X-Treme Free Markets

10:51 pm, 12/26/05

X-Treme Free Markets
An economics lesson, from Somalia:

Somalia does not spring to mind as a good place to do business, but in telecoms at least it has something to teach the world. A call from a Somali mobile phone is generally cheaper and clearer than a call from anywhere else in Africa. The trick is the lack of regulation. Somalia has had no government since 1991. It was cut off for a while, but then private mobile companies moved in and found that the collapsed state provided a curious competitive advantage.

No government means no state telecoms company to worry about, no corrupt ministry officials to pay off (there is no ministry), and the freedom to choose the best-value equipment. Taxes, payable to a tentative local authority or strongman, are seldom more than 5%, security is another 5% (more in Mogadishu), and customs duties are next to nothing. There is no need to pay for licences, or to pay to put up masts. It is a vivid illustration of the way in which governments, for all their lip service to extending communications, can often be more of a hindrance than a help.

If you want customers in Somalia, you have to provide a good product, or else they'll take their money to somebody who will and you'll go bankrupt. Now, Somalia does have, er, some problems, but if the socialist worldview were even remotely relevant to the real world, these companies would be taking advantage of the "wild west" economic terrordome of Somalia to divide up the turf, bend over Somalian mobile phone users, and take them for everything they've got. This defies common sense, but is exactly what liberals routinely argue that business is all about, and hence why it must be regulated.

In reality, this only happens when the government gets involved, carving out heavily regulated mini-monopolies to "protect consumers" by erecting huge barriers to legitimate competition, thus eliminating substantive need for technological improvement or any pretense of fair market value. (Even those providers who do want to provide good services at fair prices often find themselves forced to jump through so many bureaucratic and regulatory hoops that responding to the market is nearly impossible.)

As for corruption, Somali warlords have neither the time nor the inclination to strongarm peasants over their choice of cell providers, but the picture is different in the West, where government tends to be omnipresent. Granting the state the power to make a decision for you naturally grants the state the power to screw you over in their own interest, and public utilities are no exception, as demonstrated by our friend Mayor Daley's attempt to collude with Governor Blagojevich to force all telephone competition out of Illinois so SBC Illinois could run the show unopposed. (SBC Illinois just happened to be headed up by Bill Daley, the Mayor's brother, and it would've worked, too, if it weren't for those meddling federal courts.) Labor unions add extra fun, since a state-backed monopoly typically spells job security and plenty of cash flow to extort from one's employer.

The obvious solution, as with so many problems, is to get government out of the picture. Of course, some of the regulation-inclined believe that what consumers want is far less important than what "society" needs, whatever that means. Readers may contemplate the logic of this premise on their own.

On a related note, I've been advised to have some heavy sedatives and a change of underwear on hand before I open my first Time Warner Cable bill. Apparently, some people get satellite dishes just to avoid the State of New York's taxes and fees.