Like much of the business community I have had plenty of time for thought and reading. A 24 hour trip to Milan has turned into a five day marathon. Both reading and experience have stimulated thoughts about the operation of markets.
Firstly, after several hours on Thursday, I managed to secure a hotel room in Milan in a market over-saturated by demand from a huge trade fair further burdened by grounded souls like myself. Market forces were in full flow and the result was an ordinary (polite term) hotel for 3oo Euros for the night. I was lucky as other hotels were asking for up to 1,000 Euros for a night. This is market forces at their most rampant and one has to believe that, ultimately, those institutions that gouged their customers when the opportunity presented itself, will see their greed repaid when capacity is hard to fill. Customers have long memories and in any business it is good to remember this.
Turning to my reading, I was able to absorb the Financial Times of Wednesday April 14th from cover to cover (there being no other English newspapers available) and one article by the estimable John Kay made a big impression on me. Entitled ‘Economics may be dismal, but it is not a science’ he probed the recent failings of macro-economic theory. One sentence jumped out at me and it is one often tripped out by economists. It was ‘The economic role of government is to keep markets working’.
I am a firm believer in liberal but effective regulation of markets. Free markets have demonstrably delivered more value than those managed by governments – just look at the achievements of a series of 5-year plans by decades of Soviet governments. Whilst it is tempting to point to the current crises as a failure of markets it seems to be that this is a failure of regulation rather than the markets themselves.
Why am I going on about this? Well, the connection with the medical device industry is that it has a vibrant supply side with extensive numbers of competitors in almost every sector that you may choose. Despite this, governments persist in trying to manipulate and manage the markets that the industry operates in. They do this for two reasons. One is that they confuse medical technology with pharmaceuticals where there are arguably market failures that regulators need to address. The second reason is that governments of all shades seek to make short-term savings when the political cycle demands. The result of all of this is that governments distort markets which are quite capable of delivering long term value to both themselves and consumers (patients). What they should be doing is ensuring that the market works for all and keeping intervention to a minimum. And being highly ethical and responsible, medical technology companies do not gouge their customers when the opportunity presents itself. They do put the customer first and understand the value of long-term relationships.
– John Wilkinson, Chief Executive Eucomed