Monday, September 05, 2005

Free market policies should apply equally to all business sectors :: GN

From the Gulf News editorial:
The free market policies should apply equally to all business sectors. The concern expressed by UAE residents over the 30 per cent rise in retail petrol prices is understandable, but unjustified.
This country has consistently stood for liberal free market policies; why, then, should people be shocked when oil prices too are being liberalised to reflect more accurately international market prices?
These same free market policies have served the country very well to date and they have stood in good stead for businesses which have thrived in this laissez-faire atmosphere, so the same spirit of openness and free market policies should apply to the retail oil sector as well.
. . .
The move forms part of overall steps taken towards opening the doors wider across all industry sectors by the higher authorities. For instance, the telecommunications sector has recently been liberalised, as has property ownership, to cite but two recent instances.
. . .
The fuel price hike will undoubtedly also cause higher prices across the board but here the government should institute consumer protection laws and other legislation to protect the interests of the people.

But free market forces should be allowed free rein. As has been amply demonstrated, it is open market policies that ultimately serve the long-term interests of the common man.
Which paragraph above does not seem to fit? This one:

The fuel price hike will undoubtedly also cause higher prices across the board but here the government should institute consumer protection laws and other legislation to protect the interests of the people.
Consumer protection laws against what? Against increases in prices due to increase the increase in the retail price of fuel? That contradicts the general assertion of the editorial that free markets work best, and the specific assertion that the lifting of price controls on petrol retailers is justified in light of the increasing wholesale price.

Economists argue that there is a role for government to regulate markets when there is a monopoly or cartel. Perhaps this is the consumer protection that the Gulf News editorialist has in mind. If so, then there is more work in the UAE to be done to provide the common man with consumer protection from monopoly. I refer to
  • the government organized cartels like those for juice and milk
  • government granted exclusive dealerships which pervade the economy

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3 Comments:

Blogger strangeloops said...

The article makes it sound like suddenly the price of fuel is now totally free, just as the telecom market is totally free, in this "laissez-faire" atmosphere.

My limited understanding is that the changes are pretty minor, in both cases. It's not hard to divine a motive for making a big deal of all this - I seem to remember complaints about the UAE's protectionism, from one of its trade partners.

3:29 PM  
Blogger John B. Chilton said...

Strangeloops, you're on target.

Telecom here is hardly a free market. Entry into the market is highly restricted by government. Consumers have little choice.

In petrol there are just a few retailer brands, and as important, each brand owns all the stations handling their brand. That does not meet the conditions for a competitive market. And the brands have heavy government ownership. That's not laissez-faire. Perhaps price has become deregulated (free to adjust). I have no idea what government barriers might exist to entry of new firms, but if they do then we do not have a free market.

6:37 PM  
Anonymous Anonymous said...

Gee, how about some "free-market" policies in the labour market?

I won't hold my breath.

8:36 AM  

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