The expensive and endless lobbying habits of big business is insulating them from being usurped by agile and innovative start-ups which, in turn, is preventing wealth being spread about, as predicted by Adam Smith.



This is further complicated by the fact that, markets in which the Government is the only customer are highly susceptible to cronyism – the nexus between the governing elite and the business elite that contrives to put the interests of business first, at the expense of the national interest. Not least, because the twin evils of lobbying and corruption rear their ugly heads every time taxpayers’ money crosses the boundary between the Public Sector and the Private Sector.



Here in the UK, there is a fear among free marketeers that uncompetitive businesses will intensify their lobbying efforts in the run-up to Brexit day 29 March 2019, to shield themselves from being exposed to foreign competition. This is further exemplified by the fact that in some markets, regulators have allowed themselves to be captured by incumbent firms, which then rewards them with special treatment.



For example, in the market for military equipment, the role of the regulatory authority and sponsoring agency has been combined in one department of state, the Ministry of Defence – which means that the independent scrutiny function, free from political interference, is non-existent.



Whereas it is considered a necessary evil in well-functioning democracies for big business to lobby Government to skew the market in their favour (at the expense of small and medium-sized enterprises whose voice is drowned out), what is distorting the market even more is the ill-considered actions of Government itself, as it goes about its business of procuring assets for public use.



The UK Government is committed to pre-competitive market engagement with industry – in what are called Industry Awareness Days – to relay details of each individual defence equipment procurement programme – and has been for decades now.



However, far from serving as a forum for conveying the Ministry of Defence’s requirements to military equipment manufacturers and offering them an alluring prospect of networking with like-minded people with common interests, Industry Awareness Days (instigated and hosted by MoD) have become nothing but a gathering of the great-and-the-good (on overheads) from competing firms where talk, in huddled groups, immediately turns to how to carve-up the product market, snuff-out new market entrants, subvert the competition process, contrive to nullify its use altogether or fix prices!



A much more effective way of transmitting MoD’s requirements to all-comers in the defence manufacturing industry is through the vehicle of a carefully constructed and worded invitation to tender, whose formal release marks the start of the multiple-phase, winner-takes-all competition and concludes with down-selection of the single defence contractor for the final Manufacture, In-Service Support & Disposal phase.



If ITT recipients need to take on first-tier Supply Chain partners for dissected workshare parts of their Technical Solutions, then they should be chosen through open competition, on the basis of best value for money – not at a gathering where price-fixing is on the agenda!



The Government would do well to heed the words of Adam Smith, the Scottish philosopher and economist who wrote in The Wealth of Nations (1776) that “…… 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 prices”.



Adam Smith goes on to say “It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary”.



Not only does this ill-considered action illustrate the complete failure of Government policy when it comes to spending taxpayers’ money, it also reinforces the view that people in the pay of the State haven’t got a clue about what it is that drives the behaviour of for-profit organisations in the free market – not least, because they have not spent a single day of their lives in the Private Sector!



It’s not so much a lack of skills in Whitehall that is the problem, but a surplus of people with the wrong skills. Some people say that they can be retrained to equip them with the necessary skills which will enable them to deal with today’s challenging public service tasks. But the inescapable truth is that these people are simply beyond repair!

@JagPatel3