart competition and create monopolistic profits. They did so with the help of the governing class, and/or by taking advantage of laws that allowed such behaviour.
Rum Rebellion writes for the people
It’s arguable when this cosy relationship came about. But the need for governments to raise money for war, by tapping private capital, is an obvious culprit.
In the modern age, the concentration of capital (and with it, power) got so bad that in the US, in 1890, the Sherman Anti-Trust Act come into being. This was the first Federal act that outlawed monopolistic business practices. According to ourdocuments.gov:
‘A trust was an arrangement by which stockholders in several companies transferred their shares to a single set of trustees. In exchange, the stockholders received a certificate entitling them to a specified share of the consolidated earnings of the jointly managed companies. The trusts came to dominate a number of major industries, destroying competition.
‘For example, on January 2, 1882, the Standard Oil Trust was formed. Attorney Samuel Dodd of Standard Oil first had the idea of a trust. A board of trustees was set up, and all the Standard properties were placed in its hands. Every stockholder received 20 trust certificates for each share of Standard Oil stock. All the profits of the component companies were sent to the nine trustees, who determined the dividends. The nine trustees elected the directors and officers of all the component companies. This allowed the Standard Oil to function as a monopoly since the nine trustees ran all the component companies.’
In a completely unregulated market, capital will do everything it can to preserve profits and protect itself from competition.
The problem with the ideology of ‘free markets’ is that human nature gets in the way and screws things up. In the immortal words of Lord Acton:
‘Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.’
Despite attempts to regulate the natural inclination of capital to protect itself from competition, I believe there is too cosy a relationship between business and government. Government gives the impression of being against entrenched business interests, and for the people, but that is simply not true.
Governments and big business exist in a symbiotic relationship to ensure the status quo remains. And the status quo is about retaining power. Why else do you think there is a ‘1%’ that controls most of the world’s wealth and resources?
Who meets at Davos each year to pretend they care about the rest of us? Governments and big business.
Bringing it back to the start, the underlying theme of The Rum Rebellion is not to take sides in the ‘government versus business’ ideology. Rather, it’s to point out that, ultimately, they are on the same team.
And on the opposing side is us, the people. That’s who The Rum Rebellion writes for…
Editor, The Rum Rebellion