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Chile’s Toilet-Paper Colluders Got Nothing on the State

By: Contributor - Dec 14, 2015, 8:12 am
Chilean consumers must realize that the real collusion is happening within government.
Chilean consumers must realize that the real collusion is happening within government. (Emol.com)

By Tomás Leiva Lèrou

EspañolLast month, a massive case of collusion within the Chilean toilet-paper industry hit the headlines of major newspapers across the country. Two companies which dominate a large chunk of the toilet-paper sector decided to join forces and fix prices, sparking a heated debate within Chilean society.

As expected, state authorities decided that the best solution was to enact more regulation, increasing the bureaucratic burden on the business sector and handing more power to politicians.

As a liberal, however, I’m not really too concerned about the so-called collusion between these two companies, since there are several brands available on the market, and new firms can always emerge.

First of all, it is worth clarifying that a “collusion” is just a voluntary contract between two or more parties — a practice that a group of politicians want to see banned.

Now, people tend to consider it an abuse when a group of businessmen decide to raise prices, and particularly when they are coordinated. On the other hand, when they drop prices, they rarely make it to the front page. Obviously, it’s their duty to lower prices for consumers, right?

In the case of collusion over toilet paper, consumers were forced to pay more, and that had an impact on their budgets. However, what has happened with the price of cars over the past few decades? And with home appliances? How much have clothing prices dropped? How many people have benefited from Chinese imports?

In reality, the duty of an entrepreneur is to make his business as profitable as possible.

Legal Collusion

What is more worrying is the collusion in the public sector, where competition is nonexistent and even prohibited. Despite the abuse that can arise from these sorts of situations, only the state is allowed to participate in certain markets.

Take, for example, the Chilean Civil Registry, where employers last November colluded to stop serving the public, because the government denied their request for a bonus.

Imagine the huge lines that resulted, the 10-hour delay to pick up your national ID card or to get a marriage license. Think about the parents who were forced to wait to register their newborns with the state, or those who needed a death certificate to proceed to bury a loved one.

I don’t want to pass judgement on the employees of the Civil Registry, headed by Nelly Díaz, or their reasons for the strike. However, while the quarrel was between the employees and the government, the Chilean public had to deal with the consequences.

And, to make matters worse, they’re planning another strike, which will surely cause more delays. This sort of action should definitely be considered collusion, and certainly a much more serious kind of collusion than within the toilet-paper industry.

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When will we see the Civil Registry privatized? When state employees decide to stop working, will citizens ever have an alternative? When will the government finally delegate to the private sector these services? When will the worst abuser of all, the state, stop causing problems in our society?

Tailor-Made Rules?

In a free society, special rules should not be drafted to benefit consumers nor businesses. The rules should be designed so that both parties are free to engage, or not engage, in voluntary exchange.

More regulation is not the solution. When politicians get involved, businesses then have an incentive to start funneling money under the table to get legislation that favors them.

How else do you think a small group of pharmacies dominates the entire market? How have our forestry companies reached the “too big too fail” stage? Why give more power to politicians who have not earned our trust?

Big businesses may collude to fix prices, but as long as we have an open market, without entry or exit barriers, new businesses can always come in and lower the price. On the other hand, when it comes to services provided by the state, the public has no choice but to be trampled on.

It’s time to put an end to this double standard and condemn the collusion that takes place in the public sector, including collusion between the government and big business, which hate competition and only hope for more regulation in their favor.

Tomás Leiva Lèrou is the cofounder of Sector Privado, a social organization dedicated to promoting property rights through street activism. Follow @Tomasleivalerou.

Translated by Adam Dubove.