Never forget, markets can be changed by altering demand, not just supply

Matthew Syed suggests that Anglo Saxon capitalism is corrupt:

Twenty-five ministers from the coalition government took up jobs in sectors they had regulated, including Ed Davey and Chris Huhne at energy companies, and Nick Clegg at Facebook.

As to why this is so:

Most economists now accept that this labyrinthine web of retrospective inducement has had a chilling effect on capitalism. By dangling the carrot of future employment, giant corporations influence ministers in the here and now. This happens in myriad ways, but the most pernicious relates to the companies’ desire to protect themselves from the challenge of new ideas and competitors. They work with compliant politicians to introduce regulations, subsidies and bailouts that act as barriers to entry, stifling the free market.

We leave the truth or not of the specific assertion to the individual as we agree that the revolving door does have its problems. So, how do we solve this?

The Syed solution is to ban ministers from such future employment for 7 years - well beyond the time period where their Rolodex and contacts would have any influence. In return, ministerial salaries should jump by perhaps fourfold.

We would propose something different - for yes, markets like this can be altered by changing the possible supply of people willing to do governance for future economic gain. But they can also be changed by altering the demand for people willing to consider future employment options while governing now.

Which is to have governance not worth influencing in this manner in the first place. If government does not take to itself the power to “introduce regulations, subsidies and bailouts that act as barriers to entry, stifling the free market” then why would a company try to buy it? If political experience, previous political power, were worth nothing then perhaps the employment prospects of Ed Davey, Chris Huhne and Nick Clegg would be rather different - difficult for them and possibly highly amusing for the rest of us. One of them would seem suited to the job of pitchman for speed limiters for example.

That is, return to that classically liberal heyday of little interference in markets other than the most general rule setting - don’t poison the customers, that sort of thing - and we’ve solved the problem. No one would demand the services of retired politicians - nor trail rewards to those in office - because such influence and attentions would be worth nothing.

It’s possible to be more blunt about it. If government is able to influence who makes a profit then those desirous of profit will buy government. The solution is not to change the supply of those who can sell profit making opportunities, it is to change the demand for the services by abolishing the ability.

A free market economy doesn’t have room for corruption in it. So, if we desire to end corruption let us free the economy.