Competition and monopoly

Ages ago, John H (blog) made a comment in another place which wormed its way into my head, because I couldn't think of an adequate response. He said in these or similar terms,

There are two kinds of liberal: those who believe we need capitalism to protect us from the State, and those who think we need the State to protect us from capitalism.

I couldn't put my finger on it then, but there was something which didn't sit easily. My post last week (link) on the over-abundance of power in politics was a catalyst for me in terms of crystallising why I didn't just sit on the other side from John (which I do), but why I don't accept that categorisation of the situation.

This liberal doesn't think so much in terms of capitalism versus the State, for various reasons some of which have been dealt with at length previously. The terms I use are the use of competition to protect us from monopoly.

That is the reason why, and the extent to which, I am a democrat: we need competitive politics, and the more competitive the better. But government is, at the end of the day, a monopoly business: there is only ever one government.

So we need to keep the power of the State in check, in order to avoid monopoly so far as possible. Some areas of the State are genuinely natural monopolies: the State tries to maintain a monopoly on the use of legitimate violence (apart from immediate self-defence). So we only have one military and one police force with powers of arrest and detention.

But the State has also taken it upon itself to provide schools, hospitals, and transport. Why do we need a monopoly in these areas? We need to be protected from a monopoly in these areas, which implies competitive provision.

So I can endorse the general approach of Oliver Letwin in a recent interview with the Wall Street Journal, where he says,

We will implement a very systematic and powerful change agenda where hospitals compete for patients, schools compete for pupils, welfare providers compete for results in getting people out of welfare and into work. So we get to the point where it [the public sector] is efficient because it is answering to the people it is serving and not to bureaucracy. (src)

I'm not expecting, should the Tories win the coming election, that Britain will turn into a land flowing with milk and honey. The Tories have some policies which are every bit as abusive of the monopoly of government as Labour before them. But Letwin's impulse here is the right one. We need competition to protect us from monopoly.