” … find something else to produce.” That’s the message from an article in the International Business Times about the United Kingdom (UK) steel industry.
And, the message is ridiculous; makes no sense; shows the author hasn’t thought things through; doesn’t have a true understanding of the problem.
Why?
Well, I think it’s best explained with a simple analogy as follows:
Let’s say the UK national soccer team took to the field in shackles; every player in leg irons. They’re playing the Spanish national team yet the Spaniards are not wearing leg irons. When the final whistle blows the scoreboard reads Spain 100, UK 0. The UK team got blown out; got massacred; got slaughtered.
Are you surprised at such an outcome?
I didn’t think so.
What if you read in the newspaper the next day, “UK Soccer is finished! We need to find some other sport to play!”
Yes, the team got crushed but is it because the UK soccer players are no good? Is it because they can’t play soccer?
Of course not. A two year old can assess the problem. Take off the damn leg irons! Let the players run! Set them free!
And there, my friends is the problem with the UK steel industry – and every single business in the UK – they’re shackled with leg irons. So, it doesn’t matter what they produce, they’re going to get slaughtered … until they get rid of the leg irons.
To say to the British people, ‘… the answer to the unprofitable UK steel industry is to let some other country produce steel and we’ll start producing something else …,’ is ridiculous – it’s arrogance at a supreme level. How can UK business compete – in any industry – when they’re required to play wearing “leg irons.”
You see, the problem isn’t with the steel industry. The problem is outside the steel industry. Therefore, when the steel industry goes away, the problem still remains. Whatever new business opens up – to produce anything – will have the same problem.
What’s the problem?
Glad you asked.
And, here’s the answer.
The reason for the British steel industry failure – and any other business for that matter – is simply government control over private business. That’s it; end of story.
The British government wants to control all the businesses in Britain. As such, British business cannot compete on a global market. British business is handicapped – unnecessarily and unfairly – because the government has taken control over all business.
By the way, when government is in control – of anything – how do things usually work out?
That’s right – disaster.
And, that’s what’s going on with the UK steel industry. It’s under the thumb of the British government and therefore cannot possibly operate as a competitive marketplace business. The only way the UK steel industry could complete in the global market is to get all the other governments of the world to start controlling their businesses. Convincing other governments to “leg shackle” their private businesses may prove challenging.
At one time in history, the British were the world masters of business. Hong Kong is essentially a British free market invention. Under this free market experiment, Honk Kong became an economic powerhouse. Got a business idea? You could be up and running by noon; virtually no hassles, no interference, no red tape. In a free market, regulation is carried out effectively and efficiently by … the market. You can’t cheat the market. Under a government controlled market you can cheat like crazy. You can curry favor with government officials; the government picks and chooses it’s favorites. You get massive inefficiencies because the market is not allowed to works it self regulating magic. The result – businesses that should go under are allowed to flourish. And, of course, the opposite happens – business that should flourish, go under.
Business that flourish under government control are a ticking time bomb. They will eventually implode because they’re violating a fundamental principle of economics – they’re trying to cheat the market. Impossible! The market will eventually win out. The business will crumble. And, I suggest this is exactly what has happened to the British steel industry; it’s been cheating the market for years. In a free market, the UK steel industry would have collapsed a long time ago; no way could it survive with the weight of government interference and profit stealing.
What do I mean by government controlled business?
Again, glad you asked.
First, let’s start by looking at free enterprise business. That’s where a person has an idea in the morning, they scratch out a plan, and then the business is up and operating that afternoon. Could be a guy selling hot dogs. The owner gets supplies by negotiating for the best price and quality with other businesses. The owner is also free to negotiate for labor at whatever price the market will bear; after all, labor is another cost of doing business so the owner has an incentive to get labor at the best price/quality point to run the business. Government interference is virtually nil.
Contrast this to government controlled business in Britain (and the United States and many other nations throughout the world; just look for the nations that can’t compete; those are your government controlled business nations.)
You want to open a hot dog stand in North London? Get ready to spend lots of energy, time and money “mud wrestling” through regulations, fees, licenses, double talk, government speak, and other mind numbing business crushing red tape. It all amounts to the government telling you how to run your business. And, you must comply. If you don’t, then they don’t grant you the “royal go-ahead.” Essentially, they dictate business. You get to own it, but government controls it.
Why do governments want to control businesses? Well, it turns out there are two reasons. The first reason is the one the governemnt tell you; the one they tout; the one that sounds good. The other reason is the truth. That’s the one the government doesn’t tell you; doesn’t want to get out … it’s essentially a state secret.
I’ll discuss that in another article.
Yes, in Britain, you may own the business, but the government controls it.
So, when someone says, “Get out of the steel producing business and produce something else,” I’ve got to laugh. Producing something else doesn’t fix the problem. Producing something else, just means you’ll go broke in another government controlled business venture. It’s the advise of fools; folks who don’t know what they’re talking about; folks who don’t understand business; folks who are just talking a good game but have never even been on the business playing field.
Government control of business leads to one thing – business failure. Doesn’t matter what business, the result is the same.
So, you really want to fix the UK steel industry? Then get the government out of the business. There, problem solved.