In Canada, two big banks — the Royal Bank and Bank of Montreal — want to merge. They mutually concluded that it would serve their long-term interests, such as make them more competitive internationally. Ditto for two other big banks — the Toronto Dominion Bank and the Canadian Imperial Bank of Commerce.
But they are not free to merge. Instead, they are forced to spend their creative energies in a lengthy and costly process of “proving” to the Canadian government that the mergers serve that amorphous thing called “public interest.” After that, Finance Minister Paul Martin will decide their fate.
What is “public interest”? It’s a term people are quick to utter but reluctant to define — as if defining it would unveil some hidden, demoniacal purpose.
Observe that a bank is owned by individual shareholders. It hires individuals to run its operations. It offers services and products to individuals and companies (which are owned by individuals) with diverse needs. It must make the offers attractive to win customers from competitors. Which individuals constitute “the public”? Shareholders? Employees? Customers? Competitors?
A bank’s shareholders want to maximize the return on their investment (and should want to!). All customers want low service charges but their other interests vary: depositors want high interest rates, borrowers want low-interest loans, some customers want more local branches and more tellers, while others want more bank machines and Internet banking. Some employees prefer to work for bigger banks with international operations.
Observe that these interests vary and even clash. Hence, blocking mergers in the name of “public interest” can only mean that the interests (and rights) of some members of “the public” are sacrificed to the “interests” of others.
Whoever the government includes in “the public,” it certainly won’t be the banks’ shareholders. They are the ones whose investment capital — their property! — makes possible the jobs, services and products that “the public” wants. And — because of that fact — *their* interests, decisions, and property rights are sacrificed by government decree. Aren’t they part of the public too?
If not, then the “the public” stands for whichever group or faction happens to wield political pull, leaving the rest of the public outside “the public.” Observe that countless pressure groups have vigorously lobbied the government to either block the mergers or at least secure special caveats for their “constituents.” According to Maclean’s magazine (Sept. 21), Paul Martin won’t allow the mergers unless the banks “commit” to zero reductions in job numbers, special loan deals for small businesses, and more services outside big cities. To hell with the rights of shareholders.
Consider the ominous implications. If banks are treated as “public property” in the name of “public interest,” what is to stop the government from treating other businesses, such as newspapers, as “public property”? Certain pressure groups might “convince” the government that editorials defending private property, free speech, free trade, or other individual rights, do not serve “public interest.”
Whenever individual rights are subordinated to “public interest,” the government is handed the ominous power to sacrifice the interests and rights of some individuals to the demands of others. This automatically invites hordes of pressure groups to — instead of engaging in productive work — expend time and money lobbying governments for special favors and handouts at others’ expense, all in the name of “public interest.” The inevitable result is political chaos and economic ruin.
Under true free enterprise (laissez-faire capitalism!) the government’s job is to protect the legitimate rights of each and every member of the public, including shareholders. This means protecting individuals from physical coercion (including theft and fraud) while otherwise leaving them free to offer their products and services to others on a voluntary — non-coercive — basis. It is in everybody’s rational self-interest not to be assaulted , robbed or enslaved, but rather to be left free to produce, trade and enjoy one’s existence. Under true capitalism, nobody (not even insurance companies and foreign banks) is forcibly barred from competing against the banks — nobody is forced to work for a specific bank or deal with it — and no pressure group can use government to force a bank (or any business) to serve its so-called interests.
By barring the initiation of force, including the threat thereof, capitalism rewards companies for being creative, productive and efficient. Consequently, the individual qua “consumer” is offered ever-better products and services at ever-lower prices. This harmony of people’s rational self-interest stands in stark contrast to the false and destructive view that one’s “interests” lie in enslaving and looting others.
To conceive of one’s interests as requiring the violation of other people’s rights is irrational. First, it invites others to violate one’s own rights. Second, as under socialism, it punishes ambition, creativity and productiveness — thereby denying oneself the benefits of living in a society where such virtues (and their products) flourish.
If “the public” means the sum of its individuals — not “my gang” or some super organism as per communism and fascism — then clearly the violation of anybody’s legitimate rights can never be in the public interest.
Contrary to what many believe, bank mergers under true capitalism do not thwart competition. If, after the mergers, opportunities emerge to profit by offering consumers better products and services at lower prices, existing banks and profit-seeking investors will seize them. It is only when people treat others (particularly those others who have most to offer and lose) as sacrificial fodder that entrepreneurs flee for freer-greener pastures, as they should.
Each of the four big banks has determined that merging serves its own interests. Nobody’s legitimate rights — neither the employees’ (there is no right to force others to employ you) nor consumers’ — are violated by such mergers. It is immoral and destructive for the government to force these banks to waste their money and creative energies on the ridiculous task of proving that mergers serve “public interest.” Furthermore, it invites the government to do so elsewhere.
If a government truly wants to protect the interests of all its citizens, it should protect individuals from those who conceive of their interests in terms of enslaving others.
The Canadian government can start by stop behaving like economic dictators and leave banks free to merge. It can then begin de-regulating the financial industry (and other industries!) so that we can all reap the benefits that true capitalism offers.
