The pharmaceutical industry most starkly reveals how profits are "social" creations – it makes its profit because it is granted artificial monopolies in the form of patents. But it is not alone in this respect.
Another obvious case is the banking industry. Today, many banks all over the world would not have existed but for the huge public money poured into them in the aftermath of the 2008 crisis. Even in the case of those that have not been bailed out, their profits would have been much lower (or their losses far bigger, in the case of loss-making ones) without the cheap money showered on them – without any condition, unlike in the case of state supports such as unemployment benefit – through cuts in interest rates and the quantitative easing by the Bank of England.
In other instances, the social protection of business is more roundabout. The horsemeat scandal has revealed that British supermarkets and the European meat industry have made higher profits from the relaxation of regulations regarding food standards, introduced by the coalition government in 2010 in the name of cutting government spending and, more important, "red tape". The Poundland scandal has revealed that British retail stores would make lower profits if they were not allowed to use the claimants of unemployment benefits as unpaid workers.
Friday, 5 April 2013
The free market is a myth
Ha-Joon Chang strikes again. What a fantastic writer who relentlessly exposes the myths of capitalism. See http://www.guardian.co.uk/commentisfree/2013/apr/05/company-profits-welfare-payments-society
Posted by Christopher at 15:06