The following is a guest submission by Keith Farrell, student president of the University of Connecticut’s Torrington Campus and founder of the Spirits of ’76, a “non-profit organization dedicated to spreading liberty by inspiring involvement in community and volunteerism”:
Norway is facing a crisis that may threaten its holiday cheer. News has spread this week of the urgent situation in Norway where the country faces a butter shortage. Yes, butter. While the media has spent plenty of time talking about the shortage, one topic that has been suspiciously missing from any coverage I saw was discussion about the causes of the shortage. The only fleetingly cited causes were the monopolistic practices of Norway’s butter-giant, Tine, and Norwegians’ low-carb diet.
Butter line in Oslo
Not long ago, before I had the benefit of studying Austrian economics, I wouldn’t have given the story much more thought. I would have, presumably, listened to the media and agreed that an evil, greedy corporation was to blame for stifling the people of Norway’s holiday cheer by depriving them of a key ingredient for seasonal goods. I wouldn’t have wondered about the conditions that caused the monopoly to develop in Norway, nor would I had thought how government regulations contributed to the situation. I, like many, tended to shirk away from economics, viewing it as complex formulas and mathematical equations I could never grasp. All I knew was what I was taught in school and reinforced by the media: free markets would always lead to monopolies, thus we need governments to make things fair and ensure evil companies like Tine don’t ruin people’s holidays. Through studying Austrian economics, I have gained such a solid and more in-depth understanding of the world around me.
Now, upon hearing of a butter shortage in Norway, my spotlight saw right through the fog. I didn’t have all the details yet, but the distinct stench of unintended consequences caused by government intervention was unmistakable. I couldn’t depend on the media to tell me more. I would have to dig deeper if I wished to understand the root causes. Several questions popped up in my mind. Why only butter? What about other dairy products? And how could a country that is surrounded by agricultural nations run out of something as fundamental as butter? Couldn’t they just buy some from Sweden or Denmark?
Norway’s economy is a mixed economy, with the state controlling key industries such as petroleum. Its socialistic reforms since World War II have caused the nation to pride itself on its public assistance to its citizens. Heavily subsidized health care is delivered to Norwegians for little or no cost to them directly. A government guaranteed minimum pension and unemployment insurance are just some of the other benefits Norway offers to its citizens. Norwegians also enjoy pretty high wages. While this all may sound lovely, we must remember that somehow these things need to be paid for.
As a result, Norway is one of the most expensive countries to live in on Earth. Protectionist policies and taxes limiting free trade have added to their woes. With their high cost of operation and employment caused by excessive taxation, regulation, and abnormally high wages, Norway simply cannot compete with its neighbors. To address this problem, tariffs and import restrictions are designed to shield Norwegian industries from competition. This has plenty of unintended consequences.
Austrian economists will be the first to tell you that odious government regulation may lead to monopolization. The logic is easy to follow. When regulation and taxation becomes overly complex, only bigger companies can thrive. While bigger companies may hire lawyers and specialists whose entire job is to make sure their company is compliant with the rules and regulations of the state, small companies simply do not have the time or money to hire the personnel needed to interpret and comply with the system of complex regulation. Government intervention in this manner often has the exact opposite result as is intended, creating a system that favors bigger over smaller, perverts competition, and leads to the consolidation of industries under the control of corporate giants.
Norway’s butter industry is a perfect example. One corporate entity, Tine, controls most of the butter in Norway. It is a cooperative of Norwegian farmers which has enjoyed, largely due to government regulations, monopolistic operations with little to no competition. Interventionists in Europe are quickly calling for the government of Norway to break up Tine into smaller companies, rather than open up the markets to outside competition. However, Norway cannot allow free trade if it wishes to continue with its centrally planned mixed economy. The cost of maintaining their programs and wages is too high and their industries would not be able to withstand competition.
Thanks to my knowledge of Austrian economics, I was able to see the root of this problem. While the government of Norway may point the blame at Tine, there can be no mistake about it: it is their regulations, protectionism and central planning which caused this problem, and any fault Tine does share is negated by the fact that the government’s policies are what led to Tine’s monopoly.
Need a lesson on how competition, free markets and public choice lead to a more plentiful market and more prosperous society rather than centrally planned and managed economies? Go to your local super market and head over to the dairy section. Go ahead, take a moment and marvel. We have hundreds of butter companies to choose from. We have whipped butter, spray butter, salted butter, generic brands and big name brands, butter designed for baking, butter for spreading etc. If Land O’Lakes ran into a butter shortage we could just buy from one of their many competitors. In the centrally planned economy of Norway, a country full of dairy farmers, has no butter. So remember when you are enjoying your favorite holiday foods how something as common as butter is taken for granted here in America thanks to free markets!
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