Saturday, March 23, 2013

Socialism for Small Business?

John Kenneth Galbraith is remembered for declaring that the only form of socialism that would be acceptable in America was socialism for the rich.

Now Britain's Labour Party, looking for ways to drum up support before sweeping aside the Conservatives in the next elections, is promising state intervention to protect small business against the abuses and excesses of big business.

[Labour Party] shadow business secretary Chuka Umunna raised the prospect of automatic sanctions for big companies that fail to pay their suppliers on time.

Umunna said the UK's late-payment culture was "outrageous" and warned that a future Labour government would consider banning firms from public contracts under a tough new sanctions regime.

The shadow business secretary outlined action against late payment in a series of measures announced to the annual conference of the Federation of Small Businesses.

"Too many small businesses are effectively bankrolling bigger businesses that refuse to pay them on time. This is outrageous," Umunna said.

"In government we legislated so that late payments can incur interest, and we established the prompt payment code. But I know how hard it can be to challenge your own customers.

"So, the next Labour government will expose those who pay late and we will seek to put in place a regime that will automatically trigger action against late payers, perhaps by preventing them winning public contracts and through reporting requirements on payment performance in their company accounts."


Owen Gray said...

That's precisely the kind of socialism today's movers and shakers want, Mound -- the kind that socializes losses and privatizes profits.

crf said...

That proposed labour policy sounds kind of dumb, honestly. It fits the caricature of "Big Government".

Whether one company is paying another isn't the government's nosy business. And there already exists novel things called "law courts" to handle this. Perhaps they don't work perfectly, but how is it an improvement to have a parallel government bureaucracy to decide if one company is being fair to some other, or whether one company is nice enough to get a government contract?

The Mound of Sound said...

I think the government/business relationship has been that way for quite a while, Owen. In the U.S., for example, it has been the government that empowered the rise of corporatism and oligarchy.

Chris, I agree that this is certainly novel. I wish I had some background information on the supposed problem this is intended to rectify.

Anonymous said...

It's another transference of wealth scheme and the large entities do it because they can. The result is they download their financing costs onto smaller firms and individuals. Also frees available capital for other purposes.

It's not a new game by any means but has certainly gained popularity in recent years.

The East Coast oil and forestry oligarch imposed 90 day terms on all suppliers they could a couple of decades back for example.

Bankers use a similar scheme when they when they withhold money from peoples accounts for 5 banking days when they cash cheques. Only they get to multiply funds in their possession by times 20 or so

The Mound of Sound said...

I guess that's an inevitable incident of the rise of monopoly or somewhat lesser variety of market dominance.