The present British government is remarkable for its sense of direction. One may not approve of the road it is taking but it is difficult to deny that, to a greater extent than most governments for many years past, it is following a planned course. The impression it creates is conveyed by a recent cartoon showing the heads of Messrs. Heath and Callaghan mounted as trophies, while Mrs. Thatcher waits impatiently for Arthur Scargill to be put in place beside them.
Mrs. Thatcher has proclaimed her belief in the value of economic freedom (we follow the common practice of speaking as if the Prime Minister were personally responsible for all the words and deeds of the government she heads). The declaration is sometimes scorned by the left, for to them economic freedom means freedom for all to live without worrying about economic matters, and Mrs. Thatcher clearly does not favour that. But she does mean what she says; she is using “economic freedom” in a sense different from that given it by the left. For Mrs. Thatcher the phrase means freedom of action in economic affairs, freedom to compete, freedom to accumulate wealth and, as the obverse of that and inseparable from it, freedom also to lose any wealth one may possess.
Most of the people active in the economic field, in the market, show by their behaviour that they do not share the high opinion of competition expressed by some of the theoreticians. They engage in it for the sake of what they can get out of it, and if they can get more by refraining from competition they are very ready to do this. Hence the widespread tendency away from an open, competitive market towards agreements, some public, some extremely private. A simple partnership eliminates competition between two people, and beyond that there rises a whole range of associations. Every firm is a device for eliminating competition among its members, companies merge or are taken over, thereby eliminating competition between them up to the level of a conglomerate or a multi-national, and there is an almost limitless variety of less complete joinings and informal understandings: supply agreements, trade associations, cartels, professional bodies, price-rings and the like. All of these restrict competition and all of them are set up by the traders themselves. It is in this way, and not by unrestricted competition, that a market operates if left to itself. Adam Smith remarked, long ago, that men of the same trade never come together, even for amusement, without the meeting producing some conspiracy against the public.
Mrs. Thatcher has repeatedly declared her belief in the value of economic freedom, and this has been taken to mean that she intends to do away with these arrangements. Not so. Economic freedom, in her sense of the term, means freedom for those who make up the market to behave (within the limits of decency and convention) as they wish. If they choose to replace competition by more comfortable arrangements then in her view it is right that they should be free to do so.
Some of her actions seem at first sight to contradict this. The opticians’ monopoly over spectacles has been ended and the power of the trade unions weakened. The virtual monopoly of conveyancing enjoyed by the solicitors is being widened to admit banks and building societies, there is talk of extending the rights of audience in the higher courts to solicitors, and industries owned by the government are being sold into private hands. But none of these moves shows an intention of throwing the market open to free competition. Their principle beneficiaries are the supermarkets, the employers, the banks, the building societies, the solicitors and the investors. Each of these groups is made up of big fish that have already swallowed most of the smaller ones in their respective pools, and to redistribute business and profits among them according to the pressure each is now able to exert is a very different thing from establishing an open market. Under Mrs. Thatcher’s government the Monopolies Commission continues to function, but the need for this confirms that competition is not free and open; it is only when much of the competition has already been eliminated from an industry that monopoly begins to look like a danger.
The market is motivated by the desire of traders to acquire wealth. Competition is one way of doing this, agreement to refrain from competition another, and traders free to do so use the method which seems best in the circumstances. Mrs. Thatcher accepts this. In all the years she has been in power she has made no movement, on any broad front, to oblige traders to behave otherwise than as they think best. The Prime Minster shows herself to believe that those who operate the market ought to be left free to pursue their individual interests in the way they choose, and this is one valid interpretation of the phrase “economic freedom.”
Mrs. Thatcher is opposed not only by the left, who would replace the market with a planned economy, but also by people (including the group calling themselves Libertarians) who want all those active in the market to be in unrestricted competition. These often speak as if open competition were the condition towards which the market tends; they regard its present state, from which competition is largely excluded, as a perversion introduced and maintained by the government. This goes against the evidence; it is, in the main and in the first place, the traders who seek to restrain competition, the government doing little more than enforce their wishes, and that only partially.
As an example take the patent system. This is one restraint upon competition, and it is maintained by the state, but the government does not compel the owner of a new invention to patent it. If the traders are in favour of free competition there is nothing to prevent them putting their bright ideas into production unpatented, relying on their own abilities to secure them the advantage. The patent system is not imposed by the government against the will of those concerned, it is maintained by the government in response to a demand from the traders.
The privileged position of some professional groups is protected by the state; doctors, barristers and solicitors are the obvious examples. This is a restriction upon competition, but it is not one imposed unilaterally by the government; doctors, barristers and solicitors are not eagerly agitating for their professions to be thrown open to the laity. Almost every trade, industry or profession has one or more associations defending the joint interests of members against outsiders; that is to say, restricting competition. This is not something imposed by the government, it is voluntarily arranged by those concerned. When the people running a market are left free to behave as they choose, the outcome is restriction of competition.
The establishment of unrestricted competition would mean, for the people now engaged in the market, not greater freedom but greater restriction. They would no longer be free to restrict competition and they have shown, by their readiness to do this, that it is a freedom they value.
Those who would throw the market fully open are, none the less, seeking greater economic freedom. They are seeking it not for those engaged in the market but for the community at large; to limit the freedom of traders to restrict the market is to increase the freedom of citizens generally to take part in it.
When economic freedom is at issue the question arises: is it to be left for each to take what he can, knowing that this means accumulation by a few and dispossession of the many? Or is it to be guaranteed to all, at the cost of limiting the amount enjoyed by each one? Mrs. Thatcher, her party, her government and those who support it favour the first answer. Those who would establish a market fully open to all and operating by unrestricted competition favour the second. Both answers are valid interpretations of the phrase “economic freedom,” and each of them is rendered incomplete by its exclusion of the other. A society offering complete economic freedom would incorporate both, enabling the supporters of each to follow their inclination.
from Ideological Commentary 22, January 1986.