Quarter Life Crisis

The world according to Sven-S. Porst

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Markets

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As things go, there are discussions with friends every now and again dealing with the wonderful world of capitalism that we live in. And of course, dealing with how it sucks in many ways. Talking to people who took courses in economics and have the bits of theory at hand always gives a positive impression of the whole thing. Having companies compete for the honour of having you as a customer looks like a good thing. And getting a better deal because of that and hopefully development of more efficient processes in the long run sounds good as well.

Yet, when wandering around supermarkets which stock more and more über-absurd products these days; when thinking of all the degenerate stuff put to the ‘market’ by companies ranging from Nestlé to Microsoft, you start wondering where what sounds so good in theory starts failing in practice. While those companies are healthily profitable, they don’t seem to be motors of development or actually providing benefits for their customers. At least no more than other companies.

I found the way a friend of mine put it quite interesting: Often there is no free market. – Of course all companies will talk about the market and complain about markets before they have entered them. But as soon as they’re in that market they’d rather own it and run a monopoly. All good business sense, I suppose. But it makes businesspeople look like liars when they speak about the ‘free market’ as if it were a universal idea that needs to be realised because it’s so good and important. It’s not. At least not for them and they’ll happily fight against it should the need and opportunity arise.

In particular, businesspeople are often seen complaining about too many regulations and stating that ‘the market’ will sort things out between themselves to be nice and efficient. How can one possibly believe them? Are there examples where that kind of approach really works?

On the other hand, every time I phone someone out of town I enjoy how a market that’s reasonably regulated can work: At some stage it was decided that the publicly owned German phone system will be opened to private companies as well. And Deutsche Telekom, the former state phone company, was forced to sell some of their capacity to other companies (it would have been silly and unrealistic to require each company to install their own phone lines everywhere…) at prices that need to be accepted by a regulation authority. While those prices are arguably still a bit high, they definitely created a market for many other phone service providers. And long distance calls have gone down in price significantly since the market was created. In my first year at uni, in 1997, when this whole thing started, a company offered a minute of long-distance talking for around 10 cents. Back then that was cheap – perhaps half of the regular Telekom price. These days you pay less than 3 cents per minute, which means you don’t have to worry too much about the phone bill.

I guess prices could be even lower. At least we now have the relatively absurd effect that, using the cheapest offer in the evening we pay around 1,5 Cent per minute for a local call, 2,2 Cent per minute for a national call and 1,8 Cent per minute for a call to a rich country (like U.S. or U.K.). I.e. phoning a friend a few time zones away can be cheaper than calling a friend at the next railway station.

November 30, 2004, 1:32

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Comment by gummi: User icon

I found the way a friend of mine put it quite interesting: Often there is no free market. – Of course all companies will talk about the market and complain about markets before they have entered them. But as soon as they’re in that market they’d rather own it and run a monopoly.

Under a lot of guises, there’s also the wealth of subsidies given by governments to aid certain commodities or markets. Most people tend to put that in the Keynesian category of intervention, but when an intervention continues in perpetuity one has to wonder if it’s just “that way”, all of the time.

On the phone price stuff. I recently had a free upgrade for my ADSL allowing Voice over IP. The prices are ridiculously cheap compared to the France Telecom company, and similar to prices you talked about. They must be bleeding over there. I think this has prompted them to fight for reparations from the ADSL folks using their infrastructure - some moaning about their original tarif was unfair. It might be a long drawn out fight, or a flash in the pan. The death throes of a monopoly can be quite violent.

December 1, 2004, 12:59

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