.jpg)
It is indeed a bad day for all those who will lose their jobs & one I can't help but be sympathetic with, but there is a lesson in this.
Government involvement in business has the effect of picking some business winners, while destroying others. The Energy Efficiency and Conservation Authority, with its subsidies, looks like a good thing on the surface, but as 19th century French essayist Frederick Bastiat warned us to beware of, 'That Which is Seen, and That Which is Not Seen.” www.bastiat.org/en/twisatwins.html
For every contractor successfully tendering for this government work there are others missing out. Now under normal market conditions this would be true too & also quite proper. However, the state involvement creates a distortion by interfering in the market process, let me explain by example:
Bob, Bill, & Bruce all sell milkshakes from their own individually owned shops all around the $2.50 mark. Bob sells his for $2.40 to attract his customers by price, Bill sells his for $2.70 because his have more ice-cream in them & Bruce sells his for bang-on $2.50 because he believes in consistent quality with a fair price. All have been competing for years for customers in an honourable & fair manner and all have been trying to grow their businesses in a free market (NZ has a mixed economy, but this isn't important for the purposes of this example). One day the government decides that everyone that is thirsty, but don't have enough money to buy milkshakes, are entitled to milkshakes anyway, and announce to Bob, Bill, & Bruce that they can all tender their services to provide milkshakes to the needy. At first everyone is excited, expecting to get the business – they all wait for the government reply telling them they've been successful. On the day of the expected reply Bob gets his mail and opens the government letter, 'Hooray” yells Bob, 'I've got the contract”.
Bill, in fear of seeing Bob's delight, rushes to his mailbox rips open the government envelope and wouldn't you know it, he won a contract too! Bruce the poor bugger missed out.
After a few months, back in the market place, Bob & Bill are going great guns; they price the milkshakes for people, the people have to pay a small deposit of 50 cents but don't mind at all, and Bob & Bill send the rest of the account to the nice government man who in turn pays them the balance each week. They got so busy they took on extra staff & bought new milkshake machines. Bruce on the other hand carried on trying to sell milkshakes for a while, but had to close because no one wanted to pay the $2.50 anymore when the customers only had to pay 50 cents at Bob or Bill's. Bruce works in a factory now, putting ice-block sticks into ice-block moulds, 'it's a job” he says philosophically, 'After all I have to keep working because the government needs my taxes to pay for everyone else's milkshakes,” he despairs.
A few months later, Bill starts getting the feeling that the government man isn't keeping up his end of the bargain; Bill is no longer allowed to sell milkshakes under this scheme – kind of changing the rules Bill thinks. The government man says, 'oh no, it's in the contract, clear as day,” Even though Bill has never really trusted the government, he put that mistrust aside as the milkshake contract was too good to pass up, it was a ‘sure thing'.
