The Price of Milk & a Free Market

by Les May

I seem to have heard quite a lot in recent weeks from 'Tory Lite' Labour leadership contender Liz Kendal and her 'Crypto Con' cheerleader Simon Danczuk, about the need for Labour to take a business friendly attitude.

 

So why then have they remained silent about the spat between the farmers and the supermarkets about the price of milk?  Surely they've heard of it, or were those pictures of cows in supermarkets a tribute to the Photoshoppers artifice?

 

You don't need a degree in economics to understand what is going on.  There is a glut of milk at the moment allowing the supermarkets to buy it cheaply.  So cheaply in fact that the price being paid to UK farmers is below the cost of production.  That means only one thing; some farmers will go out of business.

 

So what; they should be 'more efficient'; more responsive to 'market forces'.  But is it really so simple as that?

 

We already import about one third of all the food we eat.  Driving farmers out of business will exacerbate that.  But the 'efficient' (or lucky) farmers will survive, fewer farmers means less milk will be produced, so the price of milk will rise again.  That's free market economics and you can't buck the market!

 

That's not how the farmers see it.  Farming and supermarkets are both businesses.  They just happen to be motivated by very different self interests.  So what is a 'business friendly' approach in this case?

 

One of the first responsibilities of any government is to ensure the security of the nation's food supply.  The national interest ought to override the self interest of particular group.  Just as Jim Callaghan found he could not rely on the Trades Unions to act in the national interest in the late 1970s, we cannot rely on businesses to act in the national interest in 2015.

 

In 1971, the Tory government of Ted Heath nationalised Rolls-Royce after it ran into difficulties over the development of the RB211 engine.  Thankfully Heath realised that the national interest had to take precedence over dogma and Rolls-Royce survived to become the very successful company it is today.

 

Ironic isn't it that Kendal and Danczuk are more in thrall to free market economics than a former Tory prime minister?