Green: interests vs preferences

It’s widely thought that workers’ preferences and interests might not coincide. But the same might be true of capitalists. That’s one possibility raised by the Green report (pdf) on government procurement.
He complains that “the Government is failing to leverage both its credit rating and its scale”. He wants the government to cut costs by paying its suppliers later and to increase its bargaining power by centralizing procurement. In other words, the government should behave like businesses do: “There is no reason why the thinking in the public sector needs to be different from the private sector.”
However, the savings government would make from this will come at the expense of companies’ cashflow and profit margins. Capitalists’ preferences - that government behave like business - are therefore possibly inconsistent with capitalists’ interests, that government help them maximize profits.
I say “possibly” because some of the pain of lower profit margins would be passed onto workers in the form of lower pay. It’s unlikely, though, that all of it would be.
It’s also possible that, as the government cuts spending, private spending will increase to offset the loss of profits. At a time when the banking system is Donald Ducked, however, believing in this requires one to believe in the magic money fairy.
Now, I’m in favour of cutting capitalists’ welfare state. But let’s be clear. This is what Sir Philip is advocating. And if the cuts are not offset by increased spending elsewhere - and they won’t be - they are bad for profits.

Comments

[Leigh Caldwell]

I did think this comment from Green was a strange one.

If the government wants to best use its AAA rating, it should pay suppliers EARLY, not late.

If it pays suppliers later, they will have to finance the credit themselves, and (in a competitive market) charge the cost to the taxpayer. Since companies' cost of credit is higher than the government's, this will cost the public more than if the bills were paid on time.

[D]

Which businesses? I imagine Green's Topshop don't get an awful lot of government contracts.

Potentially, Topshop competes with the rest of the private sector for capital, so this could be (slightly) in his interest.

In practice, he could just be doing it to increase his reputation for being an efficient manager. (And therefore increase the remuneration he can demand).

[Roger]

Good point - the companies to be screwed over are those in construction and services which generally have very little to do with retail.

And although Green himself doesn't care to pay any taxes lesser bourgeois who still do would much rather pay less even if that hurts some other capitalist's profits.

After all we are talking about a class who feel no collective loyalties at all.

[Sean]

The conclusion of this post will not hold if the current excess profits are being dissipated via rent-seeking behaviour. In that case, cutting rents at the source can lead to lower taxes and thus improve profits.