It’s official. Finance Minister Paul Martin told the four big banks he won’t permit them to merge. Why not? The proposed mergers would allegedly give the resulting two banks “unacceptable” powers that would not serve “public interest.”
The ominous implication is that “public interest” is served by Martin wielding the power of an economic czar.
What does “public interest” mean? Politicians never quite define what they mean by the “public interest”, yet they always use it to defend the anti-capitalist, statist policies they advocate.
A bank is owned by individual shareholders. It hires individuals to run its operations. It offers products and services to individuals and companies (owned by individuals) with diverse needs. It must make such offers attractive to keep customers away from competitors. Which individuals constitute “the public”? Shareholders? Employees? Customers? Competitors?
A bank’s shareholders are interested in maximizing the return on their investment. Competitors want its customers. Customers want low service charges but their other interests vary: depositors want high interest rates, borrowers want low-interest loans, some customers want big banks with large lending capacity, others prefer small banks. Some employees prefer to work for big 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 subordinate to that of others.
Whoever the government includes in “the public,” bank shareholders are certainly excluded. 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 shareholders part of the public too?
If not, then the “the public” stands for whichever group or faction happens to wield political pull. Several pressure groups, representing workers, small businesses, consumers, competitors, etc., have vigorously lobbied the government to either block the mergers or at least secure special aveats — zero reductions in jobs and branches, special loan deals for small companies, more services outside big cities, etc. — for their “constituents.” To hell with shareholders’ rights.
If banks are treated as “public property” in the name of “public interest,” what’s to stop government from treating other businesses, such as newspapers, as “public property”? Pressure groups might “convince” government that editorials defending private property, free speech, or other individual rights, do not serve “public interest.”
Subordinating individual rights to the “public interest” hands government the ominous power to forcibly sacrifice the interests and rights of some individuals to the demands of others. This 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.”
Under capitalism the government’s job is to protect the legitimate and equal 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. Nobody (not even insurance companies and foreign banks) is forcibly barred from competing against 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 company) to serve its so-called interests.
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, creative thinking and productive efficiency, thereby denying oneself the benefits of living in a society where such virtues (and their products) flourish.
If “the public” means the sum of all its individuals — not “my gang” or the majority — then clearly the violation of anybody’s legitimate rights can never serve public interest.
Contrary to what many believe, bank mergers under laissez-faire, capitalism (true free enterprise) do not thwart competition. If, after banks merge, profit opportunities arise by offering customers better products and services at lower prices, existing banks and profit-seeking investors will seize them. Government thwarts competition — freedom of competition — by violating shareholders’ rights.
Martin should be told that the “unacceptable” powers threatening our legitimate interests is the power that he and his government currently wield — the power to abrogate our legitimate rights.
