The Rover Question

Whenever a major company is in trouble or a factory is to close, the political debate becomes increasingly an auction. Which political party is more willing to prop up the failure than the competition? Rover has not been an exception. As a Free Market Liberal, I can not condone state subsidies and am therefore dismayed by the generosity that “The Paid Help” wishes to show to business failure, with money that is not theirs. Yet whilst I cannot condone the state solving the problem with our money, I also cannot dissolve them of any blame for the failure. Rover probably never had a chance, it makes outdated cars that consumers do not want to buy and does not have the resources to afford the R&D necessary to compete. In addition it has a Brand damaged by poor quality and faint memories of the rubbish produced by its state owned predecessors. But just as you do not throw bricks at someone who is drowning just because you are unable to save them, neither should you cripple already struggling businesses with tax and regulations that make their lives even more difficult. Since the 1997 election, some 1 Million jobs have been lost in manufacturing companies in Britain. Much of this is the flip side of globalisation, a process that inexorably makes us all richer and reduces the prices of everything we buy. It is also due to technological progress that enables fewer workers to produce ever more goods. One cannot help but wonder however, whether this job loss process would not have been slower, and therefore the adjustments to be made easier, had our Government in cahoots with Brussels not made running a business such a thankless task. For how many struggling businesses was some Stealth tax or Brussels directive the last straw? Solutions such as protectionism, which always resurface every time a major company goes under, are practically and morally wrong. The government has no right to tell anyone which car they are allowed to purchase with their own money and decades of protectionism lead inexorably to the creation of cosseted companies that can not compete. If one looks at the history of the British car industry, the case for subsidy and protection is shown to be pathetically weak. So whilst there is no easy answer to the creative destruction that occurs in order to utilise assets most effectively, there is something that our political masters could do.

1. Do not load productive businesses with useless regulations that cost them the earth and benefit no-one.
2. Don’t treat the productive sector as a cash cow to be milked in order to employ unproductive state workers.

Because if anyone in the current Government shares any of the blame for failures of companies like Rover, it lays with Gordon Brown’s command and control and Tony Blair’s surrender to Brussels. Likewise, if they fail to find new jobs, the economy not providing fertile ground for creativity, creative destruction will simply become destruction. A government failure, not a market one. So whilst cries of protect our jobs ring in a crescendo around the Midlands and elsewhere, bear in mind who the real enemy of economic success is. Companies need to be protected alright, but not from the competition. Rather they need protection from the ravages of rapacious tax collectors and regulation wielding Eurocrats.