Beware the “level playing field”– it is a dangerous myth

Beware the “level playing field”– it is a dangerous myth

by Eben Wilson
article from Monday 23, December, 2019

WE ARE GOING to hear a lot about “level playing fields” in the upcoming months of EU negotiation.  Consumers should beware; what sounds like a sentiment for fairness ends up being precisely the opposite. 

There are two problems, the “level” and the “playing field”. Both are easy targets for business lobbies eager to protect their trade; or in Adam Smith description:

 “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise price”.

Think about the lowly electric plug. There are multiple variations of this across the world; all doing the same thing, connecting an electrical device to a mains socket.  What can “level” mean here? International and national safety standards circumscribe the general design, but the type of plastic and its moulded form, the way the connectors are embedded, fusing and other features can have diversity as long as they meet these regulations. 

That last clause is key; it is regulators who level the playing field. But go back to the earlier part of the sentence; types of plastic are business supply chain choices, form moulding and embedding of components are design choices; it is the business that governs manufacturing choices and their costs, so – by definition – there is a non-level playing field.  Crucially, where competition for custom exists between suppliers, business choices are driven to be economic – using scarce resources to best productive effect – so that producers then offer best prices. 

But if those choices are circumscribed by regulatory levelling, the business focus changes to the preserving of positions within the levels.  Along with industrial association lobbying comes an incentive to keep all market players at the same unchanging levels – commoditising standardised production for best profit. If you go to any industry technical standards group you will find a range of participants; all will be welcome, large or small. The large like the small because it suggests that they are not dominating the standards process, the small like being there because they can hang on the coat tails of the larger players to whom bureaucracies will listen.  What both are engaged in is protection of their trading position; there is no other reason to be there, staying in their factories and incurring costs to re-engineer products does not make good business sense if you can make steady money out of existing commoditised and protected sales.  

The first outcome of course is that the prices that consumers pay are higher, but there is a second outcome within this commoditisation that affects us even more, lack of innovation.

The lock here is the “playing field”.  For regulation to make any sense, it always has to assume a playing field, but actually playing fields do not exist. Markets are spontaneous arrangements that flex through time; different players, different products, different sales channels and methods, and different technologies apply. 

Go back to electrical devices again; think of the lowly direct current device charger – 12 volt or 5 volt tapped off the main supply.  Twenty years ago, these were heavy, hot devices. Housings were thick, cables were chunky.  But when electronic devices such as phones became prevalent, these new markets changed the hardware market.  New windings and components coped with both 110 volt and 240 volt mains, cooler devices had thinner, lighter enclosures, USB cables allowed for a standard format of internal wires, smaller devices even catalysed a re-think of the UK’s clunky plug to give it folding or sliding pins so it could fit in a handbag. Soon, we will have field effect transistors and induction coils that will reduce these connectors yet further. 

This playing field is not a bounded field in any way … it’s a commercial eco-system that adjusts across markets and supply chains that involve copper, plastics, sub-components, machine assembly methods and the global supply of these parts.  

Deciding to have a “level playing field” means deciding to police this vast moving array of global relationships. This inevitably means expensive administration of the oversight process, with administrators desperately codifying complexities, struggling to cope.  Usually they fail, creating muddy rules that only in-industry players understand and often abuse. And, since regulators cannot know all the ins-and-outs of new and changing trading relationships, the simplest way to deal with complexity is to demand blind compliance with yesterday’s old methods.  Fill in the form, adhere to the process rules … it all reduces the chance of competition through innovation; ask anyone who has tried to trade into France, competing with French interests. 

As Adam Smith also said: “To widen the market and to narrow the competition, is always the interest of the dealers…The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.

This is what the notion of “creating a level playing field” offers; deception and oppression that reduces consumer well-being and comfort.  Sadly, it is central to the modus operandi of the EU and the lack of growth and innovation across the EU is visible in the new comparative statistics.

Of course, Scots living in the never-never land of an SNP state are right to be leery of statistics, but there are perfectly good logical arguments to suggest that a departure from the EU will be helpful to a land of supported trading and subsidised agriculture.  The key here is to plug Scotland into a larger international eco-system. 

Take oranges, controlled by the protected Spanish growing industry under a mixed quota and tariff regime that can see a 38 per cent tariff applied to third country imports.  We Scots have a poor diet, would a third off the price of oranges not help us make better choices? What about North African dates, Caribbean bananas, Kenyan beans, US chicken and potatoes, and a barrowload of other food stuffs that could radically cut the price of the weekly shop? 

What about the Scottish farmer, I hear you cry. Well, premium meat grown on grass (or heather) commands top prices overseas; a steak in Beijing costs $75, in Penang $65.  Most of this price is nothing to do with the meat costs. Scots already play to the exclusivity of our food and drink; and our overseas traders know how to leverage quality for sales.  It’s time to haud our weesh and get oan wi’ it – globally.  If we can import cheap commoditised Chinese plugs and chargers, we can surely export specialist quality food. 

And finally, there is another side of the coin, when we import from new territories we create new relationships. We get to know what others produce and how, and inevitably they too find out what we can produce for them.   New trade comes from old; because we find out how to share new ideas.  This is the counter to those who say we need to stay close to the EU because we are similar and share cultural commonalities. Yes, all very cosy for Scottish politicians and bureaucrats who can lard it well in Brussels with their fellow controllers, but useless for Scots who have to make their own revenues from their own toil; we need new pastures to build new wealth.  The SNP should be supporting us to go and find them, not working out how to lock us to failure. 

The British people, including one million Scots, clearly chose to leave the EU to enable their own self-determination – and voted again this month to confirm that decision. Intrinsic to enabling this is that our politicians, including the SNP, recognise why for many businesses this is a call to arms, for change, innovation and wealth building.  They should not presume our acquiescence in their control. As Adam Smith also said:

“The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority … which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.”

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