Mythical free markets

It’s a perennial observation of mine that the free market that various people keep telling us failed a few years ago, leading to much crisising of global finance and the invention of words such as ‘bankster’ (when perfectly adequate words such as ‘banker’, ‘crook’ and ‘twat’ already existed to cover those who are respectively successful, dishonest or inept), actually has about as much reality as the tooth fairy. To describe as free an industry that is interfered with by governments of many countries in the form of regulation and regulatory bodies has always seemed ridiculous to me.

Nor is it just bankstering, to use what I assume is the new verb. Governments have always liked picking winners with other people’s money, and a perfect example of that turned up today with the news that the Upside Down version of Vauxhall has posted a profit of A$89.7 million for 2011. There’d be nothing wrong with that, nothing at all non-free market or uncapitalist about it at all, were it not for the fact that Holden was also subsidised to the tune of A$89.7 million.

Yep, that’s right. To the nearest hundred thousand dollars Holden’s profit last year was exactly the same as the amount it was given by the Australian, which of course it first takes by force from taxpayers.

But Holden’s chief financial officer George Kapitelli said the two figures were a “coincidence”.

“It does stand out when you first see it but it’s a coincidence,” he said. “We’d love to have the [profit] figures higher than the … [government] benefit, but these are audited figures. It’s the way the numbers have fallen.”

Yeah, missing the point a little there. It’s not that the two figures are the same, which of course is a complete coincidence. It’s more that the two figures are remotely similar, and even that there are two figures in the first place. And also that it seems to be getting worse.

In 2010, Holden posted a profit of $112 million after receiving $100 million in taxpayer assistance.

So it’s gone from amount of subsidies being 89% of the amount reported as profit in 2010 to 100% of it in 2011. Help the sole-trader little guy out here: why not scrap the subsidies and just admit that Holden only broke even last year, down from a fairly modest $12 million profit the previous year?

But Mr Kapitelli said it was inaccurate to link government funding to profit figures.

“You really can’t isolate one particular element of our financials and draw a conclusion that that’s why we’re profitable,” he said.

Eh? Look, I know a big company’s books are not a simple thing but when you’re declaring your profit, when you’ve reached the point where you can say that $x million profit or loss were made, then surely you can admit that without this or that factor creating income or costs then it would have been $y million. And in this instance it’s fair to say that without the help of taxpayers’ money, which would undoubtably have been given most unwillingly by the diehard Ford fans if the Australian Tax Office had asked them, Holden’s real profit last year might not have bought the board lunch at McDonald’s. The conclusion is not that the aid is why Holden was profitable, it’s simply that in absent said help it would not have been.

“We also pay hundreds of millions of dollars in tax revenue in Australia, many times more than the amount received in government co-investment.”

And I don’t doubt that this is 100% true, which just leads to another question the ignorant sole trader needs some help understanding. If Holden really need that money doesn’t it say that they’re being taxed more than they can afford by $89.7 million or so? This isn’t robbing Peter to pay Paul. It’s robbing Peter to pay Peter to fool Paul into believing that the sticker price on Peter’s cars is really as low as it appears.