Georgy Porgy

Snigger

Everyone knows what the problem is, but no one, until now, has been prepared to act. The supermarkets enjoy what economists call a monopsony: excessive buying power caused by market dominance.

Thus supermarket chains should be broken up because of the undue power they hold over suppliers.

Well, yes, but click through that link George supplies to the definition of a monopsony.

A single-payer health care system, in which the government is the only \”buyer\” of health care services, is an example of a monopsony.

So, whatever we do to the supermarkets because they\’re screwing over the suppliers we must also, in logic do, to the NHS. You know, like break it up, expose it to market forces.

Okey Dokey.

As I\’ve said before, it\’s cute to watch George Monbiot meeting economic ideas. He never quite grasps the implications of them.

9 comments on “Georgy Porgy

  1. Though it looks like the NHS is a very strange monopsony – its “simple shopper” approach ((C) “Watt Tyler”) seems to pay higher prices for things than other customers! 🙂

  2. Oh silly you, Timmy!

    The National Health Service is a Government organisation and is therefore the most wonderful thing it is possible to be (apart, possibly, from other Government organisations).

    But supermarkets are the private sector and are therefore evil, probably serving fried baby in the boardroom canteen.

  3. Yes Pogo, the NHS procurement is seen as a running joke even within other parts of the public sector. Remember the old Commercial Directorate?

    I am currently on a procurement project with a large local authority (the procurement is generally well run, the biggest probs come from central government interference and our mates in Brussels with their insane Public Contracts Regs).

    We often run into contact with the local PCT on things, and the boys and girls around our office usually compete to find the best ‘PCT incompetence’ story. Some of the stupidity is just breathtaking. And this isnt a ‘public sector’ bash – I wouldn’t necessarily say the same about other public sector bodies we come into contact with (eg fire, police etc).

  4. Christ I wish that man would learn the difference between gross margins and operating margins. He cites gross margins to suggest that the supermarkets are making excess profits (and provides the usual anecdotes that the farmers are making zero or negative profits, a situation which appears to have persisted for a suspiciously long time) but of course unless you know operating costs, gross margins are meaningless. I think it’s safe to presume that supermarkets are more efficient operating cost wise than other forms of retailer, so if supermarket gross margins are exorbitant compared to other retailers (of course, he provides no data on gross margins at small independent retailers) then their operating margins must be astronomical. Of course he provides no data on supermarket operating margins. Sadly such data is hard to find, because most supermarkets do not report estimated food and non-food margins, and all I have is anecdotal evidence myself that they make around 2-3% on food. That doesn’t look like profiteering to me, but perhaps once you look at the return on capital it is. Then again, doesn’t the Competition Commission repeatedly find no evidence of excess profits?

  5. The whole edifice of anti-trust economics is based on a false, “perfect competition” model of business that ignores that competition is not a static game, but an ongoing process. When a person like Monbiot attacks Big Business, it is often seldom asked as to how such a business became big in the first place. Was it because it received State favours and protections (bad) or because it offered excellent, good value products that many people wanted to buy (good)?

    One of the nonsenses of anti-trust, as nailed by Ayn Rand years ago, is this: under government competition laws, you can be guilty of price collusion and cartelisation if you charge the same prices as your rivals; you can be accused of gouging if you charge higher prices, and you can be accused of predatory pricing if you charge a lower price. You cannot win (which of course is the whole idea).

  6. Although I agree with you it doesn’t follow that just because a business gained its monopoly through being better than its rivals it will remain so once it has no competition (Microsoft Office?) Barriers to entry – or their lack of – are what really matter in competition policy.

  7. JP

    you what? I’m fairly sure ‘anti-trust’ economics can survive moving outside of the perfect competition framework into dynamic settings, with as much detail concerning ‘how a business become big in the first place as you could wish for’.

    you’re right some concepts (like price gouging) that are pretty shaky but I don’t think clever comments can magic away the reality of monopolistic and collusive behaviour

  8. I used to work for Sainsbury’s. They never gave us exact figures, but I do remember a poster up in the staff area that instructed us to be careful with shopping trolleys as they cost £80 to replace, which was the same as the profit on £3,000 of sales, implying 2.67% profit or thereabouts – which sounds reasonable.

    Of course that was about 10 years ago – things may have changed…

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