It's The Politicians That Need Some Steel

The people that run our country worry me, but the people that want to run our country (Labour, the Lib Dems, the Greens) worry me far more. Despite the fact that, apparently, China has produced more steel in the past two years than the entire UK has since the 19th century (and wow, what a fact that is if it's true!), and the fact that the British steel industry is losing over £1million a day as a result of the collapse in steel prices (can they not spot the obvious supply and demand link between the two facts?), they still want to flirt around with the idea of nationalising British steel - not because it's the prudent thing to do (even the most blockheaded politicians must be able to undertake this basic arithmetic), but because it's popular with UK voters.

I wonder if any of those calling for nationalisation of costly, failing industries ever gave a thought to the concomitant losses in other parts of the public sector (health, social services, defence, police officers on the beat, old age pensions, etc) required to pay the price. Probably not.

One thing they definitely don't give a thought to is the notion that when a business or even a whole industry dies in the free market, it is not only a good thing in the long run, but a necessary thing too. Not only is a death in the market a sign that others are providing the good or service more competitively and efficiently, it is also a necessary departure that makes room for new industries to grow. Imagine if the companies that produced video tapes hadn't died or moved to newer technologies, or suppose people were still trying to make a living producing telephone boxes or designing gramophones - it is easy to see why they wouldn't be solvent anymore.

When obsolete industries shrink or discontinue this helps free up new capital for fresh industries. If we had tried to artificially keep alive the video tape industry, we wouldn’t be enjoying so quickly the improved movie watching experience of DVDs or On Demand TV: if we had tried to artificially to keep alive the old telephone industry, we would have slowed down the growth of the burgeoning mobile phone industry that has seen so many other auxiliary gadgets included on our hand held devices too.

It is just as necessary for a healthy economy to allow providers of extraneous goods and services to shrink or die as it is new ones to emerge. The former is essential to the latter, as there always needs to be fresh capital freed up for new and improved industries. Trying to artificially preserve the British steel industry over more competitive steel production elsewhere is not very different to trying to artificially preserve fax machines at the expense of emails - it is only a more immediate and reactionary example of the same thing.

Alas, it is true that all this does have a negative short-term effect on the workers in the British steel industry, and in some cases on local communities, but artificially propping up an industry that is being outcompeted by a more competitive industry abroad is not the right thing to do, for all the reasons just explained (By the way, if you're still having emotional home-grown difficulty with this point, let remind you of a previous article I wrote for the Adam Smith Institute in which I explain how artificially propping up failing British industries also hurts other British industries in the process).

The reality is, there is a horrible and harmful co-dependency between the masses of our population - who are so Anglo-centric that they fail to understand how competition works, and how stifling competition harms us as well as everyone else - and the pliable politicians that rely on their vote to survive in their roles. The people that govern us, and the people in the shadows wanting to govern us, are toxic to our economy, because they make decisions of popularity, not of prudence, based on the fact that the majority of the people they govern prefer popular myths over prudent truths. As George Orwell once famously said: "In times of universal deceit telling the truth is a revolutionary act", and this nation badly needs a lot more truth injected into the political mainstream.