Sunday, August 14, 2011

Government Interferes Once Again and Our Costs (Taxes) Go Up!

This article is about Japanese government interference in business but it has a lesson for everyone in every country the world over.

The Beatles had an opinion on taxes!

Once again, with a huge amount of problems, the Japanese government cannot just get out of the way and allow the free market to take care of things and fix our problems. The Japanese government insists upon getting involved and making decisions that involve you or me and businesses. Trust that whenever the government puts their hands, the results are an increase in our taxes.
Please allow me to pick this article apart and expose its inconsistencies and illogic.

Of course, regular readers of this blog know that I am against government interference in any way shape or form and see this example as another attempt to "fix" things but they will only make things worse.

Japan's parliament is set to approve a landmark bill on renewable energy championed by Prime Minister Naoto Kan as a way to reduce the nation's dependence on nuclear power following the worst nuclear plant accident in the country's history, and which would break the monopoly of the 10 major utilities. 

Ummm, excuse me. This is a pretty Orwellian use of the English language isn't it? It says, "reduce the nation's dependence on nuclear power... and which would break the monopoly of the 10 major utilities." How do they come to this propaganda and new use of this wording? Ten utilities does not a monopoly make. Monopoly means one. The Investor Words online dictionary of financial terms describes "monopoly" as, "monopoly - definition of monopoly - A situation in which a single company owns all or nearly all of the market for a given type of product or service."

The final passage of the bill, which aims to bolster investment in renewable energy, is expected by the end of the month. 

"Aims to bolster investment"? Well, yes and no. If history is any record, I think they mean that the government gets involved and distorts the market and therefore allows their corporate political backers insider information so they might cash in on new laws before they become public.

Ironically, it paves the way for the highly unpopular Kan to step down.

The only good news in this article so far. Kan steps down. The bad news is that the next guy will be even worse. This reminds me of the old story of the king who walked through the kingdom and came upon a very old woman who bowed down to him and kissed his feet. The king was so surprised as the rest of his subjects hated him and often threw stones in protest against his lavish life style and massive taxation. The king said, "Woman! Why do you hail me so when the rest of my subjects hate me so?" The woman replied, "I am a very old woman and have seen many kings in my life. And each king was much worst than the last. So I wish for you a long and healthy life, my lord." 

Its main feature is a requirement that utilities purchase power from outside providers such as private companies or cooperatives under certain circumstances.

Idiots. The government "requiring" purchases? Where have we heard that before? Don't these clowns understand simple basic economics? That when you do something like this, it distorts the market and is a de facto tax burden increase on the public as they will wind up paying any increase in costs?

This is seen as opening the door for much greater use of renewable energy, an area where Japan lags, accounting for just 9% of total supply. 

You know, what really cracks me up about these people (and some of the public at large) is that they claim that the free market and private business only have money at heart and do not concern themselves with the public good. I won't discuss the public good part for the moment and will wait until someone challenges me on that point, but let's look at the notion that the private companies only care about making money.

If this were true that their only concern were profits and that they strive for maximized profits at every turn (I'm not saying they don't) then, if so-called renewable energy sources were profitable, then we wouldn't need government interference or new laws to goad these private industries into pursuing them.

That the government must force private businesses into this market, then, if we use this logic, only goes to show that these businesses are not profitable. Nevertheless, the private businesses are forced into these markets.

What happens? Costs inevitably go up. What happens to these costs? They are either financially supported by the government or through charging customers higher rates for good and services.

Now, keep in mind that the government has no money. The government gets all its money from taxation. That means that these private industries are forced into these new businesses and then, when not so profitable (or losers), pass on those higher costs to you and me as customer. Or, the government takes our tax monies and supports these businesses.

Either way, ultimately, these monies come from you or me either directly through our pockets or through taxation or stealth (debasement of our currency and the ensuing inflation). This means that you and I support these businesses when they lose money.

If we have to pay for a businesses with taxes or by stealth or directly, then, it also goes to reason that when this private business makes money, then we should enjoy the profits, right? But we don't. See? The next line supports my argument completely:

But big manufacturers, already hurt by power shortages and the effects of the high yen on exports, will face higher electricity bills as a result.

Once again, the government comes up with an idea and what happens? It costs you and me money. Anyone who thinks big corporations are going to eat those higher costs and not pass them onto the consumer is fast asleep and just hasn't been paying attention.

Great, our expenses go up. Thank you sir, may I have another?

It'll be good to be rid of Kan, though. The best situation would be to get rid of them all.

After Kan? Meet the new boss, same as the old boss. 

UPDATE: Here's a timely post exposing US congress insider trading:


Murasaki Shikibu said...

In a situation like this there is a strong element of *luck* that comes into play.

Some children survived because their parents picked them up and their parents made the right decisions. Some children perished because their parents too picked them-up and then made the wrong decisions.

In some cases, the right and wrong were a result of quick rational thinking, but in some cases it was simply a matter of luck.

Martin J Frid said...

You missed the point about Japan's power company monopolies. Each one company has the monopoly in one region. Thus, if you live in Tokyo, you can only be a customer of Tepco. Yes there are other power companies, but you cannot be their customer. Yes there are 10 or so companies, one for a specific region. That in effect means they have regional monopoly on supplying power to customers, who have no choice but to sign up with the ONE company for their region. Hope that explains it.

Anonymous said...

Martin is mostly correct, but there are many exceptions all over Japan. For example, in Roppongi hills in Tokyo we have 自家発電 (Jikahatsuden) and are not on the TEPCO power grid. Deregulation in Japan - as in the USA - will take a long time. But, at least, when deregulation in the USA occurred, it didn't raise our expenses across the board.

mike in tokyo rogers said...

Thanks everyone... I still think that the article is confusing the terminology. These are not monopolies. They are what is called, "Dango" in Japanese and the closet thing is "Cartel" in English, there is agreement amongst the companies to not encroach on other's territories. Not exactly monopoly per se. Am I wrong?

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